One of the starkest contrasts to Biden’s financial plans happens to be changes to retirement savings. Much of that comes down to tax credits. Right now, savers can contribute up to $19,500 in a defined contribution plan such as a 401K. Savers can deduct the amount saved from their taxable income. The argument is these favor people in higher income brackets. Not only can they save more, but they are also able to bypass more in taxes.
Biden’s plan reimagines this tax deduction as a flat refundable tax credit.
This means that anyone — regardless of the amount saved — would receive the same deduction percentage. While the Biden Campaign hasn’t officially put an amount on the credit, The Tax Policy Center predicts the amount would equal around 26% of an individual’s retirement contribution. This means a household earning about $80,000 per year would see the maximum deduction amount. Those above that income and saving more would see the value of their contributions reduced. For example, someone earning $600,000 would get the same tax break as someone making just $60,000. The idea is that those in higher brackets would still be ‘on the hook’ for more taxes.
Secondly, Biden is looking to make retirement savings mandatory and automatic. Right now, the number of workers without a 401k or pension plan is rising significantly and there is a major retirement crisis. Biden is looking to establish plans for these workers lost in the shuffle. While several of these plans had existed before — such as MyIRA — they have been closed. Biden would re-establish these plans and expand them to include more workers.