One Benefit of 401(k) Investing May Be Going Away -- Here's What to Do About It
Where are you saving for retirement? For many Americans, there's only one answer: in a workplace-sponsored 401(k). These tax-advantaged retirement accounts hold some $6 trillion in U.S. retirement assets. They offer savers a range of benefits, including automatic, pre-tax payroll contributions, tax-deferred earnings growth, and, often, employer-funded contributions.
Unfortunately, the tax perks associated with 401(k) saving may lose their luster in coming years. Here's why: When you take distributions from your 401(k) in retirement, those amounts are fully taxable as regular income, just like a paycheck would be. You accept that future liability as a trade-off for tax-free contributions today and tax-deferred earnings over time. That trade-off makes sense, because most savers expect their effective tax rate in retirement to be lower than it is today.
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Source Fool.com
