Movement to Scrap 401(k)s Gains Traction

[scooterbug44]

No, but if and when they actually propose something or want to pass legislation I am more than willing to have a rational discussion about it.

The idea is not to take your money and buy votes with it, but to find a way to guarantee a certain value/rate of growth in retirement accounts to protect people in case of another tumble in the market.

 

[30ashopper]

No, but if and when they actually propose something or want to pass legislation I am more than willing to have a rational discussion about it.

The idea is not to take your money and buy votes with it, but to find a way to guarantee a certain value/rate of growth in retirement accounts to protect people in case of another tumble in the market.

Just so I understand where you stand, you support Ghilarducci's concept?

 

[scooterbug44]

I think it is an interesting idea that obviously requires further discussion, examination, and hashing out of details. Don't think it's perfect or definitely what we should do, but an interesting idea.

The whole reason it is even getting attention is because the current system isn't working for people.

 

[chrisv]

Just from a process standpoint, I would not necessarily agree that it is much further along than expected. I am involved with a few groups that are often asked to participate in fact-finding presentations on Capitol Hill. These fact-finding missions are typically held on the House side and are good for legislators as they open up opportunities to publicly air some interesting possibilities to address current issues. However, the majority of them stop after the first round or two of subcommittee testimony. Specifically related to this discussion, it is taking place at the subcommittee level of the house also.

For it to become law, it would have to be reported out of subcommittee to full committee. Then it would have to gain the support of full committee and would likely be amended if it was able to even do that. Then be scheduled for a vote at the Full House level and gain full House support. Keep in mind that the Dems didn't want to touch the bailout bill and Pelosi didn't want to bring it to a vote without Repub support and this would be much more controversial. Moreover, I doubt this would have the support of many Repubs OR Blue Dog Democrats, who when added together could defeat the bill.

Not to mention, there would have to be a companion Senate bill that would have to be passed through similar steps. While I believe it is prudent to be concerned with any radical changes to our federal system, especially in regards to taxes and retirement, I believe it is too early in the process to get too worked up. If you want to begin to work against it, the best first step will be to see if there is any desire in the Senate for such a bill. Currently, I have not seen any.

Beachsand, I am sincere when I say thank you for your insight into your role in the fact-finding presentations, but with all due respect, your lesson in civics was a bit condescending.

I never said the idea was "much further along than expected", rather, that this idea is "much more real" than some may want to let on. This was presented to a subcommittee, and the press secretary for one of the chairs said that "it was part of the discussion." IMO, the best time to kill something is while it is in it's infancy, in subcommittee, before it sees the light of day. Making folks aware of it and encouraging them to express their opposition (or support, if that's your bag) at this point is the very essence of these fact-finding hearings.

Pelosi refused to allow the bailout to go forward without republican support to keep from derailing Obama's candidacy. If that bill had passed as a democratic, partisan vote, I suspect that the democrats would be in much worse shape in this election.

In the current congressional makeup, I agree that this type of proposal would have little chance. I imagine that it would fare much better in the projected 111th congress and possible 60 seat majority senate.

 

[John R]

Can you hook me up with a personal gaurantee this won't blossom into the real thing scoot, like, maybe paying my share if you're wrong?

No, but if and when they actually propose something or want to pass legislation I am more than willing to have a rational discussion about it.

The idea is not to take your money and buy votes with it, but to find a way to guarantee a certain value/rate of growth in retirement accounts to protect people in case of another tumble in the market.

Scooter, good luck. Rational and shopping really don't go hand in hand ;-)

The concept may work, but our government will surely screw it up. Giving it to the SS administration to handle is the first mistake...

 

[30ashopper]

I think it is an interesting idea that obviously requires further discussion, examination, and hashing out of details. Don't think it's perfect or definitely what we should do, but an interesting idea.

The whole reason it is even getting attention is because the current system isn't working for people.

So, just to be sure, lets go over the basics of the plan as it stands now -

On top of social security, medicare, and federal taxes, a new mandatory tax is added to your payroll taxes, which is taken out pre-tax. You have no option of opting out.

The income from this tax goes to the social security administration, which takes the money and lends it to the federal government by purchasing bonds. Congress is then able to take that money and spend it on something else. (This is identical to the way social security works.)

The investment has a gaurenteed min/max return on it, 3% above inflation. You can't earn more and you can't earn less. You are not able to access this money until you reach retirement age. After you reach that point, the money is streamed out to you in the form of monthly checks, the amount of which is controlled by the government. (just like social security.)

If you have an existing 401K, that account will be liquidated and a check for it's total worth will be sent to the government. Congress will then be able to borrow this money as well.

Do you support a plan like this? If not, how would you change it?

 

[scooterbug44]

So, just to be sure, lets go over the basics of the plan as it stands now -

On top of social security, medicare, and federal taxes, a new mandatory tax is added to your payroll taxes, which is taken out pre-tax. You have no option of opting out.

The income from this tax goes to the social security administration, which takes the money and lends it to the federal government by purchasing bonds. Congress is then able to take that money and spend it on something else. (This is identical to the way social security works.)

The investment has a gaurenteed min/max return on it, 3% above inflation. You can't earn more and you can't earn less. You are not able to access this money until you reach retirement age. After you reach that point, the money is streamed out to you in the form of monthly checks, the amount of which is controlled by the government. (just like social security.)

If you have an existing 401K, that account will be liquidated and a check for it's total worth will be sent to the government. Congress will then be able to borrow this money as well.

Do you support a plan like this? If not, how would you change it?

Based on the article link, the above is not completely correct.

1) You do not pay a tax, you contribute 5% of your pretax salary to an individual account - which you can track and monitor.

2) The account has a guaranteed minimum return of 3% above inflation, but can make more than the set percentage. (don't quite understand that one)

3) It didn't say anything about liquidating existing 401(k)s, but did mention maintaining tax free contributions to IRAs and 401(k)s but capping that - perhaps at $5k per year.

 

[30ashopper]

Based on the article link, the above is not completely correct.

1) You do not pay a tax, you contribute 5% of your pretax salary to an individual account - which you can track and monitor.

2) The account has a guaranteed minimum return of 3% above inflation, but can make more than the set percentage. (don't quite understand that one)

3) It didn't say anything about liquidating existing 401(k)s, but did mention maintaining tax free contributions to IRAs and 401(k)s but capping that - perhaps at $5k per year.

...and you would support this if it came to a vote?

 

[scooterbug44]

Not as it is currently presented, but think it's an interesting idea to discuss. Lot of missing details and scenarios it doesn't cover - self-employed people, unemployed people etc.

Haven't exactly been impressed with our various government's money management over the years - I'd much rather be in charge of my own destiny.

 

[BeachSiO2]

Beachsand, I am sincere when I say thank you for your insight into your role in the fact-finding presentations, but with all due respect, your lesson in civics was a bit condescending.

I never said the idea was "much further along than expected", rather, that this idea is "much more real" than some may want to let on. This was presented to a subcommittee, and the press secretary for one of the chairs said that "it was part of the discussion." IMO, the best time to kill something is while it is in it's infancy, in subcommittee, before it sees the light of day. Making folks aware of it and encouraging them to express their opposition (or support, if that's your bag) at this point is the very essence of these fact-finding hearings.

Pelosi refused to allow the bailout to go forward without republican support to keep from derailing Obama's candidacy. If that bill had passed as a democratic, partisan vote, I suspect that the democrats would be in much worse shape in this election.

In the current congressional makeup, I agree that this type of proposal would have little chance. I imagine that it would fare much better in the projected 111th congress and possible 60 seat majority senate.

I apologize for being condescending as that was not my point at all. My main point was how it seemed that in the media and attached websites the process always seems so much simpler than it really is and thus so much further along. As for the idea being real, I whole-heartedly agree that it seems real and if some want to stop it now is a fine time. It is highly likely however that many Congressional members aren't up to speed so don't be surprised if you don't get a well thought out response to your concerns. My point is that I am not sure that it has legs. In my more than a handful of years in government, I have used the phrases "part of the discussion" and "interesting" (not intriguing) to provide wiggle-room for various options under discussion while still not being fully supportive or bought in to options. It shows that you are willing to listen, but non-committal.

As for your assessment of Pelosi and the Obama presidency, you may disagree but once McCain said he was voting for it, it was a moot issue as they both were on the same side of the bill, but my point remains the same. Pelosi does not like to take issues to the floor that does not have some broad-based support in her House as she does not like to lose her votes. In this case, I still don't see how you get the Repubs and the Blue Dogs on board.

Finally, your last paragraph is why I commented in the beginning. I wanted to show how far this is from a reality of actually happening in the short term so that it would not be another tool to say, see they'll wipe out your 401k if you vote for X. Whether it is on the Presidential or Congressional level.

One thing that is a distinct reality that we should probably think about is the second stimulus after the election from a lame duck Congress. How many more billions are we willing to invest in recovering our economy, and what should be our priorities? From what I am hearing, it will have more christmas tree ornaments (earmarks) than the Dr. Suess Christmas Tree.