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Susan Tompor: The 401(k) looks better after a bull market but what happens in Washington could hurt

Susan Tompor, Detroit Free Press on

Published in Home and Consumer News

Right now, money that's saved pre-tax is later taxed when its withdrawn from a regular 401(k) during retirement.

Expect more details and more debate to come.

Right now, some financial advisers are suggesting that workers aim to contribute as much as they can under the current limits -- particularly in light of the uncertain tax picture.

Earlier this month, the Internal Revenue Service announced some cost-of-living adjustments to pension plans and stated that the maximum contribution consumers can make to their 401(k) will be $18,500 in 2018. That's up from $18,000 in 2017.

The extra catch-up contribution limit for employees aged 50 and older who participate in a 401(k) will remain unchanged at $6,000 in 2018.

The 401(k) story, of course, has not always been a happy one. Boomers who saw their higher-paying jobs eliminated in the Great Recession -- and watched their retirement savings vanish -- weren't always able to add more savings into the stock market and wait for better days ahead.

Many everyday savers who fled in panic did not jump back into stocks for many years, if ever. Five years after the crisis, a quarter of those who sold out of stocks still hadn't reinvested in stocks, Fidelity said,

Even now, many people still don't feel all that comfortable with their 401(k) plans.

According to the Fidelity Investments Ten Years Later analysis, only 38 percent of respondents feel more confident about their investment approach now than they did in 2007. That's down from 48 percent in a similar survey that Fidelity conducted five years ago.


Today's investors said the biggest changes they made in the years after the recession was reducing debt and increasing savings rates. Fidelity said savings rates for 401(k) customers have trended upward in the decade.

About 25 percent said the crisis caused them to reassess how much risk they could handle and shift to a more conservative investment approach.

The Fidelity analysis was based on an online survey conducted in August of more than 1,200 Americans who began investing before the crisis. In addition, Fidelity analyzed the behavior of nearly 1.5 million participants in Fidelity workplace retirement plans and more than 5 million clients with IRAs from June 2007 through June 2017.

About The Writer

Susan Tompor is the personal finance columnist for the Detroit Free Press. She can be reached at

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