The shape of 401k's to come

MSN ^ | 2/07/14 | Mark Miller

[Libloather]

**SNIP**

The biggest change will be a new emphasis on retirement readiness, rather than simply getting workers to join a plan and contribute. The idea is to focus on actual retirement outcomes, and it reflects apprehension about the large number of Americans who are approaching retirement unprepared. If that's something you're worried about, it turns out your boss shares your concern.

The 2013 Retirement Confidence Survey by the Employee Benefits Research Institute (EBRI) found that just 13 percent of workers are very confident they will have enough money to live comfortably in retirement.

And a 401k benchmarking survey released last year found that just 12 percent of employers believe that most of their employees will be financially prepared to retire, down from 15 percent in 2011. That survey is conducted annually by Deloitte, the International Foundation of Employee Benefit Plans and the International Society of Certified Employee Benefit Specialists.

[Alberta's Child]

I moved 50 % of my retirement 401 K contribution to a Roth 401 K where you are taxed when you contribute verses taxes after years of capital gains.

The problem there is that the same Congress that will want to get their greedy filthy hands on the tax revenues from 401(k) plans will also want to get their greedy filthy hands on your "tax exempt" Roth IRA withdrawals.

I had a financial advisor telling me to do one of those Roth IRA conversions back in the 1990s when the Roth was first established. I came back to him with the following response:

"Why would I pay taxes on a Roth conversion right now if Congress can change the law in the future to tax the Roth IRAs just like regular IRA withdrawals anyway?"

He thought about it for several days, then came back to me and said I was right. From that point forward, he was still a big fan of Roth IRAs as new accounts, but was no longer advising his clients to do a Roth conversion from a traditional IRA. His rationale was the same as mine: There's no need to give up tax-deferred plan contributions you've made in the past in exchange for a tax-exempt withdrawal that may not be there when you retire.

Of course, there were some exceptions to this. He had some "asset-rich" clients who were temporarily out of work who were able to do the Roth IRA conversions in a year when their income put them in a low tax bracket. For these folks it was worth the risk.

[Fred Hayek]

In my particular field, companies may likely encourage us older engineers to stay on due to the lack of new engineers and technicians (instrumentation, controls, and process automation). When I do decide to retire, I may wind up teaching at one of the tech schools here in the Houston area. Not so much the money, it would be something to keep me busy. Add to that the canard that older engineers are not current on new technologies, which has been proven untrue.

[cashless]

Here is my myopic view of what is happening according to the Cass Sunstein model of changing behavior (nudge, shove, shoot):

For now, Federal government will offer the typical, low interest long term bond in exchange for what? YOUR CASH MONEY. When that plan fails, as it is designed to do, with lower return on investment than the market will afford, then employer tax breaks will be offered if their 401-k matching funds are issued using these bonds. When that fails, as it is designed to do, the individual tax exemption on contributions will be altered such that contributions made in the purchase of the bonds will have no contribution ceiling versus contributions made for traditional investments (e.g. mutual funds). In other words, 100% of contributions made for the bonds can be written off from AGI but contributions made in traditional investments will see the write off lowered or eliminated. When that fails, as it is designed to do, all new contributions will be only in the bonds and a law passed that no personal savings, regardless of designation, held longer than a defined amount of time will be converted into bonds and it will have a retroactive element involved such that all funds currently saved (and growing even modestly greater than these stupid bonds) will be converted.

The object is to raid the retirement accounts for cash. They know they can't do it out right without losing elections. Retirement will be nothing more than personal Social Security accounts funded by the same worthless bonds stuffed into the current Federal Social Security, which began with LBJ robbing the “Trust Fund” and putting it into the General Fund to fight the War on Poverty and the Vietnam War simultaneously. And because a Democrat controlled government is so inept, they wound up LOSING BOTH WARS.

We are so screwed.

[AppyPappy]

People would rather pay for new cars and iPhones than invest for their future.

Yeah, I said that.

[Popman]

-—”Why would I pay taxes on a Roth conversion right now if Congress can change the law in the future to tax the Roth IRAs just like regular IRA withdrawals anyway?”——

I considered that and came to the conclusion that if Congress does go after regular 401 K they will leave Roth alone simply because the “rich” utilize the Roth far more than joe six pack....

No real “evidence” to think that....just a gut feel that congress will protect the rich and gives them an out saying.... See we didn’t touch all 401 K

Also I didn’t convert my regular 401 K just opened up a Roth and split my future contribution 50/50

[Popman]

I forget to add: if congress does try to tax Roth accounts.... You would be penalized twice on you investments... Not saying that they won’t but double dipping on taxing Roth would make them look look like greedy bastards....instead of trying to save the country....

Plus I imagine many in congress have Roth since they can afford to make large contributions to them...

It is probably in their self interest not to tax Roth ....

You know for the “women’s and child” /S

[EVO X]

Of course, there were some exceptions to this. He had some "asset-rich" clients who were temporarily out of work who were able to do the Roth IRA conversions in a year when their income put them in a low tax bracket. For these folks it was worth the risk.

The idea is not to pay taxes. The Roth makes some sense if you have money to contribute while in the 15% tax bracket or below. Or you know in all likelihood that you're going to be in a higher tax bracket when you retire.

My take on tax deferred retirement accounts is to let a person have control of their own retirement account. The average person changes jobs 11 times in their career. Just have the company make a direct deposit into the account. Then your not screwing around with roll overs when switching jobs.

[DanZ]

“Personally, I think that we should tax consumption rather than income. “

I see the G’ment as THE PROBLEM. Too Big, Too Intrusive Too much of the DICTATOR. - And it makes no difference if it is a Democrat or a Republican in charge.

Nixon gave us the Dept. of Education
Bush increased the Fed. G’met with No Child Left behind

Most of the Federal Departments NEED to be ELIMINATED and the scum who work there need to be enjoying putting their Kids to bed at night because they cannot get a Job.

[DanZ]

“lack of new engineers and technicians (instrumentation, controls, and process automation).”

In the 1990’ SOME EPCs in Houston ran training courses. Now most are pushing work to Low Cost Centers like India, Philippines, Check Rep. etc.

And they all complain that they cannot find quality Designers, Engineers or Project Managers.

[E. Pluribus Unum]

Government can never steal enough money.

[Alberta's Child]

I see. Everything you've posted there makes sense.

Also I didn’t convert my regular 401 K just opened up a Roth and split my future contribution 50/50.

Very good! LOL.

[Cementjungle]

You're very lucky these days to have a pension. I did the corporate bit for 30+ years and don't have a pension at all to look forward to... a bit of a 401K yes, and maxed out on the SS (assuming that's still in existence a few years from now when I can start to collect).

The only thing that saved my butt was the real estate bubble 10 years ago and cashing out of the Los Angeles market then at the absolute peak. We had a big house, plus a 4-plex rental property there, both of which we sold in 2005 and cleaned up on, allowing us to move out of CA and get out of the corporate rat race and into working for myself.

[Organic Panic]

Being self employed my retirement consists of zero ‘investments’ in government backed anything, and 100% new capacity in my shop. There is no doubt, in my mind anyway, that IRAs 401ks and other schemes will be taken over by the feds. MyRA opened the flood wall. Besides, chances are with my family health history I will drop dead on the shop floor. There are a lot of people depending on my tax dollars.

[2001convSVT]

"On a different side of the retirement equation is the constant question - - When are the Feds going to ‘nationalize’ the 401(k)’s? And what can I do to keep from losing all of my money to them?"

That's what MyIRA is for, a vehicle that has the potential to make all privately held retirement saving into worthless Treasury Bonds. Voluntary now but given a T-Bill crisis, Congress could mandate the purchase. And another thank you to Justice Roberts who ruled, that as part of being a US citizen the government has the right to make you purchase a product (i.e. obamacare). Like you I am also trying to figure outwhat can I do to keep from losing all of my money to them.