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Trump's tax plan won't affect 401(k) deductions, White House says after confusion

  • The White House says President Trump's tax plan will not affect 401(k) contributions.
  • Trump administration officials had created confusion around the policy.

The White House said Thursday that President Donald Trump's tax plan will not affect 401(k) contributions, after it created confusion that it could eliminate a deduction for participants in the plans.

Trump administration officials lacked consistency on that part of the tax proposal since they unveiled an outline of the president's plan on Wednesday. The White House proposed to remove nearly all tax deductions, including those at the state and local level.

During his daily briefing Thursday, press secretary Sean Spicer was asked if Trump's plan would affect 401(k) contributors. Spicer said that the plan protected charitable giving and mortgage deductions and "that's it."

He was pressed about it again during the briefing and backpedaled, telling reporters to "let me get back to you on that."

After the briefing, the White House said Trump's plan would not, in fact, affect 401(k) contributions.

Contributions to a 401(k) reduce taxable income and earnings in the accounts grow tax-free until withdrawn.

Federal income tax deductions on retirement contributions aim to encourage more saving. It is not clear, however, how much the tax benefits affect the amount of money Americans put aside.

Aside from your house, your workplace retirement savings plan likely makes up the largest chunk of your overall wealth. The average 401(k) balance in the fourth quarter of 2016 hit an all-time high of $92,500, according to data from Fidelity Investments.

— CNBC's Eamon Javers and Tom Anderson contributed to this report

Watch: Improving your 401(k)