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It begins ...
Posted by: McQ on Thursday, October 23, 2008

In anticipation of an Obama presidency and full dominance by Democrats in Congress, your 401(K) is now in jeopardy:
Powerful House Democrats are eyeing proposals to overhaul the nation’s $3 trillion 401(k) system, including the elimination of most of the $80 billion in annual tax breaks that 401(k) investors receive.

House Education and Labor Committee Chairman George Miller, D-California, and Rep. Jim McDermott, D-Washington, chairman of the House Ways and Means Committee’s Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.
I don't ever want to hear another word about "greedy Wall Street". Democrats in Congress have been trying to find a way to get at the huge pool of money for decades.
The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.

A plan by Teresa Ghilarducci, professor of economic-policy analysis at the New School for Social Research in New York, contains elements that are being considered.

[...]

“I want to stop the federal subsidy of 401(k)s,” Ghilarducci said in an interview. “401(k)s can continue to exist, but they won’t have the benefit of the subsidy of the tax break.”

Under the current 401(k) system, investors are charged relatively high retail fees, Ghilarducci said.

“I want to spend our nation’s dollar for retirement security better. Everybody would now be covered” if the plan were adopted, Ghilarducci said.
Ah, a little "spreading of the wealth?"

Who is this cow and why is anyone listening to her?

Simple answer - there's revenue to be had here.

So, let's play along for a moment - remove the tax deferral and what happens?
“From where I sit that’s just crazy,” said John Belluardo, president of Stewardship Financial Services Inc. in Tarrytown, New York. “A lot of people contribute to their 401(k)s because of the match of the employer,” he said. Belluardo’s firm does not manage assets directly.

Higher-income employers provide matching funds to employee plans so that they can qualify for tax benefits for their own defined-contribution plans, he said.

If the tax deferral goes away, the employers have no reason to do the matches, which primarily help people in the lower income brackets,” Belluardo said.
Tax deferral is removed and so is any incentive for employers to match funds. So that gets dropped as well. Who suffers most. Those that are benefiting most right now - lower income people who are actually saving for their retirement over and above the pittance they'll receive from Social Security.

In many cases, those matches are in double digits percentage wise. Not bad interest if you can get it - gone with this "beauty" of an idea.

Now read the freakin' language carefully that this idiot from California uses (and yes, he's a freakin' idiot - this is the political situation these people have been waiting for for years and they plan on exploiting to the fullest) when describing the "favor" he's been doing those of us who have 401(k)s:
“The savings rate isn’t going up for the investment of $80 billion,” he said. “We have to start to think about ... whether or not we want to continue to invest that $80 billion for a policy that’s not generating what we now say it should.”
Investment of 80 billion? Investment? You mean deferred tax you dope? Say what the hell it is and quit pretending that it's the government's to "invest".

And note, according to him you savers out there aren't generating "what we now say" you should. Since you're not meeting their standards (whatever they are) and they need more revenue (and that's the point of all of this, since "95% of Americans" are getting "tax cuts" but there's no plan to cut spending), they'll arbitrarily declare 401(k)s to be a failure and tax them. That'll collapse a successful private means of saving for retirement and get it right where they want it - under government control.

The asshats who gave us Social Security now want to get into the piles of money private citizens have saved so they can pour it down some government rat hole or lard it into some pork barrel project. Or just, you know, "spread the wealth" a little.

Oh, and what is their brilliant alternative to tax deferred 401(k)s? You'll love this:
Under Ghilarducci’s plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5 percent of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3 percent a year, adjusted for inflation.
5% mandated into Social Security and a 3% "special" government bond. Oh, how freakin' wonderful. This is nothing more than a stealth way to prop up Social Security enough to kick the can down the road further and give greedy politicians access to taxes from the 401(k)s that remain.

Said the boob from California:
While Miller stopped short of calling for Ghilarducci’s plan at the hearing last week, he was clearly against continuing tax breaks as they currently exist.
And the idiot savant from Washington? Well his staff is impressed:
“This [plan] certainly is intriguing,” said Mike DeCesare, press secretary for McDermott.

“That is part of the discussion,” he said.
Hold on to your wallets, pensions and anything else that's not nailed down, because these SOBs are going to be coming after it. This is just the first of many attempts to wrestle everything that can produce a revenue stream into some semblance of government control.

And yes, this makes me madder than hell.
 
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Comments
"I want to stop the federal subsidy of 401(k)s," Ghilarducci said in an interview. "401(k)s can continue to exist, but they won’t have the benefit of the subsidy of the tax break."
WTF?!?!? so !NOT! taking my money is now a government SUBSIDY! GIVE ME A BREAK!
 
Written By: josh b
URL: http://
Don’t we already have a federal retirement program overseen by the SSA? How’s that going?
 
Written By: Is
URL: http://
WTF?!?!? so !NOT! taking my money is now a government SUBSIDY! GIVE ME A BREAK!
Exactly. It’s not a f u c k i n g subsidy.

The federal government doesn’t charge me a sales tax at the register on my groceries every week, so I guess they are subsidizing my grocery bill. I didn’t even know I should be grateful.
 
Written By: Is
URL: http://
So... the premise is to raise taxes (I’m sorry... end the subsidy) on 401k’s and use the revenue to create a government retirement system in which everyone is given $600 per year, is required to invest 5% of their income in a government sponsored retirement plan that would invest in government bonds and pay 3% per year guaranteed, which would be overseen by the Social Security Administration. Nice.

It is laughable that they actually think they are investing anything. It is "invested" in government bonds, just like Social Security. The government would receive our money, write an IOU to itself, and spend it on discretionary expenditures. Years later when the bill comes due, they have to pay off the bonds with no way of doing so. This is exactly the problem with Social Security, and this plan follows the same premise. Don’t we have enough unfunded mandates? What are they smoking?
 
Written By: Is
URL: http://
Teresa Ghilarducci
PhD 1984 University of California, Berkeley
Figures
 
Written By: josh b
URL: http://
Teresa Ghilarducci
PhD 1984 University of California, Berkeley
Figures
Save the trees!
 
Written By: Is
URL: http://
Question 1...

That 5%....im assuming thats AFTER tax?
 
Written By: josh b
URL: http://
Wow, I bet this is just the proverbial straw that makes Pogue want to go out and pull the lever for Obama. No?
 
Written By: capt joe
URL: http://
Don’t worry, this is step three.

1. "I didn’t realize how bad it was, we have to raise taxes on everyone making more that $32." Remember that happened? (Clinton)
2. 15% tax o on all retirement funds. Remember that proposal? (Clinton)
3. This expand the Social Security "Lockbox" transfer to the gummint.
4. Medicare/Social Security becomes "The government will take care of you" all in one plan (no competition allowed) that will determine how long you work, at what, and when you have out-lived your usefulness.

BTW, the major corporations that over-obligated (and underfunded in boom markets) themselves in benefits, especially defined benefit retirement benefits, are going to want their plans to be absorbed by this because, with the stock market down, their annual plan audits are going to show negative figures so high that the "bailout" is going to look like small potatoes (sic). And the gummint is going to have to bail them out too, right?
 
Written By: RRRoark
URL: http://
This is nothing more than increasing the social security tax from 7.5% to 12.5%. Hey it gives the govt more money and they can then use that money to say "we balanced the budget".

Lets see

Employer gives me 100% on my 6% plus whatever interest I can make on that through investments.

Us Govt gives me 3% on my 5% GAURUNNNNTEEEEEDDDDD.

So If I Make 100k and invest 6k in my 401k that means I would make 6k plus say 3% return on my investment so that would be a total of about $12,360 for my 6k investment over a year.

Instead with the govt I will have about $6,180 from the govt over a year that they will owe me and will GAUREEEEENTTTEEEE to pay me as long as the govt can print money.

Tell me where do I sign up.

 
Written By: retired military
URL: http://
Since there is no government money, how are you going to pay me? I mean, you don’t expect me to go to work when you are going to pay me anyway, right? It’s cheaper to stay home. I won’t need the second car or as much gas money or work clothes, or books to keep up on my profession.

This is the dumbest idea I’ve ever heard. Destroy the incentive to work or save, and you will get a lot less of either. Then tax revenues decline and people are angry and unemployed. Then politicians are found hanging from lampposts. Save the environment by stopping this idiocy now.
 
Written By: MarkD
URL: http://
I want to see how many dunces who vote for Obama stand in the same spot a year from now, as the Dow continues to tank, as unemployment continues upward, and we should ask them: how do you feel about Obama right about now?

Of course, the media (except perhaps Fox, if Obama doesn’t find a way to have them thrown off the air for not kissing his fanny) won’t do these interviews. But the good news is that as the economy worsens, and Obama makes more mistakes - raising taxes, raiding 401(K)s, etc. - his approval ratings will go down, down, down.

And a year from now, Republicans need to do to Obama what the Dems did to Bush: denigrate him, call him a loser and a failure as a President, and go on tv every day and remind people that "this is what you were warned about, but you voted for the clown anyway."

And, hopefully, in November 2010 we can win the House and Senate back and make the last two years of the failed Obama administration a dead duck.
 
Written By: James Marsden
URL: http://
"I want to spend our nation’s dollar for retirement security better"
Go f**k yourself fatty. Who the he** are you and why is anyone paying any attention to what you say?

Some annon. egghead with grandiose plans for my money.

 
Written By: shark
URL: http://
Guess I have to look into cashing out now...
 
Written By: shark
URL: http://
What are they smoking?
My retirement crack and damn, it must be good.

 
Written By: Arcs
URL: http://
shark - Guess I have to look into cashing out now...

Yep. Take the hit on taxes now and find some sort of investment that Uncle Sugar doesn’t tax or plan to tax (yet).

Otherwise, stick it under your mattress.

F***ing government.
 
Written By: docjim505
URL: http://
"I want to spend our nation’s dollar for retirement security better"
no, this isn’t socialism, of course not...
 
Written By: huh
URL: http://
Funny but our savings rate is abysmal. How the frak is this going to help any?
 
Written By: h0mi
URL: http://
Wow.

Just... wow.

I believe the time has come for me to begin hoarding shiny yellow metals.
 
Written By: Nathan
URL: http://
Now we know how Obama will balance the budget in 4 years and pay for his additional social programs and fix social security.

Basically double the future outlay for social security while he spends it now.

GREAT PLAN.
 
Written By: retired military
URL: http://
And, hopefully, in November 2010 we can win the House and Senate back and make the last two years of the failed Obama administration a dead duck.
Or maybe things will start to improve in a year or so (as most experts are suggesting), Obama will get the credit, and Republicans will be locked out for the next 16 years.
 
Written By: TomD
URL: http://
Many years ago I wondered how much we collectively as a nation of savers would have to contribute and store in 401K plans before they started showing up on the Federal spend & tax radar like a steel zepplin.

Guess I need wonder no longer.

Screw the promises they made, screw the penalties that set that would stop us from getting the money out for just any old reason.

There’s GOLD in them thar accounts! Come on lads! Out picks and shovels! We’re going to mine the ’rich’!
 
Written By: looker
URL: http://
linked as of 4pm eastern
 
Written By: Bithead
URL: http://bitsblog.florack.us
"a new system of guaranteed retirement accounts to which all workers would be obliged to contribute"

The first thing I thought of when I read this is that the new accounts would be in government securities. Lo and behold, it seems I was right on target.

"The money in turn would be invested in special government bonds that would pay 3 percent a year, adjusted for inflation."

Now, from the next post on Argentina;
"He said that since their 1994 inception, the funds have had a 13.9% average annual return."

Is this all some part of some vast international left-wing conspiracy?


*****************
"Exactly. It’s not a f u c k i n g subsidy."

And yet the word ’soc*alism’ is considered profane and/or obscene by your filter. How appropriate.

*****************

 
Written By: timactual
URL: http://
"Republicans need to do to Obama what the Dems did to Bush: denigrate him,"


1)Racist alert! Another example of why you right-wing Bushbot...etc. won’t vote for the acknowledged savior of the nation.

2)You mean like they did to Michael Jackson?
 
Written By: timactual
URL: http://
And yet the word ’soc*alism’ is considered profane and/or obscene by your filter. How appropriate.
s o c i a l i s m
 
Written By: Is
URL: http://
I think if this goes into law I will move to San Francisco or Nevada.

At least there I can legally charge the government before they screw me.

 
Written By: retired military
URL: http://
And yet the word ’soc*alism’ is considered profane and/or obscene by your filter. How appropriate.

It isn’t the word ’soc*alism’ that trips the filter, it is the word ’c*alis’ that is contained within it.

Gold and guns... the latter to protect the former when they try to come and get it, along with everything else.
 
Written By: Nathan
URL: http://
And yet the word ’soc*alism’ is considered profane and/or obscene by your filter. How appropriate.


Socialism.

The word works for me.

I changed the filter from "cialis" to capitalize the "C", so socialism should work just fine now.

Also, socialist.
 
Written By: Dale Franks
URL: http://www.qando.net
If McCain were smart, this would be a television ad everywhere. Lots and lots of people, including blue collar workers, of which I was one for 18 years, sock money into their 401(k)s to prepare for retirement. This issue should become nuclear. Although I have no doubt that Obambi would deny any such idea was in the offing, it might sway voters who are thinking that maybe, just maybe, giving the legislative and executive branches to one party is a bad idea.

As I said, it would be smart to bring this up. Then again, I did say McCain so, you know, it probably won’t happen.
 
Written By: physics geek
URL: http://physicsgeek.mu.nu
So, you’re wrong. Socialist.
 
Written By: Dale Franks
URL: http://www.qando.net
I agree, McCain should run this ad.

Think of all the folks WHO DONT put money into 401Ks now that will start having an additional 5% of their pay taken out.

It wont be called a tax as Obama said 95% of folks wont see a tax increase. It will be called an investment account fee.

 
Written By: retired military
URL: http://
I’m sorry, but a I could get a 5% return on investment on the stock market with my eyes closed. 3 percent won’t even keep up with inflation under the stagflation that Nobama will put us through.
 
Written By: Chaz706
URL: http://
Absolutely astounding.

As screwed up as 401k’s are, our government finds a way to make them worse.

Some points:

1. The problem outside of its base and naive socialist leanings is that the government investing in its own bonds is a sham as pointed out above. Calling the obligation a bond is just a misleading way of saying it is a tax on future earnings. A government bond is a debt instrument that cannot represent savings for itself. The reason for the bond is the money has to be spent. If not it would be held as cash or invested in some other entities security. It is just spending when the government lends to itself with the bond representing a claim on future tax dollars. It is not investing in any meaningful sense of the word.

If you or I buy a government bond it is the same, but it is a claim on future taxes for us. Since those taxes (largely) do not come from us personally it can be meaningfully said to be an investment.

The point of this is that even critics don’t seem to understand that a government bond should not be trusted as saving not because they will spend it (but theoretically could not and put it in a lock box) but because they have to spend it, by definition. Just like when we buy one of their bonds it is because they need the money to spend.

2. We shouldn’t complain about a bond paying 3% above inflation because it is a low return (which it isn’t) but because it is a sham. Inflation plus 3% is actually more than the vast majority of investors get on their retirement accounts over the long run. On a risk adjusted basis it is a no brainer if it were not a sham.

By the way, that is why one of the screaming buys in the market now are TIPS, which are yielding 3% above inflation now, and investment pro’s consider them a screaming buy, and they are right. That price will not be available long term, the market will drive it down. I cannot see the treasury issuing massive amounts of such bonds for this program (putting aside the sham nature of such a thing as a "savings" plan) because they would rightly say that it is an awfully high rate to pay when they can issue debt that right now is likely to trail or only marginally exceed inflation.
 
Written By: Lance
URL: http://asecondhandconjecture.com
"s o c i a l i s m "
"It isn’t the word ’soc*alism’ that trips the filter, it is the word ’c*alis’ that is contained within it."
"The word works for me."

Jeez, doesn’t anybody here have a sense of humor?

I kind of liked the filter, it kind of made sense if you consider that ’ism to be undesireable, and it amused me. I miss it already. I shall continue to refer to IT as ’the ism that dare not speak its name’.
 
Written By: timactual
URL: http://
Cripes!

This is horrible!

If they were to go after 401k’s, I’m sure they’re coming after my IRA.

So it’s possible I’ve been pumping money into my IRA for 15 years and now these whacks want to take it away and replace it with some other ponzi scheme?

I kept my IRA going because I was sure Social Security was going to be pile of nothingness by the time I retired.

I guess they’re going to be tired of giving me my "subsidy" also.

What a nightmare.
 
Written By: autot
URL: http://
Another point:
401(k) funds are mostly invested into the stock market, with a mix of bonds. If this idea goes through, at best the flow of money into the stock market will stop, or will start to flow out of the stock market as people cash out their plans. Just imagine what effect that will have on stocks.
 
Written By: kishnevi
URL: http://kishnevi.wordpress.com/
"socialism should work just fine now"
— Dale Franks.
You heard it here.
 
Written By: jpm100
URL: http://
It seems that you guys are catching on. I’m betting that within the first year General Petraeus is in the private sector, along with a lot of other generals. Prez Obama is going to want a more docile military. Otoh I am probably a nutjob because Obama reminds me more of Hitler than LBJ or Jimmie. It seems to me that he already controls the media and the intelligensia and a large part of the federal workforce. The justice dept. seems to have little interest in voter fraud or illegal campaign contributions. Time for my meds.
 
Written By: Paden Cash
URL: http://
Well, I mean, in theory, it should work great.
 
Written By: Dale Franks
URL: http://www.qando.net
"socialism should work just fine now"
— Dale Franks.
It really is the end times :)
 
Written By: capt joe
URL: http://
I saw a video of Pelosi actually state this on TV some few months ago. This time, the Dems are fooling the vast majority, rather than the successful "framing" pulled of by the Reps in the last few elections.
 
Written By: Dave
URL: http://
Jeebus:

Then politicians are found hanging from lampposts. In a more civilized age, back when duelling was socially acceptable, an angry mob might occasionally so remind the bureaucracy, like, say, Revenue Agents for the Crown.

There’s no subsidy — we’re taxed on the income stream when we cash out the 401K upon retirement. Unless "subsidy" is being perverted to mean "taxed only once."

So the Dems are going to tax us on current the income we set aside in retirement plans — are they then going to tax the retirement income stream?

Just like they do with dividends and capital gains. B*st*rds...furious
 
Written By: furious
URL: http://www.shanskvillememorial.com
I agree that this idea is the worst. And I agree that McCain should have an ad entirely devoted to this issue. I have written to his campaign website today to suggest it. Please do the same. With today’s technology, they can place an ad in a few hours. Today, at his rally in Ohio, I finally heard him mention it, but he should be shouting this from the rooftops!

E-mail him and beg him to get an ad out that addresses this!!

 
Written By: hoofer
URL: http://

 
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