Proposals to increase payroll taxes to boost revenue and expand Social Security are facing opposition from some lawmakers who believe millennial workers cannot afford to bear the brunt of higher payroll taxes, according to this article on MarketWatch. The House Ways and Means Social Security subcommittee Chair Rep. John Larson (D-Conn.), introduced a bill that would increase the payroll tax by .1 percentage points every year until it reaches 14.8% in 2043, as well as increase the earnings cap for the tax to $400,000 (it currently stands at $132,900). Ranking Republican subcommittee member Tom Reed said a higher payroll tax would unfairly hurt young people as they struggle “to pay for their rent and their next meal. We want to empower the next generation with tools to save for their retirement in a way that works best for them.”
Not saving for retirement early is one of the major money decisions that Americans regret, according to this CNBC article, citing a survey by SurveyMonkey. Many Americans also regret spending a large amount of money on their wedding and dipping into their 401(k)s and other retirement accounts when they changed jobs. Cashing out retirement assets is a big mistake, as premature distributions will reduce their income in retirement and trigger tax bill, fees and early withdrawal penalty.
IRA investors who consider converting their traditional assets into a Roth should think twice before making a decision, according to this opinion article on MarketWatch. That's because such a move presents federal and state tax pitfalls. For example, if clients made a nondeductible contribution to a traditional IRA and convert the funds into a Roth, a portion of the converted amount will be subject to taxes based on the percentage of deductible contributions made to the traditional IRA.
Clients should not stick to the traditional notion of retirement that their parents had and instead modify their concept given their own realities, according to this article from Forbes. The younger generation of workers have 401(k) plans instead of defined pension plans, will live longer than their parents and face the rising costs of health care. “Retirement is no longer associated with a gold watch and metaphoric sunsets. Today’s workers expect to extend their working lives beyond age 65. Their vision of retirement balances continued work with freedom and more time to pursue personal interests,” says an expert.
