How Election-Year Tax Changes Could Affect Retirement Savings

Your retirement nest egg could benefit or face new tax rules, depending on what lawmakers do after the elections.

Congress is considering proposals that could expand federal retirement savings incentives for eligible workers while requiring some wealthy Americans to take money out of their accounts.

The impact would not be limited to high earners. Changes to tax policy could also influence how much you put into a 401(k), when you convert a traditional IRA to a Roth IRA, and how much of your retirement money you ultimately keep.

Here’s a closer look at what is being discussed.

Potential Boosts for Savers

“Someone putting away $125 a month for retirement has a different level of concern compared to someone with $12 million put away,” said Ruth White, a tax professional and co-founder of White Sands Tax Services.

Two proposals being debated could help low- and middle-income workers build retirement savings.

The Saver's Match Enhancement Act would raise the maximum federal retirement savings match from $1,000 to $2,000 and widen income eligibility.

The bipartisan Retirement Savings for Americans Act would establish a retirement savings program for workers who do not have access to an employer-sponsored plan.

White said that under that proposal, a qualifying worker saving $125 a month could receive $1,500 a year in government contributions, effectively doubling retirement savings.

Possible New Rules for Wealthier Savers

Accounts with balances above $10 million could face a different set of restrictions.

Legislation introduced by Sen. Ron Wyden, D-Ore., and Rep. Richard Neal, D-Mass., seeks to stop wealthy Americans from using retirement accounts as multimillion-dollar tax shelters.

The proposal would bar individuals earning more than $400,000, or married couples earning more than $450,000, from contributing to IRAs if their retirement balances exceed $10 million. It would also eventually require withdrawals that could lead to additional taxes.

Roth Conversions and Tax Bills

The next Congress could raise or lower federal income tax rates, which would change the cost of converting traditional IRA savings into Roth IRAs.

Chad Cummings, a tax attorney and business professor, offered an example of how much that could matter.

Someone converting $50,000 would owe $12,000 in federal taxes at a 24% rate, compared with $16,000 at 32%, assuming the full amount is taxed at either rate.

“That is $4,000 for the same transaction, without considering state taxes,” Cummings said.

He also noted that conversions can raise Medicare premiums two years later and cannot be undone once the tax bill comes due.

Given those risks, experts say retirement savers should not rush into Roth conversions based only on expectations about future tax changes.

What Elections Can and Cannot Change

“Campaign promises do not amend the Internal Revenue Code,” Cummings said.

Elections may alter which party controls Congress and affect which retirement proposals gain momentum. But retirement account rules do not change unless legislation clears both chambers of Congress and becomes law.

The 2025 federal tax law made current individual income tax rates permanent. While future legislation could still alter them, there is no automatic rate increase scheduled after the elections.

“Continue maximizing employer matches, reviewing contribution limits, and evaluating Roth conversion opportunities based on your current tax situation,” said Christopher Stroup, a certified financial planner and founder of Silicon Beach Financial.

The election could eventually reshape retirement savings rules, but financial decisions should be based on the tax laws that are actually in effect. As Stroup put it, “Making major retirement decisions based on campaign promises…is premature until legislation is enacted.”