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If Obama gets in and there is a Democrat Super-majority – expect to lose your 401k – and this will hit the middle-class earners VERY hard – this from the Wall Street Journal:

Eyeing Your Pension

Are 401(k)s safe from congressional Democrats?

If you have a 401(k) or equivalent retirement plan, you’ve probably been watching nervously the past few weeks as your nest egg has shrunken owing to the current turmoil in the markets.

Well, it could be worse. But don’t take heart, for what we mean is it could get worse. The market turmoil has some politicians on Capitol Hill eyeing the end of the 401(k) as we know it. Workforce Management reports on a hearing of the House Education and Labor Committee earlier this month:

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. . . .

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.”

Ghilarducci outlined her plan last year in a paper for the left-liberal Economic Policy Institute, in which she acknowledges that her plan would amount to a tax increase on workers making more than $75,000–considerably less than the $250,000 Barack Obama has said would be his tax-hike cutoff. In addition, workers would be able to pass on only half of their account balances to their heirs; presumably the government would seize the remaining half. (Under current law, 401(k) balances are fully heritable, although they are subject to the income tax.)

Sounds pretty unappealing, doesn’t it? But in her congressional testimony, Ghilarducci offered a sweetener:

Short-term I propose . . . that the Congress allow workers to swap out their 401(k) assets, perhaps at August levels, for a guaranteed retirement account–just a one-time swap. . . .

How would this work? You go back to your districts and meet up with a 55-year-old who had had $50,000 in his account last month and now has $40,000 in the account. He can swap out that $50,000, valued in August, for that guarantee of what would become, if he retires at 62, a $500 a month addition to Social Security.

A 55-year-old who lost 20% of his 401(k) because of the recent stock market decline was investing more aggressively than he should have, given his age. Ghilarducci proposes to reward this imprudence in exchange for dramatically limiting everyone’s ability to take risks (and enjoy the corresponding rewards) and for greatly increasing government control of Americans’ retirement funds.

It is by no means a certainty that Congress or a President Obama would embrace such a proposal, but this is a direction in which things may move if the Democrats make big gains next month.

Here’s some more in depth and detailed look at this – if you think this is just a “thought” right now – there are some others in Congress that are really taking this thing in to consideration.  If you want to keep your hard earned savings – you should really think about your Obama vote!  He doesn’t care about the middle-class – its all a ruse.

Another related Story – Mark Levin interviews Teresa Ghilarducci: Scary and Hilarious

15 Responses to “Obama and Democrats want to take away your 401k”

  • [...] but this is a direction in which things may move if the Democrats make big gains next month. Democrats want to take away your 401k | The BoBo Files __________________ LIBERALISM The haunting fear someone, somewhere can help themselves. " [...]

  • That is the most disgusting proposal I have ever heard! She wants to take private retirement accounts and turn them into an additional influx of US Debt? I can’t understand the rational and how a friend or family member didn’t smack her and say – IT IS MY MONEY stop trying to attach it to government.  Side note – Just discovered your blog – HUGE FAN HERE

  • @MyJourney – there is a lot out there going on behind the scenes in the Dem party that just is not getting any kind of air play.  If the rest of the middle-class clearly understood what will happen to their earnings when/if Obama gets in – they would be running away as fast as they could.  They want to socialize EVERYTHING about our lives – now – they want to force savings choices on us?

    BTW – thanks for your submission to the carnival.  I like it!

  • Raider Steve:

    If they want to take my private retirement funds; 
    1.  How does taking my money play against the deficit? 
    2.  Could my money being placed in Social Security be raided as Social Security has been in the past?
    3.  3% hummm.  What happens when I retire and my money runs out because it only earned 3% vice the possibility of earning much more in my 401K or Roth IRA?  Does the government then supplement my retirement shortfall?
    4.  What happened to the money I earn being my money? 
    5.  Can the money they take from me be given to others (you know, spreading the wealth)?

  • Annie:

    After searching the web for several hours tonight regarding this issue, I have come to several conclusions. The government is using these ideas as a wealth distribution program and a way to possibly save ss or finance the federal debt. Some of the ideas are coming from progressive think tanks from some people that may be Obama advisors.  I WAS going to vote for Obama.  Be afraid to….be very afraid to.

  • @Steve – let’s try to answer your questions based on what has been stated:
    1. It doesn’t.  It just gives them more money to spend elsewhere – either that or it is set up like a ponzi scheme where they take your money to pay the “3% interest.”
    2.  I don’t see why not.  Afterall, it was Clinton who first started that concept of placing “I.O.U’s” in the social security drawer.  While the Dems like to say that Clinton left with a surplus – it was only surplus on paper.  He left a deficit – he didn’t count the social security shortfall
    3.  That’s pretty funny.  When has the government ever supplemented someone’s losses created by them?
    4.  Well – its yours at their whim apparently.  Remember, if you DON’T spend it all – only half of what is left actually goes to your heirs.
    5.  Sure – I don’t see why not.  See answer #2.

    @Annie – I’m sure in your searches you found nothing positive regarding this proposal.  You should be afraid if he gets in and there is a super-majority of dems.  You can kiss your hard earned savings goodbye.

  • Jim Carroll:

    My Journey says, “I can’t understand the rational[e]“Here it is in plain terms.  The democrats want power, and to do this they are buying votes.  Soak the “rich” (by whom they mean anyone who  had earlier decided NOT to  rely on “so-security”, the largest Ponzi scheme in history) to provide for themselves in retirement.  That’s point number one: “provide for themselves”.  The democrats want to establish the principal that ALL money belongs to the central government, and that democrats (herinafter known as the Kommisars) will decide who is deserving of how much money.Here’s another fact, and its contribution to the rationale: the top 5% of the citizens pay the bulk of the taxes.  How many votes dop the top 5% of the citizens cast?DeToqueville, quoting some ancient Greek, said (paraphrased) that democracy would work just fine until the majority decided to vote themselves a share of the treasury.  We have reached that crossroads, and from here, you  can see the end  of democracy, and of this Nation as we’ve known and loved it.Socialism has not worked anywhere it’s been tried.  Obamacrats and their ovine followers are pretty sure that’s because it hasn’t yet been tried by “the right people”.Jim

  • Jim – Those are all great points.  De Toqueville’s Democracy in America is a most excellent read for anybody who wants to understand our form of government from an outsider’s perspective.  He was enamored by our great experiment early on and he was quite impressed.  Much of what he published as warnings for a fledgling democracy is coming true.  I think had he written his essay today – he wouldn’t be quite as impressed.

  • glh17:

    This is crap. Obama hasn’t endorsed this plan. I heard this economist explaining her plan on C-Span’s coverage of the committee hearing. The plan is her’s and wasn’t even endorsed by the committee, much less Barack Obama. The only thing Obama has said about 401(k)s is that he would propose making the 401(k) option the default option in situations where the employer offers matching contributions. Currently, the default is non-participation. Thus, employees have to change from the default to participate. Now, it doesn’t seem like this would not make much of a difference, but recent research in Behavioral Economics suggests it does. That research, described in Cass Sunstein and Richard Thaler’s book entitled Nudge, concludes that setting the 401(k) as the default results in more employees participating in 401(k) plans. In other words, Obama supports more 401(k)s participation rather than less.

  • @glh17 – thanks for stopping in and commenting – however, there are other stories linked here that indicate that Congress is leaning in her direction and thereby supporting her plan – meaning – with a Democratic supermajority – Obama would sign off on something like this should he become President.

    Regarding his so-called opt-out – that is a loss of freedom of choice to do with your own money as you please. I’m sure Obama would also penalize any employer who chose not to FORCE their employees to participate as he plans on doing now with other businesses and health care and outsourcing. Government needs to stay out of private business – you see what that has caused us.

    The current opt-in choice gives people the opportunity to decide what they want to do with their money. No one should be forced to save if they don’t want to. They’re stupid if they don’t – just like those idiots who bought in to home mortgages they couldn’t afford – but – it’s their choice to be stupid. It’s NOT the government’s responsibility to look out for the people. The government should NEVER be in a position to tell us what they think is good or bad for us as it relates to personal habits (criminal activity exempted). So – what’s next? They decide that TV is bad for us – so they decide what can be aired and what can’t? They start deciding what books are bad for us and which aren’t? You start allowing the government to make these decisions FOR us and we’re on the path to socialism.

  • glh17:

    BoBo,
    I have two comments. First, I don’t know what congress will recommend, but I do know that Obama does not support such a plan as proposed by the economist for the New School. I can only guess that if he preferred that plan to the modification in the current 401(k) he would be proposing it. Second, I don’t think you understood what I was saying about the opt-out option. Here’s an example that describes my situation, which is the typical employer matching 401(k) plan.
    When I was hired I was given the option of a 401(k). My employer would matched my contribution up to 5 percent of my base salary. If I wanted to participate I had to fill out the necessary forms and return them to Human Resources indicating my choice of plans and signing off on salary reduction. I did this and my employer contributes. My “default” option was non-participating, meaning I had to go through HR to participate. Obama would change the default to participating. If someone did not want to participate in the retirement plan they would have to go through HR (or some other method) and indicate he/she didn’t want to participate. In other words, when some is hired by employer offering a matching 401(k) the employee would automatically be enrolled. In no way is participation required it’s just that the default option is participation rather than non-participation. Right now a surprisingg percent of employees do not participate in employer matching 401(k) plans. Studies have shown that workers are more likely to participate if the default option is participation. This would be a very simple way to increase voluntary savings for retirement, something desirable. Employers are not required to offer matching 401(k)s under his plan nor are employees required to participate, he simply changes the default option.
    I seriously doubt that Obama would substitute the plan your referred to in the blog for the current 401(k) plan, especially with the change in default. I’m certain his senior economic adviser, Austan Goolsbee, would not. I haven’t heard one adviser to his campaign even mention this plan, much less advocate it.
    Thanks for the opportunity to comment on your blog.

  • I’m sorry if this sounds insensitive, but god forbid anyone be successful and make a nice retirement savings for themselves through hard work.  No, the government needs to take what you busted your butt to achieve and give it to people who didnt try, dont try and will never try to be successful.Are there people out there who desperately need help, absolutely, are there equally if not more people out there willing to be lazy and take advantage of what the government gives them?  Heck yeah!  Keep your damn hands off my 401K liberals!!!

  • [...] Social … Ghilarducci said, Short term, I propose that since 401(k) accounts and the like are …Democrats want to take away your 401k | The BoBo FilesThe Wall Street Journal reports that Teresa Ghilarducci has proposed a new government savings plan [...]

  • [...] posted this story a couple years ago.  There has been speculation and talk about the government wanting to take [...]

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