Changes Could Lead Millions to Abandon Retirement Plans

BOSTON (MainStreet) -- The government officials considering changes to how retirement savings vehicles such as 401(k)s work may want to note a survey this year by the Employee Benefit Research Institute.

Nearly 90% of respondents said it was either "very important" or "somewhat important" to deduct their retirement contributions from their work pay, with one in four of these full-time workers saying they would reduce -- or stop -- their contributions if the ability to deduct them from their taxes were eliminated, a change Congress could announce as soon as December.

Taxation changes under consideration in Washington could affect how you save for retirement.

Despite the disputed claim changes would affect those primarily in higher-income brackets, Congress should note: Those earning between $15,000 and $25,000 had the most negative reaction to the notion of changing retirement plans, with nearly 57% saying they would reduce savings.

In an America without widespread pension plans, this could mean millions of the nation's poorest people turning more, if not exclusively, to Social Security to pay for all of their retirement needs, even though the system is painted by many politicians as already facing a crisis.

Such reliance is particularly troubling for 401(k) advocates because the average beneficiary gets only slightly more than $14,000 each year, hardly enough to retire comfortably with.

Attorney and CPA David White, president and founder of David B. White Financial in Bloomfield Hills, Mich., doesn't mince words as he watches the ongoing debate.

"The ramifications are very serious and severe," he says. "I think it would be a huge mistake to do this."