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Obama’s budget bad for 401(k) savers

President Obama's proposed budget for 2015 would be a disaster for the millions of Americans who are underprepared for retirement. This plan would reduce the tax incentives for employers to offer retirement plans to their employees.

Let's examine the backdrop.

Our country's retirement situation is a mess. Social Security is grossly underfunded and is headed for insolvency, yet neither political party has the guts to offer any real solutions.

President Barack Obama's Fiscal Year 2015 Budget.Andrew Harrer | Bloomberg | Getty Images

Corporations killed their pension plans years ago because they couldn't afford them, while government pension schemes are beyond broke and causing havoc in many cities and municipalities.

The largest retirement-savings vehicle in the U.S. is the defined contribution plan—namely, the 401(k) plan. This is a plan in which employees may elect a portion of their paycheck to go into an account earmarked for retirement. They receive a tax deduction for the amount that is saved and will realize the taxes when the money is withdrawn during retirement.

Saving is hard for most of us, but it's not the tax deduction that makes the 401(k) so attractive. The real beauty of the 401(k) is that the money is yanked out of one's paycheck before the worker has a chance to spend it.

(Read more: Plan for independence, not retirement)

If you work for a Fortune 500 company, odds are you have a decent 401(k) plan and Obama's budget won't have much impact on you.

However, if you are like the millions of Americans who work for a small company, this budget may kill your chance for any sort of financial independence during retirement.

Obama's 2015 budget would reduce the tax incentive for business owners to establish and maintain a 401(k) plan. Currently, all employees can participate in a 401(k) plan, and all employees are able to avoid current taxation on the money they place into the plan.

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