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 a 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.
