Under current law, taxpayers do not pay any tax on contributions to pre-tax retirement plans. A new proposal would replace the deduction with a 26% credit. In effect, lower-income earners (those in brackets lower than 26%) would reap a higher benefit by contributing to pre-tax retirement accounts by receiving 26 cents per dollar of contribution. Conversely, higher-income earners may have to begin paying tax on pre-tax retirement contributions. For example: If a taxpayer finds themselves in the 39.6% bracket and they contribute to their 401(k), they will receive a credit of only 26% and have to pay 13.6% on the contribution. If they are in the same tax bracket when they later distribute the money, they will have to pay an additional 39.6% tax. In total they will have paid 53.2% of tax on their retirement savings if the plan is passed as outlined.

For this assignment present both positive and negative consequences of the proposed tax law change with relation to the topic stated above: Assume that this is presented to your most valuable client.

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Making arrangements for retirement begins with considering your retirement objectives and how long you need to meet them At that point you need to take a gander at the sorts of retirement accounts tha... View the full answer