Politics

Rep. Kevin Brady says lawmakers considering raising 401(k) contribution limit

Key Points
  • Tax writers are considering raising the 401(k) contribution limit to $20,000 or more.
  • Earlier this week, lawmakers had been reportedly considering lowering that limit to $2,400.
  • Rep. Kevin Brady said his goal is to help people save more and start saving earlier.
Lawmakers looking at raising 401(k) contribution limits to $20K
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Lawmakers looking at raising 401(k) contribution limits to $20K

Lawmakers are considering increasing the contribution limit for a popular retirement savings plan, CNBC has learned.

CNBC has confirmed that lawmakers are now looking at raising the 401(k) contribution limit to $20,000 or more. That is a reversal from earlier reports that lawmakers were considering reducing that tax-deductible amount to as low as $2,400.

Earlier, top House tax writer Rep. Kevin Brady said that he would like changes to "help people save more, sooner." The chairman of the House Ways and Means Committee said he has talked to President Donald Trump twice this week about 401(k)s.

"He'd like to raise the limits so people can save more in those plans. So do I. I think that's a good start," Brady said.

Under current law, taxpayers can put a specified amount in 401(k) retirement savings plans without paying taxes upfront. Lowering the amount could help to raise tax revenue as the GOP looks for ways to offset across-the-board individual and corporate tax cuts.

The amount workers can contribute to a 401(k) rises to $18,500 next year, up from $18,000 in 2017. People age 50 and older can tack on a so-called catch-up contribution of $6,000.

Potential changes to the popular retirement savings have been all over the map. On Monday, Trump emphatically tweeted that "there will be NO change to your 401(k)." He called the 401(k) tax benefit a "great and popular middle class tax break that works."

@realDonaldTrump: There will be NO change to your 401(k). This has always been a great and popular middle class tax break that works, and it stays!

But on Wednesday afternoon, the president appeared to back off that tweet, calling 401(k) plans "very important." Trump said he didn't want a proposal to change them to "go too far."

— CNBC's Ylan Mui and Jacob Pramuk contributed to this report.