As I was browsing some of the blogs out there, I came across references and comments that I found interesting and scary. A professor of economic policy analysis at the New School for SOCIAL Research in New York, Teresa Ghilarducci, has proposed that 401k plans be disposed of in favor of other, ‘safer’ accounts.
According to her plan, some $2 trillion has been lost in retirement savings. Of course, anyone who follows the market knows that the reason for the loss is the drop in stock prices. True, also, is that it may be a long time before those stock prices return. Thanks (from me) to all of those who opposed getting oversite on Fannie and Freddie when the alarm bell was sounded in 2005.
Grover Norquist, the president of Americans for Tax Reform, wrote that when Ronald Reagan took office, less than 20% of American households owned stock directly. In 2008, roughly 50% of them do. The change? The 401k program. As people began to undersatnd the program, they began to invest more of their earnings in the mutual funds that were offered by their employers. The money was removed automatically from your salary BEFORE taxes. This has been one of the biggest reasons for investing, and a big reason why employers give matching funds. (And a HUGE reason why the Greed-o-crats want it gone.)
Does is SUCK that the market crashed due to governmental idiocy with regards to monitoring their very own Freddie and Fannie? You betcha. But the 401k remains a great way for folks to plan for their retirement. Especially now, with a down market. You get more for your money.
Step now, into the world of the Greed-o-crats, who brought Ms. Ghilarducci to testify about her proposal. “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.
Ok. I get it. Instead of somewhere around 15% return on my stock 401k investment, instead of being able to invest as I see fit, instead of my employer matching my contribution, I would instead have that pay TAXED so that I can get a 3% return on a government bond.
YAY for reform by our democrats. Change is on the way. And change is what will be left jingling in your pockets.
Read the whole article here.