Sunday, March 24, 2013

When does getting a check for $4K in the mail suck?

When you get it because your 401K plan has failed the IRS' non-discrimination test and the amount is being refunded from your 401K contribution for 2012 and will increase your taxable income in 2013!!! Boo. Sooooooooooooooooo annoying.

I do everything right to save for retirement and the government penalizes me at every turn -- my IRA contribution (which I max out every year) is not deductible. Now my only tax advantaged account which I am legally allowed to contribute $17,500 to (or whatever the # is) is reduced by several thousand dollars -- more than 20% of my contribution returned!!! I think the government should encourage everyone to save, and if "high income" savers save more they shouldn't be penalized. In reality, the government probably does not do this because they care about encouraging lower income savers, but because they want to get their hands on as much income as possible from high-income earners so they can tax it.  Ugh. Well, I'm just going to have to save more in my taxable account and spend less to make up for the government's constant blocking of my attempts to save in tax-advantaged accounts.

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