I couldn't really afford to fund mine until we bought a house. The tax savings from the house allowed me to afford maxing out the 401k, which of course wound up making my tax bill go down even more.
I was making a very nice salary at the time. I realized then, and I still realize now, that the only people who benefit from 401k's are people who have a lot of money in the first place. Mostly that's either childless people or people who keep it down to maximum two kids AND are making very nice salaries. Anyone else who's not really really rich in the first place is not going to be able to use it much if at all. If you have a lot of kids you have all kinds of other expenses you have to save for and worry about. If you're poor it does you no good. So the lost taxes are going to subsidize upper income people.
That's what the article is actually addressing.
Also, if you really want to know who benefits, look up the limits on SEP-IRAs:
The total contribution to a SEP-IRA account should not exceed the lesser of 25% of income (20% for self-employed before self-employed tax deduction is included; see below) or $42,000 for 2005, $44,000 for 2006, $45,000 for 2007; $46,000 for 2008; $49,000 for 2009. For 2010 and 2011, the maximum SEP IRA contribution remains at $49,000 and the compensation used in the calculation is capped at $245,000 (e.g., an employer making a 10% contribution cannot contribute more than $24,500 for any employee). For 2012 the maximum contribution is $50,000. Contributions may be made to the plan up until the date that the employer's return is due for that year.
This is why the opposition to the repeal of the Bush tax cuts was so utterly dishonest. Anyone making 250k would NOT have been paying anything like the maximum rate had they been repealed for the 250k+ set. In order to begin to pay that you would have had to have 250k in TAXABLE income. For anyone making that kind of money, their actual income is a lot higher than their taxable income because of things like the 401k/IRA/SEP-IRA deductions, which are actually adjustments to gross income. In other words, before you figure out anything else these are taken right off your income because the logic is you will collect it on retirement. So you could make close to 300k and have AGI of only 250k, and then start taking your deductions from that amount. By the time you're done you pay tax on, say, 175k and so the expiry of the Bush tax cuts, had that been applied to people making more than 250k, still would not touch you.
Makes me pissed just typing that.
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