With the bear market red in the claw, with an equal opportunity bear market taking out solid stocks right and left, with panicked investors feeling like every headline is an explosion, comes this impenetrable stupidity:
Some Democrats in Congress have held hearings that included discussions of new proposals to tax 401K money. Specifically, the idea would be to eliminate most of the $80 bn in annual tax breaks that 401(k) investors receive. Which means a nearly $80 bn tax hike.
HeavyRetirement Losses
The idea to tax 401K funds comes at a time when the Social Security trust fund is deep in the red and investors have lost nearly half of their retirement savings--$2 tn--over the past 15 months, according to the Congressional Budget Office. Retirement accounts known as 401Ks had held nearly $5 tn in savings at the start of the year.
Democrats are expected to gain seats in both the House and the Senate in the coming election. A filibuster-proof 60-seat majority is a strong possibility in the Senate, which has historically been less receptive than the House to taxing retiree funds.
In early 1968 President Lyndon Johnson made a change in the budget presentation by including Social Security and all other trust funds in a "unified budget," which effectively let government use Social Security funds for its overall budget needs.
Gut-clenching Volatility
The Democrats' move comes as investor fear is rampant, as investors have been experiencing increasing acid reflux ever since the subprime crisis went viral in August 2007.
Wall Street is witnessing gigantic swings never before seen in the history of the stock market, with the S&P 500 Options Volatility Index (the VIX) repeatedly breaking through the unheard of 80 barrier, twice the 40 levels that were unthinkable even when oil hit $147 a barrel this past summer-making a VIX 50 the new VIX 40.
Congress's Support of Taxing 401Ks
House Democrats several weeks ago invited Teresa Ghilarducci, a professor at the New School of Social Research in New York City, to testify before Congress on her plan to eliminate the preferential tax treatment of 401K plans.
Specifically, Ghilarducci testified before the House Education and Labor Committee, chaired by Rep. George Miller, (D-Calif.), about her plan.
"We've invested $80 bn into subsidizing this activity," Miller reportedly said in testimony, referring to tax breaks allowed for 401K contributions and savings.
With savings rates going down, "what do we have to start to think about in Congress of whether or not we want to continue and invest that $80 bn for a policy that is not generating what we ... say it should?" Miller reportedly said.
House Education and Labor committee spokesman Aaron Albright emailed to say that the notion that Rep. Miller wants to tax 401K money is "absolutely ridiculous," adding "chairman Miller wants to preserve and strengthen 401K plans, not tax them."
Albright noted that the committee has called 11 witnesses, including retirement experts and advisors, over the last couple of weeks to assess the impact of the market's downturn on 401Ks. He added that the committee is looking at disclosure of fees that eat into savings, as well as other measures to strengthen 401Ks.
Rep. Jim McDermott, (D-Wash.), chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, has reportedly said that since "the savings rate isn't going up for the investment of $80 bn [in 401K tax breaks], we have to start to think about whether or not we want to continue to invest that $80 bn for a policy that's not generating what we now say it should."
The idea being that, despite their tax-deferred status, 401K funds are not doing much to add to the nation's savings rate.
Government Data Flawed
However, the government's measure of the US savings rate does not include stock market gains or real estate gains, which of course have been smacked hard during the credit crisis and economic downturn. And that means the government does not count in its official savings rate the $5 tn that was invested in 401K accounts at the start of the year.
The Expert's Tax Plan
The idea is to redirect 401K tax breaks to a new government system of guaranteed retirement accounts into which all US workers would be have to contribute.
Specifically, under Ghilarducci's plan, the tax breaks on 401K contributions and earnings would be eliminated.
Instead, all workers would get a $600 annual inflation-adjusted subsidy from the U.S. government. The sum would be inflation-indexed. Workers then would be forced to invest 5% of their pay in a guaranteed retirement account administered by the Social Security Administration.
That money in turn would then be invested in government bonds that would pay a teensy 3% a year, adjusted for inflation, less than half the inflation-adjusted 7% return the stock market has delivered.
"I want to stop the federal subsidy of 401Ks," Ghilarducci has said, adding, "401Ks can continue to exist, but they won't have the benefit of the subsidy of the tax break."
Tax Cuts Set to Expire
The idea to tax 401K accounts comes as a potential Obama Administration would let the Bush income tax cuts expire across the board.
That means even small businesses earning less than $250,000 a year would also see their taxes go up. The capital gains and dividend tax rates would also rise as well. Obama might also impose Social Security taxes on a higher level of wages and self-employment income.
Lower Taxes Help the Deficit?
As the US applies the paddles to the economy with record bailouts, a member of Congress during a recent hearing posed the question to Federal Reserve Chairman Ben Bernanke whether raising taxes during a downturn as a good idea. Bernanke's answer: No.
And experts say lower taxes actually help the deficit. Between 2004 and 2007, when the Bush tax cuts were in full flower, the budget deficit narrowed from $413 bn to $162 bn in large part thanks to rapid growth in tax revenue, the Economist Magazine notes.
This was caused not just by rising incomes, but also by a shift in the distribution of incomes to the wealthy, who pay the highest tax rates, the magazine says. Much of that wealth came from the credit boom which drove up financial profits, salaries and bonuses as well as property and stock values and related capital gains, it adds.
The US has added the equivalent of the gross domestic product of Great Britain and something like two Canadas and five Saudi Arabias since 2003. Between year-end 2002 and year-end 2007 U.S. growth exceeded the entire size of China's economy, Steve Forbes has noted.
However, Congress has virtually spent the amount in its bid to build a Supersize Me Government, spending that now sits squarely on the backs of taxpayers and entrepreneurs and which does not include the trillions of dollars in extra spending for the housing bailout and the bailout of Wall Street.
All proof positive that Congress has no more sense than a flock of geese.
The basic concept of this proposal seems to be allowing for tax breaks in other saving vehicles besides the 401K. That is a legitimate arguement if the government allows $80 bln/yr with the goal of increasing the rate at which Americans save and that rate is not increasing the way they want it to.
It doesn't make sense to spend $80 Bln on a new program if it is not delivering what was promised. Would you be against a reduction in the subsidy if you knew it would help out people who have savings plans other than 401K's? I do not have a 401K where I work so why should my portion of that $80 billion and all of the others who don't have 401K's subsidize those that do? This is that opposite side of that "socialism" coin. The vast magority of responses act as if everyone in America has a 401K and HOW DARE THE GOVERNMENT tax them. The fact is there a millions of hard working Americans that DO NOT have 401K's available to them and HOW DARE YOU demand that they subsidize YOUR investment vehicles.
IF YOU ARE GOING TO SUBSIDIZE SAVINGS PLANS, SUBSIDIZE THEM ALL IN A WAY THAT THEY ARE ALL EQUAL IN THEIR RETURNS OR SUBSISIZE NONE!
November 3, 2008 at 12:00 pm
Dollarsign
Elizabeth is wrong. A flock of geese have much more sense!
November 3, 2008 at 11:18 am
chip
i know people on welfare and they live better than me collecting over 25000 a year.i think i'm gonna go on welfare to. unless mccain wins there's no reason to work.
November 3, 2008 at 10:30 am
Scotty
You haven't seen panic yet. If this idea of shifting people's life savings into a goverment account ever gets legs. People panic when it comes to trusting the government with their future well being. It's my prediction the market will seize up.
Does this coincide with the elimination of SS? People will want the money they've paid into it. This is not good.
November 3, 2008 at 10:29 am
m abbott
Just who is this "tootie frootie" Theresa Ghilarducci with the New School of Social Research who is advising Congress on HER plan to eliminate the preferential tax treatment of 401K plans? We didn't elect her to Congress, did we? How much money did Ms. Ghilarducci get paid to research how the government can screw up my 401K plan?
Boy, the Democrats just don't get it -- advice from the New School of Social Research. I just hope she didn't suggest euthanizing everyone after the age of 65 or we are in big trouble in this country!
M Abbott
November 3, 2008 at 10:08 am
Eric Friese
"The idea is to redirect 401K tax breaks to a new government system of guaranteed retirement accounts into which all US workers would be have to contribute."
What about the social security tax that I'm paying now? I'm 26 now and I know I will never see that money again. Now they want to FORCE me to pay more to the same organization that has screwed up their previous retirement plan? I don't think so.
November 3, 2008 at 9:45 am
Kathleen
I would like to remain anonymous.
---------------------------------------------------------------------------------------
I would like Fox News to continue to raise the news item regarding the potential tax to 401ks that appears to be promoted by the Democrats.
Please correct me if I am wrong, but didn't both candidates state that they would possibly eliminate the 10% tax on early withdrawal from 401Ks during these difficult financial times?
My husband and I have seen a 40% reduction in our 401ks. My husband is retired and counts on his 401k to pay our monthly expenses. The less money that remains in his 401K, the less money is available for our health care, monthly mortgage, local business purchases (grocer, retail stores, pharmacy) etc.
I am unemployed after leaving work in August to return to school because of the "cry" for nurses and nurse educators. This required an early withdrawal from my 401K in order to cover my expenses. I felt that my future contribution to my community warranted this personal expense.
Two weeks prior to the Wall Street Bail Out, I realized that remaining in school was no longer prudent. I am seeking work again and will likely need to withdraw from my 401K in the interim.
It seems the hits will keep on coming to those of us who started with nothing, worked hard, paid taxes and saved for the future.
Thank you for continuing to cover this issue.
November 3, 2008 at 9:31 am
Frank Pergolizzi
This is crazy!
November 2, 2008 at 6:50 pm
Mahlon Riggs
This has to be one of the biggest untold stories of the year. Why is this not front page news? This would be a direct income tax hike on every one with a 401K, and ruin the financial retirement dreams of millions of Americans!
It is no secret that the Democrats have always resisted 401k's, they were accidentally created by them as a benefit for large corporate wage earners, and President Reagan turned it into a means to fund individual retirement accounts for hourly workers, and small businessmen. The Democrats have tried to kill the program ever since.
When Liberals talk about people in Kansas not voting their economic interest, I merely have to point out that since I work for a living, and pay taxes, my economic interest is that of the Republican party. Despite the number of people living on welfare in Kansas, we don't all have larger welfare payments as our only hope for economic improvement.
November 2, 2008 at 3:13 pm
JET
Excuse me, 401K accounts are already taxed! I'm retired and every withdrawal from my 401K is taxed just as if I had just earned it. In addition, if a person want to make a withdrawal before they are 59.5 years old they pay an additonal 10% penalty. If congress wants to tax 401K's before they go in, then they should just scrap the concept and we'll all blow everything we earn and depend on the Government to support us in our old age.
November 2, 2008 at 2:27 pm
Edward A Palis
I believe the congress has the knowledge and the power to eliminate all 401Ks. They can use the 80 billion to pay down the debt, Why do we queations the experts from washington.After all we hired them to lead and advise us , and reelect them again when they fail.
Seems like the choice is yours if you want them to kill the 401Ks .My advice to quit voting along party lines and elect the the person that give you the independance ,and supporting a 66000 page tax code that no one person has the knowledge of what is in it
Seem to me we create our own problems,Then disagree with the outcome
November 2, 2008 at 11:47 am
Tom Whittenberg
What the Lord giveth, the Lord taketh away.
I thought my 401k couldn't be taxed until I withdraw the money. Just when you think
you can play the game, the Dems want to change the rules. From Johnson, to Carter, to
Lewinksy's boyfriend and possibly the most liberal, if "That One" gets in, who knows
what will be left when I get to retirement age.
November 2, 2008 at 11:45 am
Nardulli
This insanity will not stop until we have changed the American political system to limit every elected official to a single, longer term of office, without possibility of re election in the same body of government.
Thomas Jefferson was right. "If we allow service to government to be connected with personal enrichment, we shall see no end to its mischief and the only guard against this evil will be a limitation to a single term of service."
The stupidity of taxing 401K accounts may seem unrelated to this issue, but I think it is in fact directly related. Only the political equivalent of in-breeding could produce so ill-conceived leaps of logic.
November 2, 2008 at 9:51 am
ANDREW P. SCHRG
“Beware of Congress’s Threat to Tax 401Ks” THANKS FOR A CLEAR AND CONCISE ARTICLE.
Elizabeth MacDonald IS A JOY TO WATCH. SHE CUTS THRU THE BULL AND GETS TO THE MEAT.
GREAT WATCHING HER, WISH SHE HAD A BLOG.
November 2, 2008 at 1:07 am
Danny Flatt
At a time when our economy is crashing, layoffs on the rise and the financial arena virtually in ruins, Congress comes out with THIS! I've always felt that the Democrats were thieves and back stabbers. This proves it. Oh! one more thing. I fined it ironic that their platform in this election is promising to fix the problem. Well, they've had two years and many an opportunity to fix it. Instead, they fought against every proposal to regulate the banks. It gives one the impression that they orchestrated the whole thing to win an election. Just how dumb do they think we are? Beware the wolf bearing gifts.
November 1, 2008 at 10:21 pm
DS
Congress has lost its way and all of them need to be dismissed. 401K has always been a savings tool that benefited those that contributed, hoping that it would keep us off of public welfare at retirement. It seems like Dems want us all to be beholden to them for survival, and the Rep's just sit back and watch it happen. Taxing our 401K is another stupid idea from Congress.
November 1, 2008 at 9:27 pm
David Armitage
According to her website the rate of return paid would be 3% ABOVE THE INFLATION RATE. That's a big difference.
I'm not sure if this plan makes any sense but at least we ought to get the facts straight.
November 1, 2008 at 5:22 pm
Bill
If I read this right, this is Social Security II. I assume that taxing "5% of my pay" means a payroll tax like FICA. If I'm 55 and I make $100,000 a year, this means I'll be investing $5,000 a year for a $600/yr subsidy? So, in five years I've dumped $25,000 into this system. At $600/yr, it will take over 40 years to just get back what I put in! Holding a job becomes a losing proposition. The day this passes, I take early retirement even though I can't afford it. Then I'll be living on $25,000/yr, paying no taxes, and I'll be drawing food stamps and housing subsidies. Is this really going to make things better?
November 1, 2008 at 12:25 pm
ed
It's gettin better and better
can you e-mail this artical to me thanks
November 1, 2008 at 11:58 am
Bradley Fluetsch, CFA
Mind if I ask you a question? Do you invest any of your pension plan locally? In local businesses, real estate, or infrastructure?
I am watching Fox Business and the talking heads with Neil are discussing Obama/McCain on taxes and pensions. It was the pension discussion that created this economic insight. In your 401K, IRA, or Employer pension how much is invested locally? I am not talking about with the advisor down the street, but where the capital is deployed that creates income producing assets and employment opportunities. Ever wonder how many people have taken a slice of the cash to and from the income producing asset?
If you could invest in a local apartment building with your IRA or 401K, would you? or do you prefer a REIT or a mutual fund of REITS? Add up the pension contributions of your community and ask yourself how would that money be invested locally? How many jobs would it create? Would it perform as well as the SP 500? The current pension system takes local capital, funnels it through a fraudulent financial system rewarding the corrupt and crooked and fails to meet the needs of the retiree in the end leaving them dependent on the Government for their existence. Our retirement system sucks. I hope it is not too strong to say the nationalization of pension plans through the tax system by directing us to the public markets is nothing less than feeding working Americans to the wolves of Wall Street.
Working Americans need and deserve the ability to invest our retirements in local opportunities other than CD's at the local bank, Savings and Loan or Credit Union. I hope the next President addresses the pension and retirement system and kills off some of the leaches. Fees are killing the retirement systems. There are too many hands are in the cookie jar and the jar is not transparent.
November 1, 2008 at 11:41 am
Ellen
I am a layperson in the finer points of economics. My simplistic synopsis is as follows:
"Gauranteed Retirement Account?" Why? So we can have a secondary, mandatory Social Security pay-in (same animal, different name) in addition, so it can be spent by the government at-will under the "unified budget" and go broke as well?
I've long said we as citizens are having our hairs pulled out one at a time. Pulling them out one at a time ensures one does not entirely notice the proceedings until one looks in the mirror and sees he or she is essentially bald.
November 1, 2008 at 11:35 am
Matt Camm
This is just another way for the dems to take money from the hard working people trying to do what they can for their future and for their kids!!
November 1, 2008 at 11:18 am
Shawn
Those Jokers in DC don't care about 401Ks. They serve a few terms and get a full retirement. So let's tax the peasants and that will fix all that ails.Our founding fathers are rolling in their graves with the abuses that are going on these days. I am not one for conspiracy theories but something deeper is going on I just can't put a finger on what it might be. Political elitists and their sponsers have the American people in a vice grip and are slowly turning the screw. King George III would be so proud.
November 1, 2008 at 8:38 am
Dave Swiderski - Penn State University
There is one very important point that is missing in this argument: Yes, Congress might be "losing" $80B annually, but what about all the retirees who are now tapping into their 401Ks and receiving income and paying taxes? The treasury last year collected over $150B in taxes from qualified retirement plans alone.
Americans better WAKE UP between now and election day and think long and hard about whether you want high taxes and a nanny state or low taxes and individual freedom.
November 1, 2008 at 6:40 am
Don Kilgore
Social Security, Medicare, Medicaid are all broken mismanged government programs. Why would we agree to have our 401ks handled by bumbling idiots like Barney Frank, Chris Dodd, and Charles Schumer who created the current crises when they created the Fannie Mae/Freddie Mac sub-prime loan bill in the 1990s? They've irresponsibly resisted all attempts in the past 10 years to regulate those loans and now want to take over our 401ks? Stop the spending, stop the taxes, and stop redistribution of wealth. We earned it. It wasn't given to us!
Subscribe to Comments
Grant
The basic concept of this proposal seems to be allowing for tax breaks in other saving vehicles besides the 401K. That is a legitimate arguement if the government allows $80 bln/yr with the goal of increasing the rate at which Americans save and that rate is not increasing the way they want it to. It doesn't make sense to spend $80 Bln on a new program if it is not delivering what was promised. Would you be against a reduction in the subsidy if you knew it would help out people who have savings plans other than 401K's? I do not have a 401K where I work so why should my portion of that $80 billion and all of the others who don't have 401K's subsidize those that do? This is that opposite side of that "socialism" coin. The vast magority of responses act as if everyone in America has a 401K and HOW DARE THE GOVERNMENT tax them. The fact is there a millions of hard working Americans that DO NOT have 401K's available to them and HOW DARE YOU demand that they subsidize YOUR investment vehicles. IF YOU ARE GOING TO SUBSIDIZE SAVINGS PLANS, SUBSIDIZE THEM ALL IN A WAY THAT THEY ARE ALL EQUAL IN THEIR RETURNS OR SUBSISIZE NONE!
Dollarsign
Elizabeth is wrong. A flock of geese have much more sense!
chip
i know people on welfare and they live better than me collecting over 25000 a year.i think i'm gonna go on welfare to. unless mccain wins there's no reason to work.
Scotty
You haven't seen panic yet. If this idea of shifting people's life savings into a goverment account ever gets legs. People panic when it comes to trusting the government with their future well being. It's my prediction the market will seize up. Does this coincide with the elimination of SS? People will want the money they've paid into it. This is not good.
m abbott
Just who is this "tootie frootie" Theresa Ghilarducci with the New School of Social Research who is advising Congress on HER plan to eliminate the preferential tax treatment of 401K plans? We didn't elect her to Congress, did we? How much money did Ms. Ghilarducci get paid to research how the government can screw up my 401K plan? Boy, the Democrats just don't get it -- advice from the New School of Social Research. I just hope she didn't suggest euthanizing everyone after the age of 65 or we are in big trouble in this country! M Abbott
Eric Friese
"The idea is to redirect 401K tax breaks to a new government system of guaranteed retirement accounts into which all US workers would be have to contribute." What about the social security tax that I'm paying now? I'm 26 now and I know I will never see that money again. Now they want to FORCE me to pay more to the same organization that has screwed up their previous retirement plan? I don't think so.
Kathleen
I would like to remain anonymous. --------------------------------------------------------------------------------------- I would like Fox News to continue to raise the news item regarding the potential tax to 401ks that appears to be promoted by the Democrats. Please correct me if I am wrong, but didn't both candidates state that they would possibly eliminate the 10% tax on early withdrawal from 401Ks during these difficult financial times? My husband and I have seen a 40% reduction in our 401ks. My husband is retired and counts on his 401k to pay our monthly expenses. The less money that remains in his 401K, the less money is available for our health care, monthly mortgage, local business purchases (grocer, retail stores, pharmacy) etc. I am unemployed after leaving work in August to return to school because of the "cry" for nurses and nurse educators. This required an early withdrawal from my 401K in order to cover my expenses. I felt that my future contribution to my community warranted this personal expense. Two weeks prior to the Wall Street Bail Out, I realized that remaining in school was no longer prudent. I am seeking work again and will likely need to withdraw from my 401K in the interim. It seems the hits will keep on coming to those of us who started with nothing, worked hard, paid taxes and saved for the future. Thank you for continuing to cover this issue.
Frank Pergolizzi
This is crazy!
Mahlon Riggs
This has to be one of the biggest untold stories of the year. Why is this not front page news? This would be a direct income tax hike on every one with a 401K, and ruin the financial retirement dreams of millions of Americans! It is no secret that the Democrats have always resisted 401k's, they were accidentally created by them as a benefit for large corporate wage earners, and President Reagan turned it into a means to fund individual retirement accounts for hourly workers, and small businessmen. The Democrats have tried to kill the program ever since. When Liberals talk about people in Kansas not voting their economic interest, I merely have to point out that since I work for a living, and pay taxes, my economic interest is that of the Republican party. Despite the number of people living on welfare in Kansas, we don't all have larger welfare payments as our only hope for economic improvement.
JET
Excuse me, 401K accounts are already taxed! I'm retired and every withdrawal from my 401K is taxed just as if I had just earned it. In addition, if a person want to make a withdrawal before they are 59.5 years old they pay an additonal 10% penalty. If congress wants to tax 401K's before they go in, then they should just scrap the concept and we'll all blow everything we earn and depend on the Government to support us in our old age.
Edward A Palis
I believe the congress has the knowledge and the power to eliminate all 401Ks. They can use the 80 billion to pay down the debt, Why do we queations the experts from washington.After all we hired them to lead and advise us , and reelect them again when they fail. Seems like the choice is yours if you want them to kill the 401Ks .My advice to quit voting along party lines and elect the the person that give you the independance ,and supporting a 66000 page tax code that no one person has the knowledge of what is in it Seem to me we create our own problems,Then disagree with the outcome
Tom Whittenberg
What the Lord giveth, the Lord taketh away. I thought my 401k couldn't be taxed until I withdraw the money. Just when you think you can play the game, the Dems want to change the rules. From Johnson, to Carter, to Lewinksy's boyfriend and possibly the most liberal, if "That One" gets in, who knows what will be left when I get to retirement age.
Nardulli
This insanity will not stop until we have changed the American political system to limit every elected official to a single, longer term of office, without possibility of re election in the same body of government. Thomas Jefferson was right. "If we allow service to government to be connected with personal enrichment, we shall see no end to its mischief and the only guard against this evil will be a limitation to a single term of service." The stupidity of taxing 401K accounts may seem unrelated to this issue, but I think it is in fact directly related. Only the political equivalent of in-breeding could produce so ill-conceived leaps of logic.
ANDREW P. SCHRG
“Beware of Congress’s Threat to Tax 401Ks” THANKS FOR A CLEAR AND CONCISE ARTICLE. Elizabeth MacDonald IS A JOY TO WATCH. SHE CUTS THRU THE BULL AND GETS TO THE MEAT. GREAT WATCHING HER, WISH SHE HAD A BLOG.
Danny Flatt
At a time when our economy is crashing, layoffs on the rise and the financial arena virtually in ruins, Congress comes out with THIS! I've always felt that the Democrats were thieves and back stabbers. This proves it. Oh! one more thing. I fined it ironic that their platform in this election is promising to fix the problem. Well, they've had two years and many an opportunity to fix it. Instead, they fought against every proposal to regulate the banks. It gives one the impression that they orchestrated the whole thing to win an election. Just how dumb do they think we are? Beware the wolf bearing gifts.
DS
Congress has lost its way and all of them need to be dismissed. 401K has always been a savings tool that benefited those that contributed, hoping that it would keep us off of public welfare at retirement. It seems like Dems want us all to be beholden to them for survival, and the Rep's just sit back and watch it happen. Taxing our 401K is another stupid idea from Congress.
David Armitage
According to her website the rate of return paid would be 3% ABOVE THE INFLATION RATE. That's a big difference. I'm not sure if this plan makes any sense but at least we ought to get the facts straight.
Bill
If I read this right, this is Social Security II. I assume that taxing "5% of my pay" means a payroll tax like FICA. If I'm 55 and I make $100,000 a year, this means I'll be investing $5,000 a year for a $600/yr subsidy? So, in five years I've dumped $25,000 into this system. At $600/yr, it will take over 40 years to just get back what I put in! Holding a job becomes a losing proposition. The day this passes, I take early retirement even though I can't afford it. Then I'll be living on $25,000/yr, paying no taxes, and I'll be drawing food stamps and housing subsidies. Is this really going to make things better?
ed
It's gettin better and better can you e-mail this artical to me thanks
Bradley Fluetsch, CFA
Mind if I ask you a question? Do you invest any of your pension plan locally? In local businesses, real estate, or infrastructure? I am watching Fox Business and the talking heads with Neil are discussing Obama/McCain on taxes and pensions. It was the pension discussion that created this economic insight. In your 401K, IRA, or Employer pension how much is invested locally? I am not talking about with the advisor down the street, but where the capital is deployed that creates income producing assets and employment opportunities. Ever wonder how many people have taken a slice of the cash to and from the income producing asset? If you could invest in a local apartment building with your IRA or 401K, would you? or do you prefer a REIT or a mutual fund of REITS? Add up the pension contributions of your community and ask yourself how would that money be invested locally? How many jobs would it create? Would it perform as well as the SP 500? The current pension system takes local capital, funnels it through a fraudulent financial system rewarding the corrupt and crooked and fails to meet the needs of the retiree in the end leaving them dependent on the Government for their existence. Our retirement system sucks. I hope it is not too strong to say the nationalization of pension plans through the tax system by directing us to the public markets is nothing less than feeding working Americans to the wolves of Wall Street. Working Americans need and deserve the ability to invest our retirements in local opportunities other than CD's at the local bank, Savings and Loan or Credit Union. I hope the next President addresses the pension and retirement system and kills off some of the leaches. Fees are killing the retirement systems. There are too many hands are in the cookie jar and the jar is not transparent.
Ellen
I am a layperson in the finer points of economics. My simplistic synopsis is as follows: "Gauranteed Retirement Account?" Why? So we can have a secondary, mandatory Social Security pay-in (same animal, different name) in addition, so it can be spent by the government at-will under the "unified budget" and go broke as well? I've long said we as citizens are having our hairs pulled out one at a time. Pulling them out one at a time ensures one does not entirely notice the proceedings until one looks in the mirror and sees he or she is essentially bald.
Matt Camm
This is just another way for the dems to take money from the hard working people trying to do what they can for their future and for their kids!!
Shawn
Those Jokers in DC don't care about 401Ks. They serve a few terms and get a full retirement. So let's tax the peasants and that will fix all that ails.Our founding fathers are rolling in their graves with the abuses that are going on these days. I am not one for conspiracy theories but something deeper is going on I just can't put a finger on what it might be. Political elitists and their sponsers have the American people in a vice grip and are slowly turning the screw. King George III would be so proud.
Dave Swiderski - Penn State University
There is one very important point that is missing in this argument: Yes, Congress might be "losing" $80B annually, but what about all the retirees who are now tapping into their 401Ks and receiving income and paying taxes? The treasury last year collected over $150B in taxes from qualified retirement plans alone. Americans better WAKE UP between now and election day and think long and hard about whether you want high taxes and a nanny state or low taxes and individual freedom.
Don Kilgore
Social Security, Medicare, Medicaid are all broken mismanged government programs. Why would we agree to have our 401ks handled by bumbling idiots like Barney Frank, Chris Dodd, and Charles Schumer who created the current crises when they created the Fannie Mae/Freddie Mac sub-prime loan bill in the 1990s? They've irresponsibly resisted all attempts in the past 10 years to regulate those loans and now want to take over our 401ks? Stop the spending, stop the taxes, and stop redistribution of wealth. We earned it. It wasn't given to us!