More than 30 years ago, lawmakers made a deal with Americans: Set up a retirement nest egg and we'll let you fill it with tax-free money. A financially troubled Washington now plans to break its word.
Nothing brought ordinary Americans into the world of investing like 401(k)s. Named after a subsection of the Internal Revenue Code, these retirement savings accounts have become a wildly popular alternative to traditional employer pensions, and are today owned by a sizeable majority of Americans at or near retirement.
Through 401(k)s, an employee — not the company he or she works for — decides just how aggressive or cautious he wants to be with money set aside for the autumnal years. Employers usually offer a series of stock, bond and money market investment funds, allowing a worker to choose and mix as he or she likes.
Not only would Americans see their own retirement accounts grow as the years passed, but they could rest easy knowing that the interest earned in their 401(k) won't be taxed before withdrawal at retirement time — or, in the case of the after-tax dollars in a Roth 401(k), that their money can be withdrawn tax-free.
keyboard shortcuts: V vote up article J next comment K previous comment