Govt. talks of confiscating all 401K's

[jIM_Ohio]

If you think your employers will like to pay 5%- in addition to the 6.1% they already pay into SS and in addition to the 1.2% they already pay into medicaree, think again.

This essentially means for paying a person 50k, the company is "taxed" an additional 12.3%. While that might not sound like much, consider this:
For every 8 workers making 50k, the company is paying tax equivalent to a 9th worker.

My question is this- what is best for the economy
1) 12.3% funding SS, medicare and a "weak" government pension plan?
2) 12.3% more workers earning money and paying payroll taxes
3) 12.3% of wages being added to company profit and being taxed at higher rates than income. Corporate tax rates approach 40% for some companies- so the money is worth more to tax system if it is taxed at profits than it is if taxed at payroll.

3) is better than 2) is better than 1) as far as the revenue which the government collects- maybe it is 2) 3) then 1) because only a portion of this money is taxed in #3.

1) is safer than 2) is safer than 3) for retirement

this country does not need a government sponsored annuity
it should just make sure the sales people which sell private annuities abide by good financial standards (avoid sub prime mortgages), and provide other financial avenues for retirement (IRAs, 401ks similar).

I might have to move to another country to keep my job though- as increasing my companies tax rate to keep me employed is not something they want.

[Snave]

We know we initially encourage you to save for your retirement in 401k's once it was realized that pensions were going by the wayside. We even gave a tax break to further encourage you. With pensions mostly gone and social security going to fail at some point, we have now decided that the vehicle we gave you to save for retirement should be our own little cookie jar! Thank goodness for all of you suckers that saved in your 401k's. First, you lived below your means and bought a home you could afford, so we never had to bail you out. Then, you continued your saving ways by living further below your means and saving for your own retirement in your 401k's. Thank you for your patriotism!

Wait a second, I just realized there is nothing patriotic about you buying a smaller home so there is less to shop for to furnish all of the rooms. As well, you didn't pay your share of taxes because you were saving money in your 401k's instead of blowing your money to help the economy. Now I am just mad. Your lack of patriotism sickens me and the only way to right your wrongs is to spread your wealth around. And to think I was leaning towards giving you a holiday every year. In fact, I wasn't just going to give you one holiday, but 24: the 15th and the 30th of every month. All right, I am begining to calm down. Knowing now that you are finally about to own up to your wrongs and finally be patriotic is bringing my blood pressure back down. In closing, not only do I now thank you for renewed patriotism, but so does your neighbor who bought a home he couldn't afford and therefore had no money left over to save in his 401K.

Sincerely,

Uncle Sam

[asmom]

Originally Posted by Snave

asmom, I am having a hard time seeing how this "doesn't sound all that bad." Please explain to me why this would be good. I have read the links and listened to Ghilarducci explain her comments and how this will "spread the wealth around." The govenrment is going to TAKE my money that I have earned and saved away from me and in return give me 3% + inflation. Oh, she said the great news was that this wouldn't cost the government a dime. No kidding! However, it costs me everything. I am planning on never seeing Social Security to begin with, so I have saved and lived below my means so that I could afford a healthy financial lifestyle. What incentive does this give me to do this? Again, please explain.

Well for starters, "not all that bad" does not equal "good". If you can make that distinction then you can put the rest of my post in the proper context!

I am not going to BS you and post figures and percentages about why it would and not work because frankly I don't know.

What I do know is that the OP alleges that some in the government are contemplating seizing 401(K) accounts which is inaccurate. They are simply holding hearings, at which this person testified about her plan which eliminates the 401(K) tax break. Do you understand that this lady is an economist and not the government? Now compared to planning to seize our 401(K) plans, listening to one woman's proposal doesn't sound that bad, does it? I also think that for those who subsist on SS alone, having a guaranteed supplement is not all that bad. Once again, not all that bad does not equal good.

I realize that all over the blogosphere, it has been repeated over and over that the government is thinking about confiscating, stealing, seizing our 401(K)s when a simple search shows that nothing could be further from the truth. That is precisely why I never rely on others to tell me what to believe.

[jIM_Ohio]

The government/ 401k confiscation plan has lots of hidden taxes built in.

For example, because the new plan behaves like a pension, there will be "years of service" tied to the benefit and that would imply a MUCH later retirement than the age 65-68 most retirees get now.

Because at 3% return above inflation, the returns are not that good (stock market usually is 6-7% above inflation- double that return in real terms), so if my 401k would get me retirement by contributing 10% of my salary at age 68, then if I get HALF the return with HALF the contribution, how long do I have to work? TWICE as long? FOUR times as long (remember that 401ks compound, no mention if this new vehicle compounds using similar numbers).

In addition when this system is first introduced, there will be more "income" than "outgo". Kind of like SS around 25 years ago. Remind me how that program worked out?

If you have to work for longer periods of time to collect this pension, this economist also fixed SS- because workers will collect less SS, and contribute in longer. Deficit solved.

[Snave]

Originally Posted by asmom

I also think that for those who subsist on SS alone, having a guaranteed supplement is not all that bad. Once again, not all that bad does not equal good.

I would agree. If I was to subsist on SS alone, I too would want a guranteed supplement also. Who wouldn't? My challenge is those that plan on retiring on SS alone are not taking any personal responsibility to save with our current system. Therefore, a "not all that bad" solution is to punish those accountable for their own financial well-being to make it fairer for those deciding to abstain from saving?

[cptacek]

Originally Posted by jIM_Ohio

If you think your employers will like to pay 5%- in addition to the 6.1% they already pay into SS and in addition to the 1.2% they already pay into medicare, think again.

And wouldn't self employed people have to pay both shares, so they would be taxed 25% even before income taxes?

[Cylenchar]

Throwing in my 2 cents here: the articles probably do not cover the details of this plan at anything other than a basic skim over level, like writing a book report on war and peace after having only read the first page of the cliff notes. As a rough idea this would require alot of work to ever be implemented. I don't mind that the House of Representatives had someone in to discuss that, the fact that they are looking into a wide variety of options on how to protect American's retirement accounts, even if some are extreme, is in my mind, a good goal.

[Giovanni]

Different companies have raided their company's pension funds. I shutter to think that our government would or could do something like this, but they have already put a foot into the door of 'gov't control of the banks' with the "Bail Out" package.

Full government control of the banking industry would be the first step in allowing the "nationalization" of the 401K's.

Has the term By The People been changed to now read To The People?

[Snave]

Originally Posted by Cylenchar

I don't mind that the House of Representatives had someone in to discuss that, the fact that they are looking into a wide variety of options on how to protect American's retirement accounts, even if some are extreme, is in my mind, a good goal.

What exactly is in need of protecting? That is my big question. If people do not want to risk their money, they have options within their accounts to place money in bonds, etc... If you are not comfortable with potentially losing money in your retirement accounts, then park your money someplace safe.

[kork13]

Originally Posted by Snave

What exactly is in need of protecting? That is my big question. If people do not want to risk their money, they have options within their accounts to place money in bonds, etc... If you are not comfortable with potentially losing money in your retirement accounts, then park your money someplace safe.

Cylenchar sort of just mis-spoke. The idea behind all of this isn't to protect everyone's retirement accounts, but rather to out and out protect their retirement overall. And for many people (who do not, or can not save in retirement accounts), that is a real threat, particularly with the ever-increasing threat to social security, medicare, and medicaid. So I actually mostly agree with Cylenchar--it's good that the Congress is looking at options in an effort to find one that will work. Just not this one....plz

[Snave]

The problem is our government governs to the least common denominator. If there is one person that can't figure it out then everyone else is going to pay. Literally and figuratively. We have a victim mentality in regards to our finances.

I understand there are circumstances that are beyond control sometimes. People lose jobs, have medical emergencies, etc... Those are the exceptions and not the rule. The "rule" has now become overspending and having tons of cc debt, buying too much home, too much car, etc... Then, when a financial crisis hits like we are going through today, we fall deeper into debt and blame everyone else but ourselves.

We already have components of socialism with social security, medicare and other governmental programs in this country. Do we really need more with a new retirement plan? Heck, we even tried socialism for the last few years with the the banking/mortgage industry. We "spread the wealth around" by allowing people that should not and could not afford a mortgage to get one. Look where that landed us.

Sorry about the rant. I am just frustrated with the lack of accountability we have anymore.

[Exile]

Originally Posted by Snave

Heck, we even tried socialism for the last few years with the the banking/mortgage industry. We "spread the wealth around" by allowing people that should not and could not afford a mortgage to get one. Look where that landed us.

I can't believe the way that the word "socialism" is bandied about and misused. Socialism is OWNERSHIP of the means of production by the government (which wouldn't be a bad idea for America since the people own the government). The mortgage fiasco is as far from socialism as one can get and still be in the same universe. That was UNREGULATED fraud enterprise. I mean free enterprise. Oh what's the difference.

[Bryan Anderson]

Don't forget that the money in your 401K does not belong to you anyway... not entirely anyway. Participating in a qualified plan puts you in business with the government and they make the rules.

Read the tax code regarding retirement plans. It states that plans can be taxed up to 90%. That just puts it in line with taxation on all other income. Congress can take whatever they want.

Republican or Democrat: Both crazy and have proved to us over and over that they can't manage money.

401K- Run like the wind!!!

[sweeps]

Originally Posted by Bryan Anderson

401K- Run like the wind!!!

Just out of curiosity, what alternative do you propose?

[swaymonae]

Hilarious... the US Gov't is obviously incapable of managing finances.. why in the hell would we trust them with our 401ks? If they do take them.. I'm starting to feel more and more like a slave every year.. What's so free about this place anymore? When our own retirement savings is put into question-- I feel so vulnerable, like there's nothing they can't just vote to take from us. I hope they leave me my cats...

[KTP]

The funny thing is, people don't really grasp what is happening in their country while it is building up. Everything is a small step, usually supported by the misled majority. Tax rich executives at 100%? Sure! Sounds good to me.

I bet people in Germany thought taking things from the rich Jewish people was a good idea too. Everything looks good while it is happening and benefitting the majority. Only later do you look back and say "Wow, we just killed 6 million people..that sucks"

[sweeps]

Wow, people are going off the deep end.

[blankcheck]

Originally Posted by KTP

The funny thing is, people don't really grasp what is happening in their country while it is building up. Everything is a small step, usually supported by the misled majority. Tax rich executives at 100%? Sure! Sounds good to me.

I bet people in Germany thought taking things from the rich Jewish people was a good idea too. Everything looks good while it is happening and benefitting the majority. Only later do you look back and say "Wow, we just killed 6 million people..that sucks"

I think that instead of the term socialist, we should start using the term sensationalist.

If this fear is that real to you, then by all means do what is best to protect your future and find a location that allows you to keep more of what you earn, earn the type of living you want, and stays out of your business (literally).

I guess I'm ignorant about this, but does anyone know of a place where this is truly the case? And why isn't that place absolutely flooded with potential immigrants by now as they leave the U.S in this time of upheaval?