Ever wonder if your 401(k) is truly secure? It’s probably not something you think about every day, but with the government under growing budget pressure, the future of these retirement plans is becoming a hot topic. Don’t worry, it’s not the money in your account that’s at risk. Instead, experts are concerned that the tax benefits that make employer-sponsored retirement plans so attractive might be due for a major overhaul.

End of the 401(k)? According to the US Treasury Department, tax preferences for retirement plans cost the government over $185B in 2019. What was once a fringe discussion among researchers is now gaining traction with both conservatives and liberals, who are questioning the tax-advantaged status of 401(k) plans.

• Bloomberg Opinion’s Allison Schrager believes the 401(k) as we know it will be “gone within a decade,” arguing that eliminating these tax perks could help shore up government funding.
• And since many workers aren’t fully motivated by the tax treatments or employer matches, removing these advantages might not face as much backlash as increasing tax rates.

What Comes After the 401(k)?

Public authorities have clear incentives to eliminate these tax breaks — it would free up more money for spending or paying down debt. Critics of the 401(k) also argue the strategies aren’t as effective as intended. Many Americans haven’t increased their savings through these programs, and only a wealthy few have fully taken advantage of the tax benefits.

• Only 14% of 401(k) savers hit the $22.5K contribution limit in 2023 — and even then, just 53% of Americans earning over $150K maxed out their contributions.
• According to Vanguard, the median 65-year-old saver has just $88.4K in their workplace retirement account — far below the 10x annual salary recommended for retirement.

Here to stay — for now: At the moment, there are no concrete plans to change the 401(k) — or similar tax-qualified accounts like SEPs, IRAs, or 403(b)s. Even if changes do come, the money already in these accounts is safe. But with one of the most valuable tax breaks for Americans potentially at risk, it might be wise to make the most of your 401(k) benefits while they’re here. After all, those perks might be gone before you are.