The 401(k) Red Riding Hood

[kentuckydan]

House Democrats Contemplate Abolishing 401(k) Tax Breaks
(http://www.workforce.com/section/00/article/25/83/58.php)
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.

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.

The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.

“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.”

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

Let me see if I have this right. They want to gut the 401(k) system by taxing it, in return they will give us $600 back of the money they ripped off, hit us with a 5% additional payroll tax and the guarantee us a whopping [b[3%[/b] return

Oh what Big White Teeth you have Grandma!

The better to rip out your financial throat my Dear,


Oh and my favourite, letting us keep our own money is a subsidy


Anyone who agrees with all this, knows how to vote this Fall.

Those who don't agree know as well















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[huney]

Dan - thank you for posting this. It further emphasizes the importance of the upcoming Congressional elections, which to my mind are of even greater impact than that of President.

The article does not say whether the plan might assess back-taxes on preexisting 401(k) contributions or gains. If so, this could be much worse than it already seems.

We are forced to contribute 6.2% of our income to Social Security and now they want to force us to contribute another 5% and tax our 401(k)?!?! Are they going to go after IRAs as well?

First they institute Social Security because they didn't believe people could save for retirement or disability on their own. Then they "invest" our contributions into financing the Federal budget to the extent that the debt can never be repaid. So they raise taxes to fund payments toward the interest - no mention of repaying principle. In effect, we pay higher income taxes to prop up a program that should have been self-supporting.

Because Social Security benefits alone cannot sustain retirement, they created the tax-deferred 401(k) and IRA to encourage personal retirement savings. Now it appears that simply because much of our 401(k) and IRA money has been wiped out in the last few months, due at least in part to their decision to require Fannie & Freddie to extend mortgages to the apparently more deserving underprivileged, they want to further penalize those of us who have managed to exercise some financial discipline.

Adding insult to injury, they seem to want to go further and take another 5% for this savings bond style retirement fund. 3% interest? I can get better than that in a CD at my local bank! There is no way a 3% interest rate paid on 5% of my income for the rest of my working life is going to begin to recoup the loss in my 401(k). It's going to have to stay in the market at least until some recovery has been made and if they've decided to tax new contributions, future gains, or worse, the original contributions, what sort of miracle will have to occur in order to regain what has been lost?

And for all this, they plan to "give" us $600? I do not see the logic.

[Voobrazheniye]

Every member of Congress, and those who WERE in Congress since 1990 should be fed to crocodiles. Barney Frank first. :croc:

[kentuckydan]

Huney it is a financial rape of the working families of this country

Party of the Workers? HAH!!!!!!!!!!!!

The 401(k) is not the investment tool of the Rich that we have
been assured will be the only ones whose taxes will be raised

The Wolf peeps out of it's sheeps clothing

[huney]

Every member of Congress, and those who WERE in Congress since 1990 should be fed to crocodiles. Barney Frank first. :croc:

Okay Paul, this time you can feed the crocodiles.

(just in case you ever felt you needed my permission :))

[kentuckydan]

Every member of Congress, and those who WERE in Congress since 1990 should be fed to crocodiles. Barney Frank first. :croc:

and just what do you have against Crocodiles??

Careful Paul you will have PETA the ALF and the SPCA after you.

[Voobrazheniye]

Okay Paul, this time you can feed the crocodiles.

(just in case you ever felt you needed my permission :))

Of course, I always joke about feeding politicians to crocodiles (sharks would be just as good - but we don't have an emo for it). But seriously, it seems to me that what is REALLY needed is a "do-over" in Congress.

When will people finally see that Democrats (and most Republicans too) in Congress have completely gone into the tank for special interests at the expense of the people? The Voters need to clean out the lot of them.

When will the American people finally be pushed to the point where they are willing to elect Liberatarians, Reformers, members of the Constitution Party... even Greens?? When will they take the government back by refusing to elect dirty, on-the-take Democrats and Republicans?

Isn't it about time?

[Voobrazheniye]

and just what do you have against Crocodiles??

Careful Paul you will have PETA the ALF and the SPCA after you.

Oh, what the heck... we'll just feed THEM to the crocodiles too!! :lol:

[huney]

Of course, I always joke about feeding politicians to crocodiles (sharks would be just as good - but we don't have an emo for it). But seriously, it seems to me that what is REALLY needed is a "do-over" in Congress.

When will people finally see that Democrats (and most Republicans too) in Congress have completely gone into the tank for special interests at the expense of the people? The Voters need to clean out the lot of them.

When will the American people finally be pushed to the point where they are willing to elect Liberatarians, Reformers, members of the Constitution Party... even Greens?? When will they take the government back by refusing to elect dirty, on-the-take Democrats and Republicans?

Isn't it about time?

If this election combined with the financial mess doesn't do it, I don't know what will.

Americans have been acting like a bunch of sheep for far too long.

[snow_flake]

[QUOTE=kentuckydan;23889][URL="http://www.workforce.com/section/00/article/25/83/58.php"]


QUOTE]Can u tell in a easy way what the 401 (k) system is?

[kentuckydan]

[QUOTE=kentuckydan;23889]


QUOTE]Can u tell in a easy way what the 401 (k) system is?

[URL="http://en.wikipedia.org/wiki/401k"]401(k) (http://www.workforce.com/section/00/article/25/83/58.php)

In the United States of America, a 401(k) plan allows a worker to save for retirement while deferring income taxes on the saved money and earnings until withdrawal. The employee elects to have a portion of his or her wage paid directly, or "deferred," into his or her 401(k) account. In participant-directed plans (the most common option), the employee can select from a number of investment options, usually an assortment of mutual funds that emphasize stocks, bonds, money market investments, or some mix of the above. Many companies' 401(k) plans also offer the option to purchase the company's stock. The employee can generally re-allocate money among these investment choices at any time. In the less common trustee-directed 401(k) plans, the employer appoints trustees who decide how the plan's assets will be invested

continued

There are some othter details but essentially the worker chooses to participate and chooses how much to participate with and in some cases with certain restrictions where the money is invested. Most companies match the funds up to a certain amount

Take some one making between 32,550 and 78,850 that fits the middke class faily well

Suppose they put $1000 dollars with matching funds into a 401(k)

They have $2000 invested for their retirement to invest that much money after tax they would have had to make $2666.67

Suppose they are 35 years old and the annual return is 8% (over time the Stock Market does better, not at present granted but over the 30 to 40 years before they retire things ordinarily average out)

Using the rule of 72 with an annual rate of 8% for say 36 years for ease that $2000 would double every nine years or 4 times and be worth $32,000 (less inflation)

So you can see that a $20/week ($1040/yr) savings plan would end up giving them a tidy nest egg when they retire

3%? would double every 24 years

PS if this person makes 52.500 and has three children their Federal Income Taxes are ZERO at present, so THEY would end up with a tidy nest egg and during the time their children were at home and dependents pay no Federal Taxes at all.

It has some but not all characteristics of the Swedish National Pension Plan, if I am not mistaken.

Taxes are deffered on the investments until you take the money out and USE it.,

There is a version called a Roth 401(k) where the money invested is "After Tax"

which means that after you pay the taxes on your income you place some of it in an
investment, the investment is not taxed and when you take money out of this version
it is not taxed.

Part of my ire is the New Speak definition of a the word subsidy

IMO a subsidy is when you GIVE someone some financial aid /money

NOT when you let them keep more of what was already theirs

[kentuckydan]

When will the American people finally be pushed to the point where they are willing to elect Liberatarians, Reformers, members of the Constitution Party... even Greens?? When will they take the government back by refusing to elect dirty, on-the-take Democrats and Republicans?

Isn't it about time?

When they get off their dead A$%^ and start showing up at local party meetings

Look I work nights. I take off a good part of a nights work and use some of my vacation time one night each month to do this.

I have no patience for anyone who works days, and thinks doing that is too much trouble,

Why I would have over a week more vacation to use .

Wait a minute, I take my vacation with my Girl Friend and I spend a LOT more money on her than I lose by not working those hours?

Hmm being engaged in the political process is actually Cheaper??? :lol:

[fbibob]

Huney, I would not worry about it if I were you. By the time Obama is through with the economy, 401K accounts will have no value at all if they are invested in the stock market.

[slkasop]

I wonder if he ever read this:


"You cannot help the poor by destroying the rich. You cannot strengthen the weak by weakening the strong. You cannot bring about prosperity by discouraging thrift. You cannot lift the wage earner up by pulling the wage payer down.

You cannot further the brotherhood of man by inciting class hatred. You cannot build character and courage by taking away men's initiative and independence. You cannot help men permanently by doing for them what they could and should do for themselves."

-Abraham Lincoln