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Why you should be worried about the 401(k) battle

(Photo from Flickr user 401 (K 2012 used under Creative Commons license)
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On Twitter, a user said I am overreacting to news that some Republicans are considering drastically reducing the amount people can put in their 401(k).

If you are unaware of this issue, get caught up fast because it has the potential to drastically affect your retirement savings.

Congress might take away the 401(k) for the wrong reason

As my Washington Post colleague Heather Long wrote last week: “More than 62 million Americans — about a third of the nation’s adult population — have put money into 401(k) retirement plans. Now Republicans in Congress are seriously debating changing the program, dramatically reducing the amount of money Americans can contribute tax-free to their 401(k) account from $18,000 a year now to just $2,400 a year. Does this make any sense? Short answer: Changes are needed, but not like this.”

Matthew Rutledge, a research economist at the Center for Retirement Research at Boston College told Long: “I think it will discourage retirement saving.”

Read this: Republicans Seem Bizarrely Determined to Pay for Their Tax Cuts by Crushing 401(k)s

Lots of folks had some choice words about the proposed plan. From Color of Money Live: What to make of GOP plans to cap your 401(k) contributions

What do you think of any move to cut the tax-deferred contributions for your employer-sponsored workplace retirement plan?

Send your comments to

I am not overreacting to the possible attack of your 401(k). And I intend to harp on this issue until the idiotic idea to tamper with workplace retirement plans is put to death.

How important is this to retirement? Read and be inspired by this: The 401(k) millionaire next door

Your help is welcome
There are a lot of you who may have suggestions for how to help someone after reading their comments in this newsletter.

So this week, I’m introducing another feature. In this section, I welcome advice or expertise you may have to help other readers. Send your comments to Please include your name, city and state.

To start, last week a number of people shared their feelings about the recent announcement that Social Security checks would be getting a cost of living increase. John Wertenbach from Virginia, a disabled retired veteran, talked about how hard it is to live on just Social Security. He gets $1,400 a month.

“There have been months where I go hungry the last week of the month because of those incidental payments that pop up,” he wrote. “I guess its better than nothing and I know a lot of people are worse off than me but it’s very hard to live like this. But what other option is there?”

I listed some resources that could help. But the outpouring of concern for Wertenbach was heartwarming and a few people offer their own suggestions.

Bruce McVeigh, a chartered financial consultant, wrote, “You should let John know that he should contact the Veteran’s Administration about any available disability benefits. He may be able to get disability from the VA. And please tell him, ‘Thank you for your service.’”

Wertenbach said he was disabled and has been unable to work since 2007 because of a motorcycle accident.

This is what the Department of Veterans Affairs says, “Disability Compensation is a tax free monetary benefit paid to Veterans with disabilities that are the result of a disease or injury incurred or aggravated during active military service. Compensation may also be paid for post-service disabilities that are considered related or secondary to disabilities occurring in service and for disabilities presumed to be related to circumstances of military service, even though they may arise after service. Generally, the degrees of disability specified are also designed to compensate for considerable loss of working time from exacerbations or illnesses

So the disability has to be service-connected. But McVeigh is right, if you are a veteran and disabled it never hurts to inquire whether you may qualify for help.

Another reader, John, wrote, “Mr. Wertenbach’s situation is most concerning to me. I was an infantry lieutenant. A man who did three tours and is now only 67 was a young soldier back in the day. He might qualify for the VA special pension as his earnings appear to be under the threshold. He should definitely apply, and ask the VA for assistance making his application. I did one for another veteran, it’s six pages of questions and not easy to finish. The review period is three months or more, but if he’s approved the pension payments begin from the date he files his application. If Mr. W. were my buddy I’d ask him to look into a senior housing project in his area. I know several veterans living comfortably in these.”

Here’s some additional information about Aid & Attendance and Housebound

Again from the VA: “Veterans and survivors who are eligible for a VA pension and require the aid and attendance of another person, or are housebound, may be eligible for additional monetary payment. These benefits are paid in addition to monthly pension.”

There is a lot of helpful information about this program at You’ll find advice, resources and links. You will want to read everything you can because the application process can be time consuming and it can take months before an application is approved. But it’s worth the effort.

Here’s a column with additional information on the Aid and Attendance program for veterans: Study assisted-living options for aging parents

Retirement rants and raves
I’m interested in your experiences or concerns about retirement or aging.

This space is yours. It’s a chance for you to express what’s on your mind. Send your comments to Please include your name, city and state. In the subject line put “Retirement Rants and Raves.”

Tammy wrote in about a situation I find all too often. This would be a good example of “Your help is welcome” feature. Send your comments to

She writes: “I’m not a retiree, but I am writing because my mom is and ever since she became a retiree it’s caused a lot of financial problems for her and our family. For as long as I can remember, she has never really budgeted nor did she teach any of her kids how to budget. At age 62, she was laid off from a high-paying job that supported a lavish lifestyle. She did not save for a 401(k), nor put aside any savings I’m aware of. She has no income aside from what Social Security gives her and what her husband’s retirement brings in. Through serious family discussions, she’s agreed to put her home (that she doesn’t live in mind you) on the market for $260,000. In the market (a very rural town with a population of 5,000) homes are not selling for anywhere near that. This house could literally sit there for 10 years.”

Here’s where I’d love your input. Tammy continues, “My question for you all is what do I do? She clearly isn’t going to pay it off and I’m worried, I’ll get stuck with the debt as time passes. Her health is getting worse and I don’t believe she has health insurance, home insurance on the house for sale, a will, or anything that remotely prepares for the future. Is this a generational thing to want to hold onto things? It seems cut and dry to me, you owe money on it, you don’t live there, sell it and be done. I love my mom don’t get me wrong. But because of her, I have completely opposite feelings about retiring. In fact, I’ve been saving since I was 25 (I’m 30, now). Am I missing something?”

There’s so much to unpack here.

But I’ll start with this. Unless Tammy co-signed on any of her mother’s debts, she’s not personally liable for them when her mother dies.

Here are some articles I recommend to answer Tammy questions:
From Am I Responsible for My Parents’ Debts?

From NerdWallet: Broke Parents? When Their Medical Debts Could Be Yours

From Time: What to Do if Your Aging Parents Are Going Broke

Newsletter comments policy
Please note it is my personal policy to identify readers who respond to questions I ask in my newsletters. I find it encourages thoughtful and civil conversation. I want my newsletters to be a safe place to express your opinion. On sensitive matters or upon request, I’m happy to include just your first name and/or last initial. But I prefer not to post anonymous comments (I do make exceptions when I’m asking questions that might reveal sensitive information or cause conflict.)

Have a question about your finances? Michelle Singletary has a weekly live chat every Thursday at noon where she discusses financial dilemmas with readers. You can also write to Michelle directly by sending an email to Personal responses may not be possible, and comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read more Color of Money columns, go here.

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