Posted on 02/29/2024 5:31:44 AM PST by Red Badger
Your 401(k) Will Be Gone Within a Decade
Please consider Your 401(k) Will Be Gone Within a Decade
If you are among the 56% of US workers with a retirement plan, I have some bad news for you: Your 401(k) will be gone in 10 years, tops. Not the money, thank goodness, but the plans themselves.
There has been a brewing intellectual movement to get rid of the 401(k) for several years, with scholars on both the right and left questioning its value. And as the federal government gets increasingly desperate for new sources of revenue, the tax treatment of 401(k)s is a likely target. There are good policy reasons to end it, but the question remains: Will Americans still save for retirement?
All of this cost the government an estimated $185 billion in 2019, or 0.9% of GDP. That’s not nothing. And in theory it’s justifiable because it creates a powerful incentive to save for retirement. More retirement savings have a triple benefit: for the economy overall, since they fuel growth; for the government, since retirees with income are less likely to be a burden on the state; and, of course, for workers who might not save enough today and regret it later.
Then again, maybe not. The first rumblings that the benefits of the tax breaks may be overstated came in a 2014 study of Danish savers. Without tax-advantaged accounts, it found, people just put their money in another kind of account. People did save more in retirement accounts, but that’s mostly because of automatic paycheck deduction. Subsequent research in other countries found similar results. Not only did the tax incentive fail to encourage more saving; the biggest beneficiaries tended to be the wealthy.
To review: Neither conservatives nor liberals are particular fans of tax-advantaged retirement accounts, and savers appear to be indifferent to them. So what’s the point of a 401(k)?
What’s the Point?
The point is obvious. People are overly dependent on Social Security, food stamps, Medicaid and other government handouts.
The Bloomberg writer links to the New York Times article, Employers Can Now Enroll Workers in Some Emergency Savings Accounts
Starting this year, a federal law allows employers to enroll workers in emergency savings accounts that are linked to their retirement accounts. But some companies, put off by the law’s complex rules, have begun offering rainy day benefits outside workplace retirement plans.
But while the law, known as Secure 2.0, has helped draw attention to the need for rainy day savings, its rules for setting up emergency accounts within retirement plans are “clunky.”
For instance, only workers making under a certain income limit ($155,000 for 2024) may participate, and their emergency savings are limited to $2,500, though employers can set lower ceilings. And though employers can help with contributions, they must deposit any match into the worker’s retirement account — not the emergency savings account.
Should we really be basing decisions made in the US to those of Danish savers in 2014?
However you save, government ought to be encouraging more savings not less.
Nearly half of American Households Have No Retirement Savings
USAFacts reports Nearly half of American Households Have No Retirement Savings
In 2022, almost half of American households had no savings in retirement accounts, according to the Survey of Consumer Finances (SCF). These accounts include individual retirement accounts; Keogh accounts; certain employer-sponsored accounts, such as 401(k), 403(b), thrift savings accounts; and pensions.
Personal saving has grown more important as employers have shifted away from defined benefit plans, or pensions, putting more of the responsibility on workers to plan for retirement. In 1989, half of working households ages 50 to 60 had a defined benefit plan. In 2022, only a quarter did.
The lead image is from the previous link. The article has an interactive age slider to see what people stand.
Saving is Unfair to the Poor
President Biden, along with Senators Elizabeth Warren and Bernie Sanders, all believe government should take care of you, not that you should try to take care of yourself.
Rather than encourage more saving, the ultra-Left proposal is to call saving unfair to the poor and eliminate 401Ks for everyone.
At the Federal level, instead of putting Social Security receipts into trust funds that get spent, how about putting at least a portion of that money into individual accounts that government can’t touch?
I am a big fan of Roth IRAs. You are taxed upfront but withdrawals are tax free. Regardless, do something!
The best place to start is get out of credit card debt.
“Buy Now, Pay Later” Plans
If you are Addicted to “Buy Now, Pay Later” Plans please get off the treadmill.
Buy Now Pay Later, BNPL, plans are increasingly popular. It’s another sign of consumer credit stress.
Credit Card and Auto Delinquencies Soar, Especially Age Group 18 to 39
Credit card debt surged to a record high in the fourth quarter. Even more troubling is a steep climb in 90 day or longer delinquencies.
Age group 18-39 are most impacted by the Rise in Credit Card and Auto Delinquencies.
If you are in the delinquent group, you are spending too much money. Your savings is negative. Find a way to get out of the trap.
At age 60, the median person only has $10,000 in retirement accounts. Median total financial assets of those age 60 is only $53,000.
$50,000 is not enough to retire on yet and have much of a life. But age 60 is too old to do much of anything about it.
Taking away 401Ks would not help.
They 401K’s and IRA’s won’t be gone. But no way will they let all that accumulation go tax free. They will eventually find a way to tax it. Way too much money available.
Roth’s are tax free.
But they do tax it when you withdraw it, and by the age of 72, you are forced to take a required minimum distribution, they could simply force that required distribution to go up and insure it’s taxed at a higher rate.
We have to dispel this notion that the role of government is to figure out how to ‘maximize tax receipts’.
The Laffer Curve states that if you tax somebody at 100%, you’ll end up with nothing, as there’s no incentive to make money. If you tax somebody at 0%, you’ll end up with nothing, as there’s no tax. SO - there’s some midpoint that maximizes taxes and just ‘raising the tax rate’ doesn’t necessarily translate into more tax revenue.
While I agree with this, it still rests on the premise that maximizing tax revenue is, and should be, the goal. It shouldn’t be. Clearly our government can’t control its spending. It’ll never be enough. The only answer is for government to be able to survive on a minimal income, giving us OUR money back, as MUCH AS POSSIBLE.
The ‘we the people’ being able to keep as much as possible should be the goal. We know how to spend it best, which includes investment at various levels, personal, local, and global. The mindset is completely upside down. The notion that problems get solved at the Federal level is insane - disproven by every socialist or communist government ever.
They definitely will eventually do that to ROTH’s. They won’t allow people to pay no taxes except on social security. I know traditional are still taxed. But the ROTH’s would not need to be mandatory to take out as it wouldn’t benefit the government at all.
And eventually 100% of SS will be taxable instead of just 85%, regardless of how much income you have outside of SS.
Theresa Ghilharducci. (sp?) evil witch. She’s been on my watch out/keep track of list for a long time.
True, over-spending is the problem, not under-taxing...............
I believe it was Jamie Gorelick. Liberal hack.
THEY control our behavior thru the tax code. It’s one of their chief weapons. They’d sooner give up their 1st born.
Been saying it for years - only a matter of time.
The Laffer Curve is “value neutral”.
It is just data analysis and math.
Policymakers are too stupid to either understand it or implement it anyway—so there is that.
;-)
They screw with what little retirement options we have left, it’ll be time to start ending bloodlines.
On top of everything else? Camel... meet the last straw.
If such a law were to pass, it would immediately collapse the entire US Banking system................
If such a law were to pass, it would immediately collapse the entire US Banking system................
There are some states that are strongly considering taxing unrealized gains.
Deep State is indeed.
And Deep State doesn’t want a healthy, financially independent middle class, does it.
I’ve been saying for several years that the government will only extend tax advantages to 401k investments in federal bonds and T-bills.
3% return and your money goes to fund the government.
That’s true. That’s another thing reagan got wrong…taxing social security. That and his love for illegal aliens are two reasons I think trump is better then Reagan.
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