Fiscal Cliff: Why Congress Might Have to Mess with the 401(k)

Time ^ | 11/29/12 | Dan Kadlec

[Perdogg]

One of the earliest fears about tax-favored savings accounts like IRAs and 401(k) plans was that when this pool of savings grew large enough Congress would not be able to resist tapping it to help solve the nation’s debt problems. We’re about to find out if those fears—persistent for decades—have been justified.

Everything including the sacred mortgage deduction is on the table as lawmakers wrestle with the fiscal cliff, a year-end avalanche of scheduled spending cuts and tax increases. With a combined $10 trillion sitting in IRAs and 401(k) plans, retirement accounts make a juicy target. Some of this money has never been taxed, and under current law never will be.

[Perdogg]

Suckers.......

[DonaldC]

Go flat tax with no deductions.

[rarestia]

Who? Those of us who took advantage of our employer 401(k) plans or the legislators who want to tax it?

[massgopguy]

She said “spread the wealth”.

[Perdogg]

The people who voted for 0bama and Dems.

[sodpoodle]

The Federal govt already mandates minimal 401K withdrawals after age 70(?) or impose a penalty.

They have their sticky fingers on money earned, money saved, money invested and inheritances to children.

You didn’t earn that - someone else deserves it - and we’ll decide who and how much.

[DoughtyOne]

I believe Time is incorrect. There’s closer to $17 trillion in retirement accounts.

[Tzimisce]

They’re going to take your 401(k).

It’s not fair that worked your ass off and saved your money and will get something for it, when so many sat on their asses playing WoW and won’t get anything.

[BenLurkin]

Congress?

Or the ‘Rats?

[Ratman83]

They do not have to do anything with them but, they do want to steal as much of them as they can.

[Sergio]

bkmk

[GSP.FAN]

Rush is covering this big time...

[frogjerk]

Many trial balloons are being floated with all of the hot air in D.C.

[AngelesCrestHighway]

Keep it up Obama!...The second civil war is coming!

[EQAndyBuzz]

Just say the Bush’s tax cuts on the rich expire at the end of the year. There is the tax hike.

If Democrats and the MSM say it impacts everyone, remind them that that’s what they ran on for the last 8 years. Tax cuts for “Only” the rich.

And if they lied about that, did they also lie about WMD’s since they are blaming the intelligence community for its failure, is this the same intelligence community that reported on Iraq?

And on and on.

[Eric in the Ozarks]

Fairness...

[Travis McGee]

[MrB]

Notice they’re referring to IRAs as well as 401k’s.

They’re going after the retirement savings of the diligent in order to pay for Baraqoclaus gifts to their choice recipients.

Now, demographically, who’s going to be “giving” and who’s going to be “receiving”, do ya think.

Google “rhetorical question” before you answer.

[brownsfan]

The takers don’t have a big 401k, so neither should you, so sayeth Jaime Foxx’s lord and savior, Barack Obama.

If they want it, they’ll take it, and there’s not spit you can do about it.

Elections have consequences. But, as I’ve been hammered with the last day or so... Romney would do the same thing. Right?

[Candor7]

Why Congress Might Have to Mess with the 401(k)
>>>>>>>>>>>>>>>>

Confiscation of 401K and leave a promissory note?LOL.

Let them do it, and guaranteed there will be a violent revolt in arms all across the country.

[TurboZamboni]

Theresa Ghilarducci

[AngelesCrestHighway]

welcome to your Twilight Zone...

[ctdonath2]

The Left has gotten good at not attacking their targets head on.
In this case, they won’t tax 401ks directly, but instead will do something which will put a neutral third party at risk, compelled (”comply with regulations XYZ or get penalized out of business”) to perform the “tax” without the actual account owner having any choice in the matter.

[PeterPrinciple]

Even if they take over the retirement plans, just who exactly is going to buy all the stocks and bonds?

[EBH]

Shut mine all down and took the penalty in NOv. 2008, day after the election....

Fools I tell ya’, fools. Everyone saying they would never do this....

Look it is your money. They want to end it? The only thing you owe them is tax on that money. That was money you or your company put aside. That is YOUR money not the governments in any way shape or form.

[smoothsailing]

The government wants your money, all of it, now!

The fiscal cliff and tax hikes on the rich nonsense is a smoke screen for the wealth confiscation that is well under way.

[Orange1998]

"With a combined $10 trillion sitting in IRAs and 401(k) plans"

So 10 Trillion is sitting in accounts waiting for the owners to claim their money?

I seriously doubt ANYONE can produce 10 Trillion dollars in one swoop because it does not physically exist.

[SueRae]

I would think a lot of people would quit en masse and take the freaking penalty just to take their $$$ out of 401Ks. The bank of Stearns and Foster is going to do well in these times.

[PeterPrinciple]

and under current law never will be (taxed).

---

I am willing to be corrected but that is a lie.

[EBH]

This was floated by in 2007, 2008 already.

They have had 5 years at least to work on the legislation and propaganda to make this happen.

It is going to happen. I’d get out before they decide to freeze the 401k accounts. That is YOUR money.

[MrB]

She and Alan Colmes need to get together.

[MrB]

Very likely they’d shut down that possibility with no warning while they wrangled it out.

[TurboZamboni]

I’ve been thinking if Uncle Sham is bluffing, they win when you have most of the populace now with no savings and dependent on FedGuvInc in their old age.(No point in saving in a traditional bank account or CD since Uncle Sham is keeping interest rates artificially low.)

On the other hand,if rumors are fostered by the government to convince people to stop deposits and make early withdrawals to boost THIS YEARS’s taxable income, that buys them time to keep on spending ,wasting, and scheming.

[Orange1998]

"It is going to happen. I’d get out before they decide to freeze the 401k accounts".

NEVER in a Million Years. The results will make the Great Depression child play.

[alamogal]

If the trillions in 401k’s and ira’s comes out of the stock market..look out below..

[Ratman83]

They are giong to get us either way.

[Milton Miteybad]

From the article:

Everything including the sacred mortgage deduction is on the table as lawmakers wrestle with the fiscal cliff, a year-end avalanche of scheduled spending cuts and tax increases. With a combined $10 trillion sitting in IRAs and 401(k) plans, retirement accounts make a juicy target. Some of this money has never been taxed, and under current law never will be.

To maintain this savings incentive the government “spends” $100 billion a year in the form of tax breaks to those who stash money in these kinds of accounts. Now, a new study suggests this tax incentive does little to change saving behavior. Some lawmakers, no doubt, are wondering: Why keep an expensive tax incentive that does not incent?

The portion in bold is just flat wrong. These are tax-deferred accounts, where current contributions are made with pre-tax dollars and are taxed at withdrawal, at the rate for that taxpayer at the time of withdrawal. The money will most certainly be taxed later on, even if it isn't being taxed now.

Moreover, the whole conclusion of the study quoted by this article is directly refuted by the article itself. Let's erroneously assume that the government actually "spends" $100 billion/year (a monumental misconception, to be certain) in deductions for contributions to these types of accounts, which have been around for 30 years or so. The aggregate deductions for retirement accounts obviously hasn't been $100 B/year from their inception to now...in the early years, whatever current revenue may have been forgone by the federal government was no doubt far less than $100 B/year. Yet, there is now a total of $10 trillion dollars held in these accounts today, which is $10 T in capital that would not have existed otherwise.

These accounts, contrary to the article's premise, have accumulated capital far faster and to a far greater extent than if the contributions had been taxed in the year they were made. The very existence of a capital pool in excess of $10 trillion that would not have existed but for the presence of the tax-deferred accounts undercuts the whole premise of the study.

Now, what I would deem to be a clear waste of federal money is any tax dollars thrown at the jacklegs who came to these erroneous conclusions.

[Mouton]

I love the smell of revolution in the morning, it smells like Victory.....sorry for the plagerism.

[GeronL]

here it comes

confiscation

and of course NO spending cuts

[EBH]

Obama Begins Push to Confiscate IRA’s & 401k’s
http://www.freerepublic.com/focus/news/2960535/posts?page=96

[trebb]

Everything including the sacred mortgage deduction is on the table...

I bought a house and never benefited from the "sacred mortgage deduction". I suppose if I had bought out of my range it might have been different, but I wonder how many middle class folks actually save anything with it. I would hazard a guess that they are upper-middle-class and/or spending more than would be prudent.

[Joe Brower]

"The results will make the Great Depression child play."

Perhaps that's the idea.

[qam1]

And how many times did the Republicans bring this up before the election?

[GeronL]

There is not enough money to give these people their money back. If everyone rushes to cash out, it could be like the 1939 stock market crash.

[Blood of Tyrants]

What? And not be able to use the tax code to reward and punish people? NEVER?

[annieokie]

Yout darned right about that. Civil War and Rev rolled into one.

Election Fraud.....Tax hikes.....Redistribution....I would say that WAR is well overdue. How will we know it has begun?

[TurboZamboni]

which one plays the man?

[I want the USA back]

Once again, the government has perpetrated a fraud. They told us to save in tax-free accounts. That was to give us the fruits of our labor in our old age, so that we wouldn’t be dependent.

Ah, but the marxists couldn’t let that last. All that money out there and OUT OF THEIR CONTROL!

Will the few remaining productive people protest and keep this from happening?

[grumpygresh]

If 401k accounts are to be frozen, it will probably occur under the pretext of a crisis. But the crisis would have to be a real crisis like a major financial collapse or war. Freezing 401k accunts would likely result in a run by the public on all other accounts including bank accounts, stocks, bonds which would cause a crash and liely a freeze on these accounts as well.
Therefore, if the government is to do something like this, they will need to act suddenly, shut down the internet, censor the media and be ready to impose martial law where needed.
It is more likely that they will try out some very innocous seeming transition to tax deferred treasuries and gradually withdrawal the tax deferred status of 401ks and similar pension plans

[annieokie]

THAT revolt is well overdue RIGHT NOW.

Election Fraud...Tax hikes...Redistrubition...Obamacare.

When does the Revolt begin, and how will we know it started?