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.
“Not the money, thank goodness, but the plans themselves.”
These kinds of stories lead to stupid comments about “them” taking all our 401k money.
The proposal is to change the tax treatment of future contributions. Teresa Ghilarducci’s proposals are the same. The money in existing 401ks and IRAs is untouched, tax treatment of future contributions is changed.
“Neither conservatives nor liberals are particular fans of tax-advantaged retirement accounts”? What outrageous drivvel. I love them. Got a huge tax break when I was in a hightax bracket. Now I’m in a low tax bracket and pay little in taxes. And my home state of SC doesn’t tax the first 16,000 of non-government pensions (nor SS). What could be better? This writer at Bloomberg is an idiot.
Yep, it will make the UK’s system look like Star Trek..................
You really think they wouldn’t take all the money if they could?
Anything that benefits the average Joe Citizen has to go.
What really needs to go are the democommies and the bush league chamber of commerce worshiping republiCAN’Ts...
We’ve got a greedy, fascist government taking wages away from
American working families and giving their money to foreign freeloaders and the younger, selfie taking, “hikers” who refuse to work for a living, in exchange for their votes. The voting system in this country is totally corrupt and seriously broken. More so than the corrupt, high fiving and fist bumping “border patrol.”
All of this cost the government an estimated $185 billion in 2019, or 0.9% of GDP."
The bolded is the problem. I sure would like to know who defines their self as "on the right" who subscribes to that attitude.
What it is really about is people in the US wanting to confiscate those savings. Probably why they are trying to figure out how to disarm the general population.
The real kicker-- they want to give those savings to the "replacements" they've escorted into the United States.
No deal they would make with us would benefit us.
He was referring to the ones in Congress, not the citizenry.
Congress, left and right, hate letting you keep your money.
As one Congressman once said, there should only be an index card size 1040 tax form. “How much did you make?”...Send it in!....then he laughed ............
You can bet if they cheat trump out of office again that they’re coming after Maga money...your money. And there won’t be a thing you can do about it. Nobody will stop it just as Nobody is stopping it from happening to trump. Don’t be pollyannish. It’s over.
bttt
Here’s how we got here.
Senator Howard Metzenbaum (champion of labor) slipped a poison pill in the Tax Reform Act of 1986 changing the rules for Defined Benefit (DB) pension plans in vesting rights from 10 years to 5 years. This change was to take place in 1989. I worked for a company with 20,000 on-site employees (jet engines) in Evendale, Ohio in 1988. The massive layoffs started soon after. This was so easily predicted. Now we have 20,000 illegal invaders crossing the border in a week to take American’s jobs and private company Defined benefit (DB) pension plans have been gutted. Now American workers are being outright replaced.
You don’t think Howard knew what he was doing? Introduced in the Senate as S.3527 Worker Adjustment and Retraining Notification Act of 1988 by Howard Metzenbaum on June 16, 1988. In 2001, there were about 2,000 mass layoffs and plant closures that were subject to WARN advance notice requirements and that affected about 660,000 employees.
88 percent of public employees are covered by a defined benefit pension plan.
https://en.wikipedia.org/wiki/Defined_benefit_pension_plan
https://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986
The big SECRET that the FREE TRAITORS don’t want you to know, is that TARIFFS funded the U.S. Government for most of this country’s existence.
FREE TRAITORS are forcing you to pay income tax so that they can access cheap labor overseas and make a few extra bucks at YOUR expense.
I will put the follow the money plan into action. Anyone or group that seizes my IRA will be hunted down.
“Argentina took all the 401ks from their citizens and then spent the dough.”
With the US Dollar on its way out as the World Currency (thanks to our backfire-sanctions on Russia), I would expect our government to do the same, when that day comes. Basically, they’ll seize all of the funds in everyone’s 401k and give them a relatively small annuity (annual payments to people that had 401k’s). Same for Pension Funds.
With the amount of money they collect from American savers, well into the trillions, it will be used to pay-down our national debt (at least half of it).
Kinda interesting that Braindead always says the line “we will only increase taxes on those making over $400,000” or something to that effect.
The spending is the problem. Our having over $1 trillion deficit year after year is the problem. Not the single-mom's 401K.
It’s what Marx called the ‘systematic pauperization of the middle class’
Abolishing the income tax would essentially abolish 401(k)’s and other retirement shelter vehicles because those plans address taxation of income. No income tax, no need to shelter against income tax.
Really, lol. It took only 3 years or so after 401ks were started that they eliminated 10 year averaging for lump sums payouts. They also eliminated taking out funds to buy a home and pay for college. Promises broken, imagine that.
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