The Trump administration and Congress have been mulling a reduction in the 401(k) tax-free contribution limits as they work on a tax plan. Currently, the employer-based plans allow most employees to put away up to $18,000, deferring taxes until a withdrawal is made upon retirement.
The 401(k) may be changed because the Trump administration is looking for ways to drum up revenue to pay for its tax reform plan, which includes significant cuts, while not adding to the national debt, an issue dear to many conservatives.
The tax-free nature of a 401(k) is set to cost the government $583 billion in lost revenue between 2016 and 2020. A significant cut to the program would bridge most of that gap.
However, its not that simple. The 401(k) simply de…
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