Although unknown to most Americans, Teresa Ghilarducci is the intellectual godmother for the Democrats' plans to radically change how Americans save for retirement. Ms. Ghilarducci, an economist at The New School for Social Research, called for the abolition of the tax breaks given to employers for 401k plans and instead proposed the mandatory enrollment of American employees in Government Retirement Accounts (GRA's) that are funded by a 5% mandatory payroll deduction in her book, When I'm 64: The Plot Against Pensions and the Plan to Save Them, published last year.
Ms. Ghilarducci outlined her proposals in a briefing paper nearly a year ago:
"The plan calls for all workers not enrolled in an equivalent or better defined-benefit pension to enroll in a GRA, a plan that borrows the best features of defined-benefit and defined-contribution plans, including guaranteed retirement benefits that last a lifetime, low administrative costs, and steady contributions. With GRAs, workers will accumulate savings in investment funds that earn a rate of return guaranteed by the federal government. These funds will be converted to life annuities upon retirement. Along with Social Security benefits, these will replace approximately 70% of pre-retirement earnings for the typical retiree.
Guaranteed Retirement Accounts eliminate the regulatory and tax law favoritism that not only gives 401(k)-type plans wide discretion and little scrutiny, but does so at the expense of the defined-benefit system.....
Guaranteed Retirement Accounts are like universal 401(k) plans except that the government, as befits a large and enduring institution, will invest and manage the pooled savings.
Contributions equal to 5% of earnings are deducted along with payroll taxes and credited to individual accounts administered by the Social Security Administration. The cost of contributions is split equally between employer and employee. Mandatory contributions are deducted only on earnings up to the Social Security earnings cap....
The pooled funds are conservatively invested in financial markets. However, participants earn a fixed 3% rate of return adjusted for inflation, guaranteed by the federal government.....
Participants who die before retiring can bequeath half their account balances to heirs; those who die after retiring can bequeath half their final account balance minus benefits received... "
Briefing Paper on Proposed New Government Retirement System
The rest of her plan is more of the same as the esteemed professor calls tax breaks for 401k plans a wasteful expense, claiming they cost the government $80 billion a year in tax revenue. She considers $80 billion in a $2 TRILLION budget "extravagant" while ignoring the fact these plans ARE taxed upon withdrawal of funds.
One benefit of 401k plans she seeks to change is ownership of the retirement funds. Currently 401k funds are the property of the employee (after becoming fully vested). If he dies, his heirs receive ALL of his money saved for retirement, minus any taxes. Under Ms. Ghilarducci's plan, surviving family members only get HALF of what remains in the account with the rest going back to the government. Consider this example: an American works for 40 years, builds up a nest egg in his GRA of $100,000 and suddenly dies from a heart attack. His wife will only receive $50,000 as the government will seize the money he earned and contributed to his retirement under this plan while the detached ivory-tower thinking of Ghilarducci and government-first philosophy of the Democrats consider such thievery to be "fair".
Unfortunately, Ms. Ghilarducci ignores the the effect her plan will have on financial markets when such a massive amount of 401k funds are transferred to the federal government. The current crisis in our markets will seem mild as they collapse from such a withdrawal of capital. Instead of addressing this very serious concern, she blithely says any injury caused to the worker can be prevented with a tax credit and says the government "conservatively invest" the money contributed to GRA's. One can only imagine the mischief this will create as it gives government further control over the markets and private businesses.
Democrats will seize upon this opportunity to impose conditions on funds receiving government investments as it does for corporations doing business with the federal government: Labor conditions. Environmental regulations. In what countries and types of business does a fund invest its money? Preferred investments and projects by favored political pals (Teamsters pension fund ring a bell?) will be a tempting target. Diversity guidelines. The list goes on as GRA's will inject the government into the economy in ways unimaginable only a few years ago.
Such a scenario is not far-fetched as House Democrats are currently discussing enacting legislation doing exactly what this liberal economist proposes: forcing the involuntary transfer of 401k retirement funds into government coffers. Investment news reported they recently held a hearing to examine "proposals to overhaul the nation's $3 trillion 401(k) system, including the elimination of most of the $80 billion in annual tax breaks that 401(k) investors receive. House Education and Labor Committee Chairman George Miller, D-Calif., and Rep. Jim McDermott, D-Wash., chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute" Earlier Post on Democrats Seizing 401k Plans
Mr. Miller had his own comments for the 401k tax breaks: "“We’ve invested $80 billion into subsidizing this activity,” he said, referring to tax breaks allowed for 401(k) contributions and savings..." Another Kingfish Post on Dem's Seizing 401k Plans.
The playbook is familiar: Democrats will use the worn out mantra about stopping tax breaks for the rich, protecting the little man on the street, etc., then fast-track legislation effectively abolishing private retirement accounts, moving most private retirement funds into the government cookie jar. The victims will receive no right to their money but instead an IOU from the government for an annuity as the government does the same for Social Security and FDIC. Meanwhile, liberals will celebrate, proclaiming they succeeded in protecting the middle class when in reality they reached their goal of enslaving everyone.
This is their idea of change.
Note: Listened to Mark Levin tonight who oddly enough, interviewed Dr. Ghilarducci. She said she wanted to "nationalize" 401k plans. No spin, no out of context, she said that was exactly what she wanted to do.
http://kingfish1935.blogspot.com/2008/10/who-is-teresa-ghilarducci.html
how sweet for the communists...protect the govt workers and make we mere serfs pay again and again and again......
this is like Russia 40 yrs ago....the communists and the govt workers enjoyed the rich life and got the perks....the rest, the bread lines....
Can’t somebody tie this woman up in a basement somewhere and not untie her until she stops with the plans to meddle with our 401(k)’s? The retirement system did not fail us. The Community Reinvestment Act, along with the mortgage securitization scheme, ultimately caused the economic doldrums that have gobbled our retirement accounts.
I got an idea...
GET THE HELL OUT OF MY LIFE!
PING!
The good news is that few will likely read what she has to say, given that USN&WR is just about finished.
Good thing we all have Social Security! < sarcasm >
The pooled funds are conservatively invested in financial markets. However, participants earn a fixed 3% rate of return adjusted for inflation, guaranteed by the federal government.....
The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.Unfortunately this does not belong in the subjective mood; it is a fact in being in a little program you may have heard of called "Social Security." The "payroll tax" is "invested in safe government bonds" to pay for your Social Security. The catch is that although the combined employee and employer "contributions" amount to 15% of your income Social Security, not only does not provide a comfortable retirement income by itself, and not only does not provide capital to hand down to future generations as a lifetime of savings at that rate logically should, the Social Security Trust Fund actually puts future generations on the hook to redeem those "safe government bonds."Christopher Dodd and Barney Frank aren't content with having looted the banking system, they have to go after 401(k)s now.
If they ever try this, they will have to move fast or pass legislation in the dead of night that makes it illegal to withdraw money from 401K’s and IRA’s, otherwise, I’ll just pull all mine out, take the penalty and reinvest.
A 3 percent return above inflation would be guaranteed by the government.
And EXACTLY how does the Government that is already 12 TRILLION dollars in debt and shortly to jump that to 13-14 TRILLION with the so-called Recovery/Stimulus Plan going to guarantee anything? They already know they are not going to be able to pay the already promised social security in a few years down the road?
This people are simply insame. The just open their mouths and spout this socialistic nonsense. But the scary part is that they are true believers........
...another reason why the socialists are so eager to disarm us...
The best response to Dr. Ghilarducci would be to propose that the existing Social Security be converted to her GRA system. That would instantly shift SS to a fully funded basis (we’d have to finance the transition) with universal participation and a government guaranteed minimum benefit greatly exceeding what current SS can provide.
May as well buy chickens. At least you can trade eggs for goods and services. And become a leisurely dillitante on the side and supplement your income by raiding federal armories and hijacking tractor-trailers carrying smokes, salt and foie gras.
Smuggling and counseling on tax avoidance by any means will become the hottest career opportunities under nobama.
It’s just absolutely killing the government that there is so much money sitting out there in 401(k) accounts that they can’t get their hands on. The government looks at all money as theirs. Well guess what? I worked for it, it’s mine and you can’t have it.
He also said that stocks do not always come out ahead, and that if he had done this when he was a young man, he would have lost a lot more money.
Grandpa died some years ago, but I wonder what he would have thought about things today.
By "overall performance", I mean something like "if a retiree had started investing in a 401K at the max rate at the inception of the program, what would his holdings be worth today".
Fabian socialist institution alert.
Although unknown to most Americans, Teresa Ghilarducci is the intellectual godmother for the Democrats' plans to radically change how Americans save for retirement. Ms. Ghilarducci, an economist at The New School for Social Research, called for the abolition of the tax breaks given to employers for 401k plans and instead proposed the mandatory enrollment of American employees in Government Retirement Accounts (GRA's) that are funded by a 5% mandatory payroll deduction in her book, When I'm 64: The Plot Against Pensions and the Plan to Save Them, published last year.
Change = theft bump...