George Miller (D-CA) and Jim McDermott (D-WA) are taking advantage of the public’s fear from the current bear market. They are looking at eliminating the 401(k) tax breaks, about $80 billion, and redirecting it to another mandatory government-run retirement system. The current tax policies empower employers to provide 401(k) matching programs, elimination of this tax break will result in the elimination of these matching programs.
This is a clear case of using the short-term fall of the stock market to take more power from individuals and put it into the hands of the Government. The Democrats are set to take control of both the House and Senate, so this is likely a real possibility in the next session.
The proposed plan would provide a $600 annual inflation-adjusted subsidy from the Government. Workers would also be required to invest 5% of their pay into a guaranteed retirement account that the Social Security Administration would run. That money would be invested in government bonds that would yield 3% a year.
The stock market has never lost money in any 10-year period. In fact, 15-year returns have always been between 18.8% and 4.3% (that’s higher than the 3% the Government wants to give). Now, throw in that companies average 3% of their payroll into matching 401(k) plans (typical is $.50 on $1.00 on the first 6% of employee pay). Without even taking stock market returns into account, a 5% contribution into the average 401(k) plan yields 50%. That’s not even a close comparison to the proposal for a Government-run proposal for a 3% yield, even with the $600 subsidy.
There is no sense at all in this. Why do some of our representatives think that Government can do things better than individuals, regardless of the facts that stare them in the face? The timing couldn’t be worse for this. People are frightened with the market down and some are utilizing fear politics to move towards a policy that would clearly hurt everyone. What ever happened to our representatives working for us instead of for the Government?
Source articles here and here.
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Posted under Economy
Written by admin on October 22, 2008
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OK, this is just a prime example of the Dems wanting to take over things they have no business taking over! The math is simple, doing this is a bad deal for us. It’s all about growing the government and taking power away from us.
I have a suggestion,if congress wants to eliminate the 401K deduction, I think we need to seriously look at the pension programs offered to congress people whether they are in office or retired. I say we need to have them to abide by the rules they are proposing on us. Yhey need to turn in the values of their pensions to the social security administration and they can get $600.00 yearly plus 5% of their income. That will stop this talk as fast as they proposed it.
You guys know that this is just flat out lie right?
George Miller never said about eliminating 401k tax or whatever stupid lies listed here. He only said, I quote:
“Taxpayers subsidize 401(k) plans by $80 billion dollars annually. For a taxpayer
investment of this size, we must ensure that the structure of 401(k)s adequately protects
the nest eggs of participating workers.
At a minimum, we know that much greater transparency and disclosures in 401(k)
investment policies are needed, to protect workers from “hidden” fees that could be
eating deeply into their retirement accounts.
And with seniors poised to suffer the most from the current economic turmoil, we must
suspend an unfair tax penalty for seniors who don’t take a minimum withdrawal from
their depleted retirement accounts, like 401(k)s.”
Where in here does he said that he wanted to eliminate the 401K. He would like to “PRESERVE AND STRENGTHEN 401k”
Before typing and looking like bunch of idiots, why don’t you guys google this and go to his website. Theresa, the socialist, did present in the hearing but so does 3 other professors from UCLA, Berkeley, and UMASS.
No wonder we’re fighting someone else’s war in IRAQ, we have too many idiots running around in this country.
I’m sorry, John, but he most certainly did. Check the source articles, it’s quoted quite clearly.
Here is the Miller quote that you apparently didn’t have the opportunity to read: “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.” That is where he talked about eliminating the 401k break. I already pointed out in the source article what that action would cause.
As far as Ghilarducci’s plan goes, McDermott’s press secretary is even cited as pointing out that Ghilarducci’s plan is “part of the discussion”, meaning it is on the table and under serious consideration. Now here are some numbers to put it into perspective. Say you put $62.50/wk into each plan (5% of a $30k/yr income). With a 3% government bond plan you would have $30,765.51. With a 401k plan with 50% match and historical stock returns, you would have between $203,709.99 (best historical return) and $51,313.29 (worst historical return). That’s an extra $20,547.78 in the worst return in history. Why Miller would think that the 401k tax break isn’t working for workers and is even listening to the Ghilarducci plan is beyond me.
One last point, you shouldn’t throw the word idiot around trying to insult people. It really doesn’t help your cause. In fact, it just makes what was a good post look juvenile.
It seems strange that you’ve listed two different sources that are actually one and the same. It is the same article written by Sara Hansard of “Investment News” which is a sister publication to your secondary source “Workforce Management.” To me this would only be one source.
After reading the whole article a few times it strikes me that this might be an effort to take different comments and quotes and put them together in a way that makes it sound like more than it is. This was a lot more about eliminating tax breaks (which is still a bad idea) but it’s a stretch to say that the Democrats in general are pushing to eliminate 401k’s just because Theresa Ghilarducci put forth her own “bright” idea. (Please note the sarcasm here!)
I’m all for bringing it to light when someone proposes such an assinine idea that could possibly end up getting support from our elected officials but to use this as a scare tactic to make people think that Democrats in general are working to eliminate 401k’s is wrong.
What other goal would be achived by eliminating this tax break? I cannot see any positives, only negatives. Although you might be able to say the Democrats might not be “intending” to eliminate the 401k, the actions they are considering (eliminating the tax break) would result in it.
And thanks for pointing out the link issue. I inadvertantly grabbed the wrong link when I originally posted. Fixed it.