How many low and middle class people are contributing $1500 per month to their IRA?
I don’t know anything about the plan, the off-sets, etc., to have an opinion on the overall plan. $2400 per year sounds too low, but I’m not married to a $18k limit, either.
1) I assume you mean $1500 to their 401k, not IRA (as IRA has a $5500 limit).
2) It depends as to whether employer matching contributions count toward this new limit (which I believe it does). Back when I was making $25k, I contributed 5% and my small-business employer matched, so that was $2500 a year (in 2008). Heck, even if you’re making $50k and have an average match (according to Vanguard) of 50 cents per dollar you contribute, up to 3% of your salary, you’d be at $4500.
Now, it may not apply to Roth’s, but my current employer is the first one I’ve had to offer a Roth option, and I’m sure my past employers were not unique, meaning a lot of people would be in fact hurt. And employer matches can only go into traditional 401ks, because otherwise neither the contribution nor capital gains would ever be taxed in a Roth. So that would cap employer matches at $2400 a year, which feels like it’d directly take money directly away from millions of workers.
The nation already has a looming retirement savings crisis — any policy that reduces incentives for long-term Savings, without introducing a better incentive, is a poor one. There’s a lot of good arguments about the problems of 401ks, but this addresses none of them.