As seen in the House and Senate tax reform bills, lawmakers have decided that making tax changes to 401(k) and other retirement options is too politically risky. Understandably, there is no doubt that Americans are attached to these tax incentives.
Unfortunately, however, studies show that Americans do not take full advantage of these retirement savings incentives, whether because of misplaced optimism about the future or an inability to save due to economic factors such as low wage growth. Or, perhaps the culprit is people’s natural attraction to instant rather than delayed gratification, which explains why some people save more for their annual vacation than for retirement. As a result, almost half of all working-age families have no retirement account savings, and the median for families with retirement savings was approximately $60k.
Yet, saving for retirement has never been more important than it is today. Social security funds will run dry by 2034. Pensions are a dinosaur of the past. Life expectancy is increasing.
Even saving for retirement on a minor scale today can help people in the future, which is particularly true for younger people like Millennials. So, to celebrate the continued tax incentives for retirement saving, perhaps contribute to your 401(k), IRA, or Roth IRA by the year’s end—and, if you are feeling particularly grateful for the tax incentives, make a New Year’s resolution to save more next year.