Tax plan proposes changes to 401K - WNEM TV 5

Tax plan proposes changes to 401K

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FLINT, MI (WNEM) -

The president's new tax proposal could make big changes to your 401K.

Contributions to your 401K are tax free until you withdraw the money, but the new tax plan could make you pay the tax before you put the money away.

"I would not like that at all," said Angela McKinnon, resident.

She said she is saving as much as she can. She doesn't want the government to put a cap on the amount of tax-deferred money people can save for retirement.

"How is your money going to grow? If you can't put that much money into it. Social Security might not be there when we get older. So you need some kind of investment," McKinnon said.

Sherri Stephens works as a financial adviser in Flint. She said currently people can put up to $18,000 into their 401K without initial taxes.

Under at least one plan making its way through Congress, the amount would drop to as low as $2,400.

Stephens thinks that would be bad for people trying to save for their futures. She said if anything, most Americans don't save enough for their retirement.

"I think most people that give financial advice would agree that that would be hugely detrimental to retirees in this country," Stephens said.

Stephens has worked in personal finance for 40 years. She highly doubts Congress will ever pass that cap.

"I would be really surprised if something like that could go through. Because again, so many people struggle to save. Traditional pensions are gone," Stephens said.

President Donald Trump is firing back saying nothing is going to happen to retirement plans.

Monday morning the president tweeted, "There will be no change to your 401(k). This has always been a great and popular middle class tax break that works and it stays!"

As for McKinnon, she is cautiously optimistic the cap idea will be shelved. She is looking forward to retirement and saving every penny she can.

"It means a lot because I don't have to put as much in because what they're putting in. I put in 6 percent and they match me up to four," McKinnon said.

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