Tax Relief: Retirement Savings

When the President of the United States signed into law a $1.3 trillion tax cut known as “The Economic Growth and Tax Relief Reconciliation Act of 2001” (EGTRRA), it became the largest tax reduction enacted in the past twenty years. However, US taxpayers should realize that there are characteristics of the Act that are strictly time-related and many of the significant changes of the Act will be gradually phased-in, only coming into play closer to 2010 rather than when they feel it should have in 2001. It is also interesting to note that these slow phase-ins were speeded up by the “Jobs and Growth Tax Relief Reconciliation Act of 2003” (JGTRRA); and, this took away many of the waiting periods brought about by the changes of EGTRRA.

In relationship to retirement saving, these Tax Relief Acts make changes that not only affect employers who sponsor such retirement plans; but, also the individual. Fortunately for the individual, the benefits have increased and, in terms of retirement plans, the Act provides for an increase in the limits on contributions, greater flexibility with regard to withdrawals, rollovers and the continuation of retirement plans, as well as greater funding security.


In terms of the affect that these Tax Relief Acts have had upon the business owner or employer, pertinent to retirement savings, the Acts are encouraging businesses to establish retirement savings plans. They also create a situation where the administration of such plans becomes far more streamlined, as well as allowing for an increase in the deductibility of contributions.

Essentially these Acts simplified plan rules and lowered retirement tax rates for both 401(k) and 403 (b) pension plans.

By: N.F.Centeno

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