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    October 15, 2008: “Will 401(k)’s Disappear in the Interest of Fairness?”

    October 15, 2008: “Will 401(k)’s Disappear in the Interest of Fairness?”

    Were you reading Legal Insurrection on the 3rd day of its existence?

    If so, you would have known that Democrats were targeting your 401(k) and other retirement accounts, Will 401(k)’s Disappear in the Interest of “Fairness”?:

    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-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.

    So is it any surprise that a first step towards eliminating private retirement accounts will be part of Obama’s proposed budget? Via Breitbart (h/t reader):

    The budget President Barack Obama will submit on April 10 will contain a proposal that would prohibit individuals from accumulating more than $3 million in Individual Retirement Accounts (IRAs) and tax-preferred retirement accounts.

    According to a White House statement, the Obama administration believes the current rules allow some wealthy individuals “to accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving.”

    “The budget would limit an individual’s total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, or about $3 million in 2013,” the statement said. “This proposal would raise $9 billion over 10 years.”

    Targeting retirement accounts was a long time in coming, but it always was in the administration’s back pocket in case needed.

    Alternative title:  All I really need to know about the Obama presidency I learned at Legal Insurrection in October 2008.


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    GrumpyOne | April 6, 2013 at 8:11 pm

    “…a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.”

    Oh boy, another collective guaranty by the guv’ment!

    Slowly, all of the incentives to be successful are being removed in the interest of “fairness.”

    You youngsters really have a lot to look forward to…

    The only good news that will come of this is that there isn’t a single person past the age of 35 who will vote to keep any politician, Democrat, Republican, etc., who proposes raiding retirement accounts. Talk about a realignment election? It would wipe out Leftism’s power to enact anything for a generation.

    The retired? They would vote them out. The near-retired? The same. People in their prime earning years in their 40s and 50s? No way would they vote for politicians who would raid retirement accounts like social security. People in their 30s, possibly in their late 20s? If they had half a brain they would realize Leftist politicians, if left to their devices, would treat their retirement accounts like slush funds, and replace their money with IOUs.

    Please let them embrace it and campaign on it. After the election, Republicans would likely have majorities to impeach Obama’s Supreme Court appointments, and repeal his entire presidential agenda with the votes to overcome a Presidential veto.

      Bruno Lesky in reply to McCoy2k. | April 7, 2013 at 7:28 am

      The 90,000,000 people who have left the workforce might not see a politician’s raiding of higher end retirement savings as a disqualifier for office.

      SoCA Conservative Mom in reply to McCoy2k. | April 7, 2013 at 12:20 pm

      Unfortunately, the 47% who are on the government dole will vote for anything that redistributes more wealth their direction.

        I see your point in a sense. The Democrats are not going to lose the massive advantage they have with voters who are people of color. But they could potentially lose the advantage they have with the higher educated, because they are smart enough to realize that Obama and the Democrat’s changing definition of what “rich” is will target ANYONES retirement – possibly even pension – funds.

        You think Enron financial scandals were bad? Wait until the government starts raiding retirement and pension accounts.

        Nothing will make people NOT SAVE than the government suggesting the rich’s retirement savings plans, which will eventually lead to middle class’s savings plans, being treated as another heap of money that the federal government can shovel into.

        People in the 1930s couldn’t have been more right. Put your money in a mattress.

          No. Don’t put your money in the mattress. Convert it to a precious metal or precious stones, THEN put it in the mattress.

          Always remember: Inflation is just a ream of paper and a barrel of ink away.

          At this point, better yet, buy BitCoins. At least that (in theory) can’t be tampered with.

    SoCA Conservative Mom | April 7, 2013 at 12:32 pm

    Once again Obama proves he doesn’t know anything about economics. Wasn’t part of the problem with the financial melt down that people weren’t saving enough, making less money available for investing? The only thing I remember from Econ 101 is opportunity cost, so I’m not the person to be discussing economics, I really should be listening. But, for every dollar saved, there is a ten fold multiplier of dollars available for investment. Won’t taxing 401(k)s and IRAs reduce the money available for investment? Wouldn’t that lead to more financial problems, slowing down the economy?

    Just a note that I see nobody else has addressed here:

    This isn’t about “Taxing 401(k)s.” Not really. This is about changing the tax incentives for where that money is put.

    Right now, you can invest that money just about anywhere and get tax deferral. This is about denying that tax deferral. And where will that money then go? I’ll tell you:

    Municipal BONDS (which are tax exempt on the federal level).

    The States and Municipalities are getting screwed because nobody wants to park their cash in Muni Bonds due to the risk of default because so many locations are overspending. If they get rid of tax-advantaged retirement accounts over a certain threshold, that money will flow to other “tax advantaged” investments.

    This is all about paying off the Municipal Unions by propping them up through purchase of Municipal bonds and funding of their retirement payout accounts (aka pensions).

    I see the White House blamed demographics for the lowest worker participation rate since 1979, most especially those older Americans.

    Until the bond market regains any credibility (i.e. interest rates go above 0%), most of those older Americans won’t retire because their 401(k)’s just aren’t performing.

    It’s interesting that these older workers are to blamed for the young not getting jobs by supposedly not leaving the workforce, and, on the flip-side, they are blamed for low worker participation rates by supposedly leaving the workforce. It can only be one way or the other.

    Remember back in the late 70′s when they told us that if we saved $2000 a year and interest rates remained at 17.4% that by the time we went to retire, we would have a million dollars. Seems so silly now.

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