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Fiscal Cliff: Why Congress Might Have to Mess with the 401(k)
Time ^ | 11/29/12 | Dan Kadlec

Posted on 11/29/2012 11:20:58 AM PST by 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.

(Excerpt) Read more at business.time.com ...


TOPICS: Breaking News; Business/Economy; News/Current Events; Politics/Elections
KEYWORDS: 0bamanation; 112th; 401k; apieceoftheaction; bho44; corruptbastards; debt; fairness; ghilarducci; nationalization; pension; pigford3; redistribution; retirement; savings; spending; spreadthewealth; taxandspend; theft; waivethis
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To: Perdogg
How would this actually work?

If much of the 401(k)value is tied up in corporate stocks, then seizing retirement accounts is really seizing the private sector.

How else would one characterize the government mandated selloff of ccorporate stocks?

-PJ

61 posted on 11/29/2012 12:11:37 PM PST by Political Junkie Too (If you are the Posterity of We the People, then you are a Natural Born Citizen.)
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To: twistedwrench

62 posted on 11/29/2012 12:12:46 PM PST by Travis McGee (www.EnemiesForeignAndDomestic.com)
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To: Political Junkie Too; FerFAL308

This is straight out of the Kirchner’s Argentine formula.


63 posted on 11/29/2012 12:14:31 PM PST by Travis McGee (www.EnemiesForeignAndDomestic.com)
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To: Perdogg

Thieves have a hard time resisting other peoples money. So I guess I can’t blame Congress. They emptied the treasury, so there is not much left to fight over now.

Well, when we are all living in mud huts holding the barbarians off with a stick, I am sure they will say a prayer for us from the Riveria or the Bahamas, or where every they put their personal stash.

Cause Congress does not do 401k’s.


64 posted on 11/29/2012 12:15:00 PM PST by American in Israel (A wise man's heart directs him to the right, but the foolish mans heart directs him toward the left.)
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To: Perdogg
Americans are stocking up on firearms and ammo for a damn good reason.
65 posted on 11/29/2012 12:16:29 PM PST by Niteranger68 (When you play all-or-nothing, be prepared to get nothing...maybe even less.)
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To: Travis McGee

Hand it over, komrad. The only retirement under communism exists in a mass grave.


66 posted on 11/29/2012 12:16:52 PM PST by TADSLOS (No need to watch the movie "Idiocracy". We're living it.)
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To: annieokie

Sabatage, everything Federal. It would be like a Guerrilla War, the Feds cant be everywhere, but individual people can. What if Hackers shut down the EBT card system? Power Lines to IRS buildings happen to go down. People aren’t killed, that would be bad press, but the average Joe wouldn’t care if a building or two happened to burn down. If something like this spread throughout the country it would be chaos. All this is just hypothetical of coarse, I would never advocate such a thing, that would be illegal.


67 posted on 11/29/2012 12:17:01 PM PST by Husker24
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To: Perdogg; ding_dong_daddy_from_dumas; DoughtyOne; Gilbo_3; Impy; stephenjohnbanker; NFHale; ...
RE :”It looked at data from Denmark, where the pension system is similar to that in the U.S., and found that every dollar that government spent on tax breaks increased total savings by about one penny.
That’s not much of a payoff. Meanwhile, the Tax Policy Center in Washington has found that about 80% of retirement savings benefits flow to the top 20% of earners. Eliminating the deduction for retirement savings would hit the well-off disproportionately, a condition with a lot of appeal in the current political climate.
....
Yet the Danish study suggests that little would change if the tax incentives were removed. Only 15% of savers actively respond to tax incentives, the study found. Far more important are features like automatic enrollment and contribution rates that automatically increase with pay raises.
So hold on to your wallet. Congress has many options when it comes to tapping this vast reservoir. It could eliminate the deduction altogether or just for top earners, further restrict the amount that is deductible (currently $17,500; for those over 50, $23,000), start taxing retirement savings growth, or take back the part that has grown tax-free.”

Summary:
1) 401Ks are tax free, more specifically income tax free (not true)
2) Only the rich use these (not true)
3) 401Ks dont encourage retirement savings (not true)
4) Getting rid of these tax deductions(???) would be popular (not true) now that everyone wants to soak the rich.

You see 401Ks are NOT tax free as Time claims they are, they are tax defered. We pay the tax when we withdraw the money in retirement.
Time would be useful for cleaning up after doing the morning business, that is aabout it

68 posted on 11/29/2012 12:17:15 PM PST by sickoflibs (Has Bohner caved to Obama again yet?)
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To: Perdogg

Notice that there was no word about tapping into pensions . . . make the 401(K) less valuable and make it a lesser alternative to a union pension plan! Voila! Another reason to spread union membership.

Sooner or later the left will court violence. And it will be responded to.


69 posted on 11/29/2012 12:18:50 PM PST by LRoggy (Peter's Son's Business)
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To: Perdogg
Fall off the fiscal cliff


70 posted on 11/29/2012 12:20:25 PM PST by Mozilla
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To: 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”.

Who’s to say the RAT scum would not make it retroactive.


71 posted on 11/29/2012 12:20:25 PM PST by kenmcg (scapegoat)
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To: AngelesCrestHighway
Keep it up Obama!...The second civil war is coming!

That's what hussein wants. He can flee to one of Soros's homes in another country. However, congress can receive the wrath.
72 posted on 11/29/2012 12:21:52 PM PST by crosshairs (Hurricane Barry is 1000 times more destructive than Hurricane Sandy.)
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To: TADSLOS

73 posted on 11/29/2012 12:22:28 PM PST by Travis McGee (www.EnemiesForeignAndDomestic.com)
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To: Ratman83
They are giong to get us either way.

So, maybe we should,,,,,,never mind,,,,it goes without saying.
74 posted on 11/29/2012 12:28:47 PM PST by crosshairs (Hurricane Barry is 1000 times more destructive than Hurricane Sandy.)
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To: crosshairs

10 4


75 posted on 11/29/2012 12:33:13 PM PST by Ratman83
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To: Perdogg

Can you imagine the scramble for gold and other hard assets such as guns and land (in nations that still respect private property rights)? Wow... There will literally be a run on the banks like nothing we have ever seen. I will camp out overnight to be near the front of the line.

I’d rather go to Atlantic City and place it all on red than flush a dime of it down the corrupt government toilet.


76 posted on 11/29/2012 12:35:56 PM PST by Lancey Howard
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To: Mozilla

Nonetheless, Wile E. Coyote always came back to wreak more havoc.
As will our polypragmatons.


77 posted on 11/29/2012 12:38:17 PM PST by ctdonath2 ($1 meals: http://abuckaplate.blogspot.com)
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To: Husker24
I wouldn't either.

Often wondered why we can't RENT A MOB to protest for our side. I don't think those people really care who they take money from, do they?

78 posted on 11/29/2012 12:39:58 PM PST by annieokie
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To: Perdogg

“The truth is, in order to get things like universal healthcare and a revamped education system then someone is going to have to give up a piece of their pie so that someone else can have more.” The First Mooch


79 posted on 11/29/2012 12:42:33 PM PST by tumblindice (America's founding fathers: All armed conservatives.)
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To: Milton Miteybad
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.

There is one category of assets/funds in IRA's or 401(k)'s that meet this description: The ROI in Roth 401(k) or Roth IRA. I believe that's what the article is referring to.

An example: you contribute $5,000 to a Roth IRA this year (that's the maximum, if you are under 50). You will have paid income taxes on that contribution, because only earned income is eligible.

However, if you don't withdraw those funds for 20 years, and you get an average ROI of 7% per year (which isn't unreasonable), that original contribution will grow to nearly $20,000.

On withdrawal from the Roth IRA, you won't pay income taxes on any of it, as long as you don't withdraw it before the year you turn 59-1/2. That means that nearly $15,000 is never subject to income tax. Furthermore, there is no minimum required distribution, so you don't have to withdraw from it at all. Then, you can bequeath your Roth IRA to a spouse, child, grandchild, etc. If it is someone besides your spouse, they will have to start withdrawing from it within 5 years after your death, but the minimum required distribution rules apply and they can spread it over their entire remaining lifetime. And except for your original contributions, it will all be tax-free, aside from any estate tax that may have been assessed.

80 posted on 11/29/2012 12:44:33 PM PST by justlurking (tagline removed, as demanded by Admin Moderator)
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