What to watch
401(k) investors unsettled by D.C. wavering
The waffling in Washington over what taxes to cut, where they will get the money to pay for the lost revenue and many other undecided money-related policy issues has had an unsettling effect on Main Street investors.
It took a tweet from President Trump to squash fears that the days of maxing out one’s 401(k) with up to $18,000 in pretax dollars might be ending. The mere thought of the government slashing that valuable tax deduction put a scare into 401(k) investors. But Trump on Monday punctured the trial balloon floated by Republicans trying to gut 401(k) benefits to pay for tax cuts with this tweet: “There will be NO change to your 401(k). This has always been a great and popular middle class tax break that works, and it stays!” That put that worry to rest. More good news: The IRS said it was upping the 401(k) max by $500 in 2018 to $18,500.
It’s not unusual for Americans to get skittish when Congress debates new laws that impact their pocketbook, says Tom Block, a Washington Policy Strategist for Fundstrat Global Advisors. “Everything is on the table,” he says.
That theory is also a reason why folks reading about Trump’s $1.5 trillion tax cut over the next decade are again wondering if the U.S. will have enough cash to fund Social Security a decade from now — even though the Social Security Administration this week said it was giving recipients a 2% benefit increase in 2018 and Trump repeatedly has said he will not touch the retirement benefit.