Problem: The 401(k) system means that my employer determines my tax rate on retirement savings. This means that any workers who do not have access to 401(k) plans through their employers have a higher tax rate on their retiment savings. This usually means that low-wage, hourly, and part-time employees pay higher tax rates on their retirement savings; obviously unfair.

Solution: Combine 401(k) into existing IRA program and eliminate old 401(k) program. In effect, increase the IRA contribution amount to $18k and eliminate 401(k)s.

Benefit: Everyone will have access to tax-advantaged retirement savings plans, not just those fortunate enough to work for companies that offer 401(k)s. Eliminates administrative cost for businesses. Simplifies tax code. Also, this plan helps small businesses by letting them compete more fairly with large companies that can offer 401(k)s.

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Labels: Public Policy