Studies / Reports / Fact Sheets

The FTT and You: Your 401K and 529 Plans

401K

As of March 2019, 401k plans held an estimated total of $5.7 trillion in the U.S. and represented more than 19% of the $29.1 trillion in U.S. retirement assets. This is an increase from 2010, when 401(k) assets were valued at $3.1 trillion in assets under management and represented 17% of the U.S. retirement market.

The FTT would have a negative impact on 401K and IRA holders across the country, with a projected cost of $281.00 in FTT taxes per year for an average 401k portfolio or IRA plan with $100,000. The cost of an FTT over a lifetime of a 401k account of this size would be $64,232 after 40 years.

The impact of an FTT on American savers including 401k holders has been noted to include a 3% reduction in retirement savings over a working life.

529 Plans

The FTT would negatively impact 529 College Savings Plan Portfolios across the country, with projected costs ranging from $2 million to $19 million for a plan portfolio with a size of $2 billion to $12 billion, respectively.

529 plans are a widely-used tool for families to save for their children’s education costs, with over 44% of parents utilizing 529 plans to help save for college. In 2018, over 13.6 million families utilized 529 tax-advantaged savings plans for educational expenses. The total assets under management in 529 plans reached $328.9 billion, according to a prior report from the College Savings Plans Network.

For a 529 Plan Portfolio with $12 billion in assets under management, the projected impact of The Inclusive Prosperity Act of 2019 is $19 million in annual FTT. In all, the impact of the proposed FTT on such a 529 plan would be equivalent to the cost of instate tuition for approximately 1,906 students per year.

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