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Obama, Dems Seek to End 401(k) Plans

In Uncategorized on October 24, 2008 at 4:42 pm

Obama, Dems Seek to End 401(k) Plans
By Mark Impomeni
Oct 24th 2008 9:00AM

http://news.aol.com/political-machine/2008/10/24/obama-dems-seek-to-end-401-k-plans/

Sen. Barack Obama’s Democratic allies in Congress are looking into a radical new plan that would fundamentally change the way Americans save for retirement. House Democrats recently heard testimony on the idea and, under a potential Obama administration, would likely move to put it in place. Democrats want to seize the money that workers currently invest in their 401(k) plans and replace the popular retirement savings accounts with a one-size-fits-all government sponsored retirement account. Under the scheme, Americans would be forced to transfer all of their hard earned retirement savings from their 401(k) to the government.

The government would contribute $600 a year to fund each account and would pay a rate of return of around three percent in interest. The government would also mandate that each worker contribute 5% of their yearly salary to the accounts. Under current law, workers with 401(k) plans contribute to their retirement accounts and earn interest tax free. The Democrats’ plan would end those tax breaks, amounting to as much as a 15% tax hike on each American worker.

Rep. Jim McDermott (D-WA) said recently that Democrats had better ideas for the $80 billion that Americans contribute to their 401(k) plans each year. “We have to start thinking about whether or not we want to continue to invest that $80 billion for a policy that’s not doing what we say it should.” Sen. Obama would likely sign on to the plan as president.

Obama, McDermott, and Congressional Democrats miss the point that under current law, Americans have control over their retirement savings, where and how it is invested, and when and how much they contribute. The idea to nationalize retirement savings is another example of Democrats’ socialist proclivities. They want control of Americans’ retirement to reside in Washington DC, not on Main St., all in the name of “retirement security.”

http://news.aol.com/political-machine/2008/10/24/obama-dems-seek-to-end-401-k-plans/

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  1. Congress mulls major 401(k) changes
    By Sara Hansard
    October 7, 2008
    A wide range of sweeping changes to the 401(k) system were proposed Tuesday at a hearing on how the market crisis has devastated retirement savings plans.
    Chief among them was eliminating $80 billion in tax savings for higher-income people enrolled in 401(k) retirement savings plans.

    This was suggested by the chairman of the House Committee on Education and Labor.

    “With respect to the 401(k), it appears to be a plan that is not really well-devised for the changes in the market,” Rep. George Miller, D-Calif., said.

    “We’ve invested $80 billion into subsidizing this activity,” he said, referring to tax breaks allowed for 401(k) contributions and savings.

    With savings rates going down, “what do we have to start to think about in Congress of whether or not we want to continue and invest that $80 billion for a policy that is not generating what we … say it should?” Mr. Miller said.

    Congress should let workers trade their 401(k) assets for guaranteed retirement accounts made up of government bonds, suggested Teresa Ghilarducci, an economics professor at The New School for Social Research in New York.

    When workers collected Social Security, the guaranteed retirement account would pay an inflation-adjusted annuity under her plan.

    “The way the government now encourages 401(k) plans is to spend $80 billion in tax breaks,” which goes to the highest-income earners, Ms. Ghilarducci said.

    That simply results in transferring money from taxed savings accounts to untaxed accounts, she said.

    “If we implement automatic [individual retirement accounts] or if we expand the 401(k) system, all we’re doing is adding to this inefficiency,” Ms. Ghilarducci said.

    Rep. Robert Andrews, D-N.J., raised the issue of which investment advisers are allowed to offer workers investment advice.

    The Department of Labor is considering “loopholes” that would allow advisers to offer “conflicted investment advice if the advisers work for subsidiaries of financial services companies that sell the investments,” he said.

    With American workers facing $2 trillion in losses from retirement plans over the past year and Democrats expected to gain seats in the House and the Senate, actions being contemplated by the committee are an important harbinger of what could come out of Congress next year.

  2. Tell me how you think that this is Obama’s plan? Six degrees of separation?

  3. If Obama wins we are all screwed…including the very rich who believe they will be ok in spite of what his policies will do to our economy.

  4. The Fair Tax Plan would end of of this nonsense. We need the Fair Tax Plan NOW!

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