Why is the 401(k) Tax Break Going Away?
Recently, the IRS (Internal Revenue Service - a revenue service for the US federal government, which collects taxes and implements the IRC [Internal Revenue Code]) passed a new policy. As of July 2023, individuals can only put a maximum of $22,500 into their 401(k) account. The 401(k) is a retirement plan to which you can make annual contributions (up to a limit). People above fifty can put an extra $7500 into their 401(k) accounts (a maximum of $30,000). These are called catch-up contributions. The IRS also states that individuals who earned more than $145,000 in the prior year must put extra money in their 401(k) accounts. Doing this helps generate income tax revenue for the government, as individuals must pay taxes every time they take money out of their 401(k) account. According to the IRS's new policy, people over fifty put their money in a Roth 401(k) account instead of the traditional one. In the traditional 401(k) account, tax benefits are given to the individual upfront....