TERRIBLE: Congress Considers Taxing 401(K) Contributions
Here’s the height of hypocrisy: members of Congress, who share in a pension system fully funded by taxpayers, are thinking of cutting the benefits of contributing to 401(k) and similar retirement plans.
Members of Congress participate in the Federal Employees Retirement System. How valuable is that? The Wall Street Journal reports:
In 2015, the average taxpayer-funded annual pension received by recently retired members of Congress was $41,316. A representative or senator retiring in 2014 after 30 years in Congress would earn an annuity of roughly $104,600 to $130,500, according to the Congressional Research Service.
The Journal notes the difference between the average American and members of Congress: “Retirement savers in the private workforce pay outlandish management fees that can exceed 1% annually on lousy investment choices; members of Congress pay a maximum of 0.039% for funds that all but guarantee matching the market.Those expenses on a $10,000 investment can easily eat up at least $100 a year for regular retirement savers; fees on the same amount in a U.S. representative or senator’s account can’t exceed $3.90.”
And just how much do members of Congress make? $174,000 annually.
Money contributed to 401(k)s isn’t subject to current income tax. Future earnings on those accounts aren’t either unless you withdraw them to live on in retirement.