First - what 401k was created for. The 401(k) was a central plan, a central tenet to get people to save for their own retirement in addition to Social Security.
Did you read that ... in ADDITION to Social Security.
It came into play during the Reagan years, and it was designed to supplement your own investment program, dollars that you have earned in a retirement plan that was independent of Social Security. And, of course, the way it works, your company offers you the 401(k). You can take a percentage of the gross, your gross pay every month and put that in your 401(k). It reduces your taxable income.
Again, designed to SUPPLEMENT your own investment program, dollars that you have earned in a retirement plan that was independent of Social Security.
George Miller, who heads the House committee that deals with 401(k)s, about a month ago said, we have to eliminate this tax subsidy. The government is losing $80 billion a year. We can't afford to lose this kind of money. There are too many people that don't need this tax break anymore. So what we're going to do, we're going to take away the whole notion that you get to deduct from your gross whatever you contribute to your 401(k). The government needs that money.
Teresa Ghilarducci wants to basically eliminate the 401(k), and the way she wants to do it is she wants to go to people who have a 401(k), who have seen its asset value plummet because of the market plunge. So she wants to go back to August levels. Everybody that has a 401(k), we'll take you back and we'll give you money. We'll restore the value. The government will. We're just going to print some money here, and we're going to restore your 401(k) to its August amount. THEN WE'RE GOING TO TAKE IT. We're going to take your 401(k), and we will put it in your Social Security account that the government is monitoring for you, and we will invest every year 3% in government bonds. We'll buy government bonds so that your 401(k) will grow at 3% every year adjusted for inflation. The most that you will be able to contribute to your 401(k) every year is 5% of what you earn.
And then when you retire, your 401(k), and plus there's a $600 annual addition that she formulates here because she finds it inequitable that some people get a 36% tax deduction and some don't because the various income tax rates that affect how much of a deduction you get. So the bottom line is, they'll take your 401(k) and put it in Social Security. They give you 3% a year plus 5% of your gross added, and then at the end when you retire, you get one check. Your Social Security check plus whatever your 401(k) is. The government takes over your 401(k). Not so much flushes it, they just take it, like they're going to take some pension money. Now, this is not centrist. This is not moderate. This is George Miller, and this is the kind of thing that Reid and Pelosi will go for.
So what DOES THIS MEAN FOR YOU if you have a 401k? Here ya go ...
That means your employer can no longer write off their contributions to your 401(k), and your capital gains would be taxable year-on-year. In other words, it becomes just another investment or savings account, with no tax benefit at all, and no employer contribution. Instead, Uncle Sam would give you your “matching” funds — up to a whopping $600 per year! Whoopee!
As Michelle Obama says, you could buy a pair of earrings every year … except, of course, you can’t. It’s in The Lockbox, defined by politicians as Locked Away from You but Accessible to Us. It goes there along with 5% of your gross earnings, apparently to play with the 7% of your gross earnings that already goes to Social Security. And what do they do with the money? They give you government bonds as your only investment option.
Maybe you’ll be lucky, and they’ll have Franklin Raines running the agency issuing those bonds.
The Democrats want to end the private retirement system that has allowed Americans to become a vast investor class and put them back in thrall of the federal government. This is nothing more than a second welfare system that would sit on top of the crumbling Social Security entitlement. It would leave the American working and middle classes with no retirement option other than a government handout.
If the Democrats control both Congress and the White House, kiss your 401(k)s goodbye, and get into the bread lines first before the crowd arrives.
I don't know about you, but I have been putting into my 401k account for around 15 years. I've worked 60 and 70 hour work weeks busting my butt so I wouldn't have to depend on the government's Social Security fund for my retirement. By the time I get there there won't be Social Security. I personally don't feel like donating my hard earned dollars that I suffered for and saved diligently to the government to hand out to those who don't care about saving for their own retirement and expect the government to pay their way.
