Government recommendations may fix retirement but larger tax bills may loom.
A bipartisan commission has come up with some proposals that may ease the problems of retirement but that fix may not be easy, according to Bloomberg in “High Earners Are Going to Hate These Retirement Proposals.”
Since not everyone plans for a comfortable retirement, many elderly people remain in the workforce and often compete for scarce jobs with younger generations. It has the potential to create a drag on the amount younger workers can earn, which then makes it more likely they will not have enough savings for retirement.
It also means that the people without savings will not be able to leave inheritances for their children.
Some of the ideas include:
- Limit mortgage interest tax deductions to encourage people to borrow less against the equity in their homes.
- Increase the Social Security tax income cap, raise payroll taxes and put a cap on Social Security spousal benefits.
- Limit the amount of assets that can be held in retirement plans that receive tax advantages.
- Do not allow non-spousal beneficiaries of retirement accounts to keep assets in the account for longer than five years.
These proposals are recommendations only and are not pending legislation.
Reference: Bloomberg (June 9, 2016) “High Earners Are Going to Hate These Retirement Proposals.”