Skip to comments.Fiscal Cliff: Why Congress Might Have to Mess with the 401(k)
Posted on 11/29/2012 11:20:58 AM PST by Perdogg
One of the earliest fears about tax-favored savings accounts like IRAs and 401(k) plans was that when this pool of savings grew large enough Congress would not be able to resist tapping it to help solve the nations debt problems. Were about to find out if those fearspersistent for decadeshave been justified.
Everything including the sacred mortgage deduction is on the table as lawmakers wrestle with the fiscal cliff, a year-end avalanche of scheduled spending cuts and tax increases. With a combined $10 trillion sitting in IRAs and 401(k) plans, retirement accounts make a juicy target. Some of this money has never been taxed, and under current law never will be.
(Excerpt) Read more at business.time.com ...
I understand what you say and I also agree that I don't really own it because if I don't pay annual taxes, they can take it away. I do hols a hard copy of the Deed of Trust which at leas makes it "mine" to live in and to defend - vigorously...
Agreed, but even more important is the assured debt spending policies...
Do a search on Roth 401k. Or, you can just click this link:
You really should do a bit of research before you accuse someone of making something up, ***wipe.
“How would this actually work? “-PJ2
The government “guarantees” the principal in the account.
When the value of the stocks or mutual funds falls below that guaranteed level, which would be triggered later by the program itself, the guarantee kicks in. When an individual converts to the guarantee amount, the stock ownership is transferred to the fedgov. Individuals that accept the transfer earlier, could get a higher guarantee level.
This will be much easier than the confiscation of gold.
Taxes are paid at the time the money is withdrawn from the 401(k), which can happen without penalty after the age of 65. The theory has been that when a person is retired, he/she is automatically at a lower income tax bracket than when working and contributing. This has been the reason why it has been such an attractive way to save. In addition, many companies contribute to their employees’ accounts if an employee’s savings reaches a certain level.
I honestly can’t see how there would be any support for this, especially in the House. 401k plans are designed for middle income wage earners and have caps especially designed so they don’t treat high wage earners more favorably. The bad PR this would generate would be insurmountable by anyone who comes out and messes with these plans.
Somebodys gotta pay for deese Obama phones.
This is what we get when we allow 47% of the dregs to vote themselves more and more money from the 52% of the earners who created it.
This is what we get when we allow 47% of the dregs to vote themselves more and more money from the 53% of the earners who created it.
Recently, O’Reilly interviewed communist toady Mark LaMont Hill about the current churn surrounding a tax on wealth. The toady literally was licking his lips at the very thought.
O’Reilly kept hammering him on how such a thing would be done (Bill maintained such a system was impossible) but the toady kept repeating that one could use percentages to do “the fair (spit) thing”.
Then that confirms my first point that this would really by a back-door federal government takeover of many public corporations?
What’s that? Just a second, my Obama phone er mobile phone is ringing... /s LOL
I hear ya.
I have a question. I am a state employee with a defined contribution plan with TIAA-CREF. It is partially funded by my employer. My contributions are mandatory and I cannot borrow against it.
How the heck would I get my money out of this thing if the SHTF? I don’t see how unless TIAA-CREF and my employer changed the rules on the plan as the topic was being debated. And who’s to say that there wouldn’t be some kind of look-back provision so that if you took out your money within a year of the government taking it, and weren’t actually retired, you’d have to pay it back?
From a financial sustainability perspective, why would TIAA-CREF, Fidelity, or any of the funds just hand over money? Yeah, it’s not theirs, but what happens to these businesses? I don’t think these businesses are going to stand for it, but I’ve been wrong before.
That would one of the potential outcomes...
Another would have the fedgov sell the shares in the market (depressing the price) in a controlled fashion - Like GM / AIG.
There is *nothing* good that comes out of this program in the end, unless you like socialism/fascism.
Those companies were already in ruins.
This proposal would kill the DOW. What would happen to healthy blue-chip companies that are relying on those stock values for their major capital projects?
These corporations would suddenly find themselves with under-water projects and no shareholder value to underpin them because of forced sell-offs at depressed prices.
The federal government will end up creating new GM's and AIG's overnight.
And who would buy back these stocks? Somebody has to be a buyer if the government is forcing 401(k) holders into selling. Would people be forced to sell their stock assets in 401(k)'s, only to buy them back at a lower price outside of a 401(k) structure?
This appears to be no different than when the Nazi's in 1930's Germany forced the Jews to sell their businesses at bargain prices or else face outright seizure.
Mark Levine replayed his interview with the complete cypher moron “economist” woman from the New School (lib commie outfit). The interview is hilarious, conducted in 2008, and she did not know who Levine was.
It worth a listen. Go to Levine’s site and playback yesterday’s show. The woman has no clue, and thinks this will be “Better” for “the people”. Without their choice of course, like all socialism— theft.
You wouldn’t happen to know which hour of the show it is, do you?
That’s all very well and true. However, in the socialist mind ANYONE with more than money their target handout group (and contiually overuse the concept of “class”, like middle class, the lower class, etc.) is subject to “fairness”.
Two things required: the attitude of “anointment” of holier than thou , and the concept that MONEY belongs to the government— all money and all income. Which is completely false and central to socialism.
The grasshoppers are coming after the ants— Aesop’s Fable come to life.
He did it in the first two segments. Then at bottom of the hour (show is 6-9pm, so this would be 8:30) he did a live book promo interview with Dick Morris on his book “Here comes the Black Helicopters” think it’s called.
But sure it was in first hour then part of the second-— his laughter is worth it, as in the original interview the moron woman didn’t know he was insulting her. God save us from these meddling aholes of “fairness”.
To be paid once a year? Quarterly?
I like the fair tax. Everything but food has a fixed rate.
10% sounds fair but the feds would probably want 25%
Maybe settle for 15%
Yeah i heard it yesterday and she had no clue he was playing with her.
I agree with your points.
The Govt still owns AIG shares, I think.
“Even if they take over the retirement plans, just who exactly is going to buy all the stocks and bonds?”
If I understood Rush yesterday, part of it is that all further contributions MUST buy at least 5% in bonds.
Well, I don’t trust the scumbags, liars and thieves in Congress. They are capable of anything.
But in this current proposal, the government isn’t proposing to “take over” anything. They just want you and me to be able to contributes LESS to a tax-deferred retirement account, because they want tax money now.
Pension plans are tougher for them to get money from now, but they could find a way to limit corporate tax savings. But pensions are mostly disappearing in the corporate world. 9 times out of 10, if I meet someone who still has a pension, they’re a government worker of some sort.
Thanks for the response. To be honest, I’d be surprised if you could find one in ten with non-government retirement plans.
At any rather, I appreciate the comments. Take care.
“Yes and no. If we punish the Blue State voters that got Obama re-elected, that will be sweet justice. The base of the Republican Party, like the man who I was replying to, get very little benefit from the Mortgage Debt Loophole, as they simply dont make $200k per year, and generally have enough kids to knock their taxes way down without it.”
By that argument The house republican(assuming anyone willing to listen to them. Should be claiming that the Democrats don’t want to tax the “rich” because they don’t want to close the tax loopholes thou which the so called Rich avoid taxes.
The democrats are just frauds.
I believe they will freeze withdrawals when they decide to confiscate them.
I cashed out half in FY 11 and half in FY12 to stay ahead of them.
Perhaps Romney should have mentioned some of these issues, and perhaps the Senate Republicans could be shouting it from the rooftops. Funny, I don’t hear anything.
"I am willing to be corrected but that is a lie."
You are correct. It is a lie.
Also, tax deferred retirement savings are subject to taxation when passed on to a non-spouse beneficiary in death.
"The Tax Policy Center in Washington has found that about 80% of retirement savings benefits flow to the top 20% of earners".
This is non surprise, because higher earners can afford to save more, and are more likely to understand the concept of saving for retirement tax deferred.
I have a friend with a lucrative union pension. He thinks 401k's are something only rich CEOs get, and that it allows them to save an unlimited amount of money tax free.
The number of people who believe this, along with those who currently have access to 401k's and perhaps even contribute to 401k's but think "The Rich" get bigger and better 401k's is large enough for Obama for get away with confiscating a portion of 401k's.
And make no mistake, he will not go after Federal Government Employee TSPs, since Federal Government Unions are a big contributor to Obama.
Boy, that would be unpopular. And dumb.
You live where housing is cheap. In much of the country the mortgage deduction is huge—and yes, more huge for the upper-middle class.
I guess it depends on the specifics, but the AMT Patch, as they call it, manages to exempt most upper middle class people. But yea, you can still get tripped up if you have, say, $150k income, high property and state income taxes, and 6 kids. You may well wind up having to pay 10% or so in federal income taxes.
Dude, you really don't know what the heck you are talking about.
Seems to me that if you make $150k, then write off $50k (or split it with tax credits for the kids), that you wind up paying $17k in federal income tax, which is about 11%.
Seems to me that you should get a better accountant for next year.
Clue to fools after pension savings - Without a job one cannot say a damn thing!!!
Liar Kadlec! Larval, belly-crawling, Left-wing maggot journoliar -- "Congress" my ass, this is all your boy Barky's crap; he, not Congress, has been working on this for three years at least.
And yes, the sum at risk is $17 trillion for IRA's, Keoughs, 401(k)'s, and other tax-deferred savings accounts.
Communist Obamanation File.
Wow .... new coinages in Greek on FR! But .... shouldn't that be polypragmatistai? Or maybe polymathetai or polypraktikomathetai?
(Those are all nominative plurals, and masculine 1st-declension nouns.) 8p
In a Roth IRA, you are taxed on money you put in, but if the money you put in makes money, then that money is not taxed when you pull it out.
Ok, you earn 150 dollars, pay income tax, get 100 dollars and put it in a Roth. The 100 dollars invested in apple goes way up to 600 dollars. You get to withdraw 600 dollars tax free when you retire. Of course if you invested your roth in the old GM, and when it went to zero, you could not even use the 100 dollars loss as any kind of deduction or offset either.
In a roth IRA, you get no deduction for contributing but all gains in a roth are not taxed ever.
Unfortunately, all loses in a roth are not deductible or available for offset either.
“If 401k accounts are to be frozen, it will probably occur under the pretext of a crisis. But the crisis would have to be a real crisis like a major financial collapse or war. Freezing 401k accunts would likely result in a run by the public on all other accounts including bank accounts, stocks, bonds which would cause a crash and liely a freeze on these accounts as well.
Therefore, if the government is to do something like this, they will need to act suddenly, shut down the internet, censor the media and be ready to impose martial law where needed.
It is more likely that they will try out some very innocous seeming transition to tax deferred treasuries and gradually withdrawal the tax deferred status of 401ks and similar pension plans”
Pretty good reasoning.
The alternative is to immediately end any tax advantage to these accounts so you pay tax regardless of whether they are 401k or plain jane stock account.
It also happened to the Jap-Americans in 1942. They were given 2 weeks to sell everything before going off to camp. Needless to say, the prices they got were less than optimal.
All they have to do is make it taxable .... retro-active.