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Thread: 401Ks destroyed

  1. #1
    Join Date
    Oct 2004
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    Post 401Ks destroyed

    A possible sign of things to come?? This is the greatest wealth building mechanism in the United States...and the dems want to have govt control retirement...

    Hint: save 10% of everything...don;t have an extra cup of starbuck per day (1.80)..put it away and you too will get rich! Do the math from age 20 to 65 with an annual AVERAGE compound rate of 5%.


    House Democrats Contemplate Abolishing 401(k) Tax Breaks
    Powerful House Democrats are eyeing 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.
    October 16, 2008
    House Democrats Contemplate Abolishing 401(k) Tax Breaks
    Powerful House Democrats are eyeing 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-California, and Rep. Jim McDermott, D-Washington, 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.

    A plan by Teresa Ghilarducci, professor of economic-policy analysis at the New School for Social Research in New York, contains elements that are being considered. She testified last week before Miller’s Education and Labor Committee on her proposal.

    At that hearing, the director of the Congressional Budget Office, Peter Orszag, testified that some $2 trillion in retirement savings has been lost over the past 15 months.

    Under Ghilarducci’s plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5 percent of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3 percent a year, adjusted for inflation.

    The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.

    “I want to stop the federal subsidy of 401(k)s,” Ghilarducci said in an interview. “401(k)s can continue to exist, but they won’t have the benefit of the subsidy of the tax break.”

    Under the current 401(k) system, investors are charged relatively high retail fees, Ghilarducci said.

    “I want to spend our nation’s dollar for retirement security better. Everybody would now be covered” if the plan were adopted, Ghilarducci said.

    She has been in contact with Miller and McDermott about her plan, and they are interested in pursuing it, she said.

    “This [plan] certainly is intriguing,” said Mike DeCesare, press secretary for McDermott.

    “That is part of the discussion,” he said.

    While Miller stopped short of calling for Ghilarducci’s plan at the hearing last week, he was clearly against continuing tax breaks as they currently exist.

    Savings rate
    “The savings rate isn’t going up for the investment of $80 billion,” he said. “We have to start to think about ... whether or not we want to continue to invest that $80 billion for a policy that’s not generating what we now say it should.”

    “From where I sit that’s just crazy,” said John Belluardo, president of Stewardship Financial Services Inc. in Tarrytown, New York. “A lot of people contribute to their 401(k)s because of the match of the employer,” he said. Belluardo’s firm does not manage assets directly.

    Higher-income employers provide matching funds to employee plans so that they can qualify for tax benefits for their own defined-contribution plans, he said.

    “If the tax deferral goes away, the employers have no reason to do the matches, which primarily help people in the lower income brackets,” Belluardo said.

    “This is a battle between liberalism and conservatism,” said Christopher Van Slyke, a partner in the La Jolla, California, advisory firm Trovena, which manages $400 million. “People are afraid because their accounts are seeing some volatility, so Democrats will seize on the opportunity to attack a program where investors control their own destiny,” he said.

    The Profit Sharing/401(k) Council of America in Chicago, which represents employers that sponsor defined-contribution plans, is “staunchly committed to keeping the employee benefit system in America voluntary,” said Ed Ferrigno, vice president in the Washington office.

    “Some of the tenor [of the hearing last week] that the entire system should be based on the activities of the markets in the last 90 days is not the way to judge the system,” he said.

    No legislative proposals have been introduced and Congress is out of session until next year.

    However, most political observers believe that Democrats are poised to gain seats in both the House and the Senate, so comments made by the mostly Democratic members who attended the hearing could be a harbinger of things to come.

    Advice at issue
    In addition to tax breaks for 401(k)s, the issue of allowing investment advisors to provide advice for 401(k) plans was also addressed at the hearing. Rep. Robert Andrews, D-New Jersey, was critical of Department of Labor proposals made in August that would allow advisors to give individual advice if the advice was generated using a computer model.

    Andrews characterized the proposals as “loopholes” and said that investment advice should not be given by advisors who have a direct interest in the sale of financial products.

    The Pension Protection Act of 2006 contains provisions making it easier for investment advisors to give individualized counseling to 401(k) holders.

    “In retrospect that doesn’t seem like such a good idea to me,” Andrews said. “This is an issue I think we have to revisit. I frankly think that the compromise we struck in 2006 is not terribly workable or wise,” he said.

    On Thursday, October 9, the Department of Labor hastily scheduled a public hearing on the issue in Washington for Tuesday, October 21.

    The agency does not frequently hold public hearings on its proposals.

  2. #2

    Re: 401Ks destroyed

    yeah this article pretty much sums it up. The people who 401Ks help are the middle americans. You do realize another reason for the stock market drop is that people who know economic policy are scared to death of what will happen if Obama is elected lol. I wonder how many dems realize this!

  3. #3
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    Re: 401Ks destroyed

    So first let me preface this post by saying I skimmed the article, didn't read it thoroughly. It's late, I'm tired, I've had a drink

    I will say though, as someone who has been a self employed (ie small business owner) for his entire adult life; who's partner is a small business owner (and a family farm to boot, double the republican points!), WE DON'T GET 401Ks.

    We have to invest on our own for retirement, and pay the taxes on ALL those investments. True, we can open tax free IRA's at the bank. Oh but we are limited to how much we can put in in any one year (I'm forgetting how much, I think 2K a year?). Mine's been such crap these past years I haven't bothered with it really, why flush money down the toilet? Oh and I also believe if memory serves me correctly, if you make over 90K (75K?) a year, you can no longer contribute to these IRAs. You have to open one that can be taxed.

    Yet these are the self employed, the small businesses champion by the Republicans as the savior of America. The ones providing all these jobs to the public. Please, quick show of hands as to how many out there are self employed or a small business owner? Let me tell you it's harder than any of you can imagine. 7 days a week work, 12+ hours a day. Vacation? Pahleese! Christmas and New Years if your lucky, Thanksgiving and Easter half day if your generous. There are no 2+ weeks vacation for the small buisiness owner. The pay? Well let me tell you if I told you what my partner made for the amount of time he works, you'd piss yourself laughing. 250K a year? HA! I'd love it if he could make 50K a year I could make more part time at McDonald's serving up fries than he does! Oh and yes, his employees who work far less than he does make MORE than he does. I've seen the payroll

  4. #4
    Join Date
    Oct 2004
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    747

    Re: 401Ks destroyed

    Dustin.if the value of your business goes up as an owner, who benefits? When you sell it, who reaps the profits? Do you want the government to take those profits i.e. a portion of the value of your business, even though you have paid tax on it throughout the period of ownership? If you have someone manage it for you and don;t sell, you have an avanue for retirement revenue...most workers do not...hence their need for a 401k....it is a TREMENDOUS vehicle for generating weatlth..even losing 32% of its value in a year...most are STILL ahead of where they would be if they paid tax on that income.not to mention that they are investments in our economy. By the way..there are not many 250k jobs that don;t work hours similar to or more than what you are talking about and vacations are not what you may think...I can certainly talk from experience. By the way...if your business makes over 250K, which most do (and recall that 2/3rds of American jobs are provided by small business)...they will be earning much less under Obamas policy.

  5. #5
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    Re: 401Ks destroyed

    Alex. Funny thing. I weighed the amount I was working and had been to build it up, and what I was getting in the end and would in the future, but decided in the end the stress on myself and limitations was not actually worth it. I had other goals in life, this wasn't worth killing myself over for. I sold out, and even though I made a steal, oh I PAID in taxes Not only in the sell out, but all along. And no it wasn't under the Obama administration lol.

    BTW, I worked on every single one of vacations I paid for, not only that I paid for me, but for my partner. And yes I , me, I I I, paid for them, including this upcoming year, cause he didn't have the money to. That's the reason I worked on them, and honestly will probably work on a "new" business on the coming one. We are talking in the middle of the Caribbean, on a luxury cruise ship, spending half my day working in the cabin. Wah wah wah, poor me I know . I do it willingly to myself, but laugh at those who don't realize the hardship.

  6. #6
    Join Date
    Oct 2004
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    747

    Re: 401Ks destroyed

    I hear ya...I wonder why I continue to work the way I do, but I think its just part of who I am. Jennyc helps me slip away from time to time, but work is ALWAYS there....congrats on the work you are doing and the responsibility you show fiscally. Its too bad there are so many that don;t share the same values.

    Part of my reasoning for being conservative is from my exerience. My father old his practice in Canada before moving to the US to be a doctor. After 30 yrs, he had little left after tax. Guess what made his final decision? He took the dog to the vet one day and they charged him $38...he recieved a GROSS of $16 to see a patient. Try and run your business on that when he pays all office/employee expenses out of pocket on that, including a then 7% GST (not its 17%)...

    The local cashier at the state-owned liquor commission came to his office. Man of 48....he was retiring on a FULL pension of 70K per year. That is the socialist system at work. Now my father has a life because he moved to the US.

  7. #7
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    Post Re: 401Ks destroyed

    Likewise the reason I identify as Liberal is because of my own "big ole gay" history. I mean I was labeled "a gay wad" in 3rd grade and on simply because I chose to be friends with girls at the time (hell and through my whole life, girls rawk!). I mean from the age of 7 on lol. I will spare you the whole sob story

    However just because socially I'm liberal, doesn't mean I am fiscally. My mother worked and still works her ass off. I was never bought or given a car at 16 like most of my friends. I road the bus all through high school. I road to work with my mom each day then took her car to undergrad in order to save to pay for grad school. Likewise when my grandmother offered to help me buy I car, I turned her down. I didn't need one that bad and wasn't about to have her give me a hand out from her retirement money. I loved her too much to do that. I have worked for everything I have and am proud of it. And yes, if it comes to me working at McDonalds, I will say "Do you want fries with that?" rather than collect unemployment, which oh yes I've paid so much into as well as social security. You made a post that you had paid more in taxes that most people making 50K a year had. At 33, ditto

    But I guess in the end for me, I'd gladly pay the taxes I have, and yes even more for rights many would and will continue to seek to deny me.
    Last edited by Dustin; 10.24.08 at 1:16 AM. Reason: spelling

  8. #8
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    Post Re: 401Ks destroyed

    BTW, just as a funny afterthought. I'm spending Halloween in Nawlins. Yes Nawlins, with get this, two republicans Just as I see myself as a socially liberal and fiscally conservative dem, they would label themselves as fiscally conservative but socially liberal republicans. Yes, we can get a long And for the past few years we've gone to Nawlins, not only to have fun, but to contribute to the local economy Even if it is deader than a doornail since Katrina (and yes I went before Katrina to compare).

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