In an extremely hypocritical move, Congress considers taxing 401k contributions. Remember Congress benefits from a pension fully funded by taxpayers. The move would include taxing 401k contributions as well as other similar retirement programs.
The Federal Employees Retirement System is participated in by the members of Congress. Just how valuable is something like that? Per the Wall Street Journal:
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 also notes the difference between members of Congress and the average American retirement:
“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 that goes without mentioning how much Congress members make annually. $174,000.
Currently all contributions to 401k retirement plans are not subject to income tax. Any earnings on those retirement plans also are not subject to taxes, unless someone early withdraws them to live on.