posted
Would Obama, Dems Kill 401(k) Plans? October 23, 2008 10:47 AM ET | James Pethokoukis | Permanent Link | Print I hate to use the "S" word, but the American government would never do something as, well, socialist as seize private pension funds, right? This is exactly what cash-strapped Argentina just did in the name of protecting workers' retirement accounts (Efharisto, Fausta's ****). Now, even Uncle Sam isn't that stupid, but some Democrats might try something almost as loopy: kill 401(k) plans.
House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created "guaranteed retirement accounts" for every worker. The government would deposit $600 (inflation indexed) every year into the GRAs. Each worker would also have to save 5 percent of pay into the accounts, to which the government would pay a measly 3 percent return. Rep. Jim McDermott, a Democrat from Washington and chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, said that since "the savings rate isn't going up for the investment of $80 billion [in 401(k) tax breaks], 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."
A few respectful observations:
1) McDermott is right when he says the savings rate isn't going up. But the savings rate doesn't include gains to money you invest in the stock market. It ignores the buildup of net worth. (If you bought a share of XYZ Corp. in January at $100, for instance, and its value doubled by December, the savings rate measure would still value that investment at $100. In short, the savings rate is a phony number.)
2) So based partly on the above faulty logic, the $4.5 trillion, as of the start of the year, invested in 401(k) plans doesn't count as savings.
3) Ghilarducci would have workers abandon the stock market right at the bottom of the market. A stupid idea, according to Warren Buffett: "I don't like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I'll follow the lead of a restaurant that opened in an empty bank building and then advertised: 'Put your mouth where your money was.' Today my money and my mouth both say equities."
4) Ghilarducci would offer a lousy 3 percent return. The long-run return of the stock market, adjusted for inflation, is more like 7 percent. Look at it this way: Ten thousand dollars growing at 3 percent a year for 40 years leaves you with roughly $22,000. But $10,000 growing at 7 percent a year for 40 years leaves you with $150,000. That is a high price to pay for what Ghilarducci describes as the removal of "a source of financial anxiety and...fruitless discussions with brokers and financial sales agents, who are also desperate for more fees and are often wrong about markets." Please, I'll take a bit of worry for an additional $128,000.
5) What effect would this plan have on an already battered stock market? Well, I would imagine it would send it even lower, sticking a shiv into the portfolios of everyone who didn't jump aboard. But I am sure the Chinese would love to jump in and buy all our cheap stocks to fund the retirement of their citizens.
My bottom line: If you believe in the long-run dynamism of the American economy, then you have to believe in the stock market. Listen to superinvestor Buffett, not the prof from the New School.
See, if this kind of stuff starts going down...its gonna get ugly. So they want us to trust the government to handle our expenses after they are the most out of what entity in the nation?
-------------------- It isn't so much that liberals are ignorant. It's just that they know so many things that aren't so.
IP: Logged |
posted
You guys are nuts! Think what a warm "in the womb" feeling you have knowing that an all-knowing and all-caring socialist government is taking care of your money. It takes a village to raise a child and it takes a village to manage and spend your money. Let's get with the program comrades!
IP: Logged |
Warren Buffet is a close advisor to Obama and you think this will get traction?
fiurthermore? in this proposal participation is not being required
Congress let workers trade their 401(k) and 401(k) - type plan assets (perhaps valued at mid-August prices) for a Guaranteed Retirement Account composed of government bonds (earning a 3% return, adjusted for inflation). When the worker collects Social Security, the Guaranteed Retirement Account will pay an inflation adjusted annuity, based on the accumulated funds.
posted
interesting: Pension tax breaks are deductions from income; high-income earners get more breaks than low-income workers. If a lawyer earning $200,000 makes a $1000 contribution to his 401(k) plan, he reduces his income tax by $350. If his receptionist, earning $20,000, makes the same $1000 contribution (which is much less likely), she will save only $150 in taxes. The Brookings Institution and Urban Institute calculate that the 3% of taxpayers with incomes over $200,000 per year get 20% of the tax subsidies
Wall Street firms collect over $40.5 billion annually in 401(k) fees.21 Yet, brokers and human resources often tell workers the fees on their accounts are zero. A good way to see what workers lose when they invest in a 401(k) plan rather than a group–based pension fund is to compare what each earns after fees are subtracted. A comprehensive study by Dutch and Canadian researchers Ron Bauer and Keith Ambachtsheer22 found that U.S defined benefit plans – where individuals do not direct their own accounts – earned a 2.66% higher return NET of fees on equities than did retail mutual funds. In Canada, the skim was even higher; the retail mutual funds earned 3.16% less. (These shortfalls are the averages for the 25 year period between 1980 and 2004.)
it's funny how reading the source material is so much more enlightening than opinions....
-------------------- Don't envy the happiness of those who live in a fool's paradise.
IP: Logged |
posted
Not for nothing but i think 401K's suck because of the penalty you get if taken out early... The reason it sucks is because they never took into account if the country and it's financial markets were in financial Hell like now... my manager at my job wishes he could take the money out and close the account but he can't because of the penalty... but he's already lost like 25% of his 401K's value... he plans to hold it and hopefully it will recover what he lost and then he plans to close the account and take the penalty nonetheless.. then he plans to start his own personal portfolio perhaps with a financial advisor or not... regardless, if this economic meltdown ever happens again in the future he likes the thought he can sell off stocks in his portfolio without fear of a penalty... and I agree with him...
-------------------- Let the world change you... And you can change the world.
posted
If you believe in the long-run dynamism of the American economy, then you have to believe in the stock market. Listen to superinvestor Buffett, not the prof from the New School.
Warren Buffet was with Obama today for his press conference...
i seriously doubt this will gain traction...
-------------------- Don't envy the happiness of those who live in a fool's paradise.
IP: Logged |
posted
Buffet has supported him from very early on.
Buffett is Obama meal ticket Nebraska investor gives support to presidential hopeful
By John McCormick | Tribune staff reporter August 16, 2007
OMAHA - Billionaire investor Warren Buffett stood next to Sen. Barack Obama at a country club fundraiser here Wednesday evening, praising the Illinois Democrat and calling for a federal tax system that would charge the rich more.
Buffett, who can move markets with a few syllables and is increasingly trying to do the same in politics, introduced the presidential hopeful and his wife, Michelle, at an event that attracted about 200 people inside a wood-trimmed clubhouse.
"He's not only a leader, but he can lead us to the right place," said Buffett, who also told a racy joke and made a few off-hand remarks about the sagging stock market.
"Barack is here to increase the abundance, but to spread it around a little more so that it is inclusive prosperity," Buffett said.
Buffett, who joked that it is "lonely" being a Democrat in Nebraska, said he first met Obama about three years ago and that the two have "had a lot of time to talk." The Wall Street wizard also said it is time to "fire the administration."
posted
Let's face it. The American Employee is not smart enough to manage their own money. Therefore, I completely support this plan. In fact, I would go one step further and suggest that employers should just send your entire check to the government. Then, the government could decide how your money could be best spent. The government could pay your bills for you; invest for you; and then send you an allowance based on your needs. From each according to his abilities, to each according to his needs.
IP: Logged |
quote:your statements do nothing but tear down the very people that support your family...
Quite the contrary. I am supporting our new President and the socialist ideas of the left. It's quite obvious that the average American needs the government to run every aspect of their life. Sending your paycheck directly to the government is the best way to support and care for the masses. Jordan - you'll feel a lot better when you don't have the responsibility of dealing with that evil money.
Get with the program or you may find yourself in a re-education camp!
IP: Logged |
posted
you are sad PM. your rants are on par with Cheney's mushroom cloud warnings.
if anybody ends up in a re-education camp? it will have been built by Kellog Root and Brown, a subsidiary of Haliburton, one of Cheneys projects.
you offer no solutions, you simply whine about things that haven't happened. you sell one minute real estate riches pamphlets, so no-one should be surprised that you are not even remotely involved with reality.
maybe if you stopped listening to the talk radio propagandists for a few weeks you'd be able to sleep. it's a sign of subcoscious struggles within the soul...
-------------------- Don't envy the happiness of those who live in a fool's paradise.
IP: Logged |
posted
My solution is to get out of the way and encourage the socialists to pass all of their radical programs. That should be enough to completely destroy the country in two years. In the mean time, we can be looking for some true conservatives to step up to the plate in the aftermath. That's the plan.
IP: Logged |
quote:Originally posted by Propertymanager: That's why I said that we'll have to LOOK FOR a few true conservatives.
and that's why i said you beleive in mythology.
what you call socialism is not the agreed upon definition of socialism.
there are even several types of socialism.
hasn't it ever occurred to you that the stuffed shirts preaching "conservative values" are simply taking your money for fairy tales and childrens bedtime stories?
we live in a Democratic Republic. the reason it was set up that way was because it was fully recognised that "mob rule" (pure democracy) would eventually lead to pure socialism.
on the other hand? the founders knew that the opposite of that become monarchy, whether it's succession is economic or genetic is irrelevant...
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
Socialism is vaguely, but truly stipulated right there in the preamble...
-------------------- Don't envy the happiness of those who live in a fool's paradise.
IP: Logged |
quote:Originally posted by Propertymanager: See, I knew that you were a socialist!
this is important PM, not only am i not a socialist, i am republican in the literal sense of the word. try looking up what republican really means.
re·pub·li·can (r-pbl-kn) adj. 1. Of, relating to, or characteristic of a republic. 2. Favoring a republic as the best form of government.
republicans beleive that pure democracy is mob rule.
if you want to rebuild the Republican party? you are going to have to move away from the ideological arguments. They are worthless, and divisive. Bush barely got himself elected in '00. in '04 the voters were scared into voting for him and Kerry had considerably less "personality" then Bush does.
Bush did not hire based on merit. He gave jobs to people that he liked whether they were competent or not. That is not free market, or conservative.
trying to sell "labels" to people and convincing them that the country is on the wrong path will be difficult to do if Obama's policies work, which? judging by the group of people has "collected" so far, and the current state of the country? is inevitable.
-------------------- Don't envy the happiness of those who live in a fool's paradise.
IP: Logged |
quote:trying to sell "labels" to people and convincing them that the country is on the wrong path will be difficult to do if Obama's policies work, which? judging by the group of people has "collected" so far, and the current state of the country? is inevitable.
Give me a break! Socialism is NOT going to work.
IP: Logged |
posted
I am not "posing" as a member of the GOP. In fact, I do not support the GOP or its leftist leanings of the past several years. The Democratic party has been hijacked by socialists and the Republican party has been hijacked by leftists!
IP: Logged |
You've impressed me with your comments in this thread.
PM,
At least wait until the guy is actually president before you start attacking his policies eh?
Mach, Tell your boss not to take his money out. Those fees will hurt too much no matter when he takes it out. Just tell him to stop contributing to that account and start a portfolio from scratch with the money he would have been investing in the 401. No penalties, he gets control of anything he contributes from here on out and his 401 can slowly recover on it's own. P.S. All this goes out the window if he's getting a company match for contributing to the 401k. He may think he can get better returns if he has full investment discretion but NOTHING beats free money.
-------------------- No longer eligible for government service due to lack of tax issues.
IP: Logged |
posted
There aren't a heck of a lot of actual socialist in this Country, but there sure are a lot of bigoted fools that don't know what it is that are accusing others of being socialist.
Almost all the nonsense the complainers about socialism are citing is stuff that every government MUST do in order to protect its population. You want to see what it is really like to try and depend on private business do it all? Go to just about any third world country and look around. Do you see any of the great corporations in those countries building roads or putting up telephone lines in the country?
A bunch of corporate big wigs built a lake in Pennsylvania way back. It's broken its dam and completely wiped out Johnstown twice. Those guys simply don't give a rats azz about the people. In order for the population not to be forced to live in horrible backward conditions, it is necessary for the Government to get involved.
Actually, except for the argument that cops living in the neighborhoods they are there to protect bringing about better protection, I don't much care for any argument to make city employees live in the city.
IP: Logged |
At least wait until the guy is actually president before you start attacking his policies eh?
Why? I can read his policies right now and some of them will be VERY BAD for the country. So, I'm opposing his socialist policies now. Why wait?
IP: Logged |
At least wait until the guy is actually president before you start attacking his policies eh?
Why? I can read his policies right now and some of them will be VERY BAD for the country. So, I'm opposing his socialist policies now. Why wait?
which and why?
this is where you always fall silent. make your case in basic terms, for a change.
as far as i can tell? all you've ever done here is repeat the soundbites that talking heads everywhere offer. they are worhtless without insight.
i've delved pretty deeply into both Mccains and Obama policy statemnts so far, and neither man's offerings were nearly as differnt as pundits claimed...
except on health, and taxes in very general way.
McCain was palnning to RAISE taxes by offering a supposed tax cut on health care, and Obama said he will raise taxes...
one was honest, and one was not.
-------------------- Don't envy the happiness of those who live in a fool's paradise.
IP: Logged |
quote:Originally posted by The Bigfoot: Mach, Tell your boss not to take his money out. Those fees will hurt too much no matter when he takes it out. Just tell him to stop contributing to that account and start a portfolio from scratch with the money he would have been investing in the 401. No penalties, he gets control of anything he contributes from here on out and his 401 can slowly recover on it's own. P.S. All this goes out the window if he's getting a company match for contributing to the 401k. He may think he can get better returns if he has full investment discretion but NOTHING beats free money.
The company does not contribute to our 401K's so there is no free money and he is losing nothing but his own... 401K's are a bad idea imo when you have no control over them in times like this with our current economic meltdown... they should be reformed and modified for future situations like this...
-------------------- Let the world change you... And you can change the world.
UBBFriend: Email this page to someone!
Printer-friendly view of this topic
![[Smile]](smile.gif)
![[BadOne]](graemlins/headbash.gif)
