Republicans are promising big tax cuts for millions of Americans this year.
But how will they pay for them?
A new study says the GOP tax bill will result in a loss of millions of dollars in retirement savings for Americans.
The analysis comes from the National Committee to Protect Social Security, a group that aims to ensure Social Security stays solvent.
In addition, the analysis finds that the bill would eliminate or significantly reduce the benefits of Social Security’s defined contribution plan, the program that helps seniors save for retirement.
According to the National Social Security Trustees Association, the bill will eliminate the ability for seniors to withdraw their retirement savings if they have certain health problems.
Those changes could leave many seniors worse off than they are now, and some experts say that would be bad news for them.
“I think what people need to understand is that there’s a very small portion of the population that will benefit, and the rest of the society is going to be hurt,” said Michael Woodford, president of the National Association of Retired Persons.
“If the people that would benefit the most are the people with the highest incomes, then the savings rate for retirees will be lower.
It’s a huge loss of money for retirees.
It will be a huge, huge hit on retirement savings.”
Woodford says that’s because the 401(K) plan provides for a maximum benefit that varies from state to state, based on the percentage of an individual’s income in the state.
In the 2018 budget, House Republicans voted to eliminate the cap.
The nonpartisan Congressional Budget Office (CBO) estimates that in 2020, the Republican tax bill would reduce the Social Security trust fund by $2.5 trillion.
The Republican plan would also reduce the annual income cap for workers who make less than $250,000.
If a worker earns $50,000, for example, they’d be required to contribute $2,000 into the Social and Medicare Trust Funds, which the Republican bill would limit the maximum they can contribute.
If they contribute $100,000 more, they would be limited to $2 to $4,000 in contributions a year.
In states that expanded the retirement age, workers in those states could withdraw their money from the 401k plan.
Under the Republican plan, workers would be able to withdraw up to $5,000 from the plan.
For retirees in the highest-income tax brackets, it would be more difficult.
“It’s very hard to understand how this could benefit anyone,” said Woodford.
“The average American retiree in 2019, the median income in 2019 would be about $113,000.”
The Congressional Budget office estimates that, in 2020 and 2021, retirees will have a net loss of $7,300.
The average retirement savings of retirees in those two years is $4.2 million, according to the nonpartisan Congressional Research Service.
The number of people who have a 401(p) plan would fall by $6.3 billion.
The CBO predicts that, for workers in the top 25 percent of earners, the plan would have a $2 trillion net loss in 2018 and 2021.
For workers in middle- and low-income households, the cost would be $6 billion in 2019 and 2021 for the 401-k and the Trump administration estimates it would cost an additional $1.3 trillion to provide the same amount of benefit.
The loss of benefits for people in the middle of the income distribution would be even worse.
According a 2018 analysis from the nonpartisan Joint Committee on Taxation, the House bill would cost the middle class an additional 1.3 percent of its annual income in 2020.
In 2020, middle-class workers would have to contribute an additional 3.5 percent of their income to their 401(q) plan, while those in the lowest-income brackets would have an additional 5.9 percent of taxable income to contribute.
The plan would cost taxpayers an additional 6.3 million in 2020 under the current tax law.
The Trump administration says it would provide a $4 trillion boost to the Social Protection Trust Fund, but Woodford argues that will only cover about a quarter of the total loss.
That’s because it would cut Social Security benefits by $500 billion over the next decade.
He estimates that if Republicans cut benefits to a level that they’ve not historically cut, they could cut benefits by more than $1 trillion.
“There are a lot of things we can do to save people from the worst-case scenario, but that’s not the only thing that we can’t do,” Woodford said.
“You can’t just go to a $500 trillion deficit and not even come close to solving it.”
But he says that the Republican’s plan to reduce the number of benefits available to workers is a “huge mistake.”
“I think that the idea that they’re going to save all the money is just a big overstatement,” he said.
According the CBO, the total benefits of the 401K would decrease by $1,500 per year