Personal Finance

Nobel Laureate Richard Thaler backs lower 401(k) contribution limits

Key Points
  • Richard Thaler, a professor of behavioral science and economics at the University of Chicago Booth School of Business, tweeted what he called "unpopular" support for reducing 401(k) contribution limits.
  • The academic's support comes as lawmakers in Washington are sparring over whether to include changes to 401(k) plans as part of tax reform.
Richard Thaler on Pro Talks

Richard H. Thaler, who for his contributions to the field of behavioral economics earlier this month, took to Twitter on Thursday to voice his support for lowering limits for pretax contributions to 401(k) plans.

Most workers who have access to 401(k) plans will be able to invest up to $18,500 next year, plus an additional $6,000 in catch-up contributions if they are 50 and over.

But lawmakers in Washington have been discussing possibly lowering that limit to as low as $2,400 amid the debate over tax reform.

President Donald Trump that there should be no change to 401(k) plans. Rep. Kevin Brady, a top tax writer in the House of Representatives, said on Wednesday that those changes are still under consideration.

When Thaler was asked on Twitter whether a $2,400 limit to pretax savings would indicate the government was endorsing that amount as adequate for retirement savings, he said other options, such as a 10 percent deferral, could offset that.

"No reason to subsidize saving by the rich," Thaler said.

Thaler was not immediately available for comment.

The popular savings plans had about $5.1 trillion in assets as of June, according to the Investment Company Institute, an association of investment companies, and about 54 million workers actively participated in 401(k) plans as of 2015.

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