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Tuesday, September 7, 2010

Are you ready for a "lifetime income option" on your 401k?

Here is your link.

The left has been talking for years about stealing your 401k money. I remember during the Clinton years some underling floated the idea of a "one time tax" on 401k funds. The uproar was immediate and Clinton came out and said that of course that was nonsense.

That is the usual method used by government officials to test the waters of public reaction to a crazy idea. Let the press quote some underling talking about the possibility of the government forcing the crazy idea on the people of this nation. If there is no reaction then the President, or congressman, or whoever, will take up the idea and start pushing it. If the reaction is strongly opposed then the President or congressman will throw the underling under the bus with a statement like "that is the underling's personal opinion and does not reflect my policy" blah, blah, blah.

Back to the press release from the government. I don't know what a "lifetime income option" is but it doesn't sound good. Probably it means "we'll take your money, then give you back as much as we think you need, and when you die your children will never see a dime of your money". Hey, they might even throw in a "good life" card to make it easier to control what you do with the little bit of money they think you deserve.

I know, a lot of people are whining that their 401k is in the dumpster. It probably is. However, do you think you will be better off giving that money to Nancy and Hussein and then living on whatever they decide you should have?

As far as government retirement bennies go, look at how well social security has turned out. That has been one of the biggest negative investments you could ever get caught up in.

I've got a better plan. How about this for a new and revolutionary idea:

The federal government should not be involved in retirement at all.

No tax deferred plans, no wealth transfer plans, nothing, except maybe the suggestion that everyone should put something aside because it's not the government's job to force other people to pay for your retirement.

I don't think the 401k and similar plans are inherently bad things as long as the government doesn't start deciding what you can invest in. If the government does start limiting your investment options then it gains huge leverage to control people and companies. Plus, most people seem to need some incentive to save ( I guess not being a parasite is not incentive enough) although that really is not the governments business.

2 comments:

Sailorcurt said...

I also have a serious problem with the "penalties" on retirement accounts.

I can understand that, should I choose to withdraw money from a tax deferred account, the government rescinding the tax deferrment and requiring me to pay income taxes on that money.

But the 10 percent penalty right off the top is robbery, pure and simple.

I'm about to lose my job. If I can't find another before this one goes away, I begin defaulting on debt. I can either start selling all of the cool things I've built up over the years (including my primary mode of transportation and my guns) to pay off the debt that we have incurred during my wife's illnesses and inability to work, or I could cash out some of my retirement accounts to pay off that debt.

The problem is that, with the penalties on top of having to pay taxes on that money, I'd be looking at losing 40% of the value of those accounts right off the bat.

Not worth it. So I'll start selling things.

The problem is, many of those "things" that I'll have to sell are tangible assets which provide value through use, and will either retain, or may even appreciate in, value over time...whereas my 401K (which is only worth about 1/2 to 2/3 of what it was a few years ago) is invested in the market, which many people are predicting is heading for another major "adjustment" as the government's debts and obligations begin to be called due.

So, basically, I am unable to use my own money to hold me over through this tough time because the government will "penalize" me if I do.

BTW: In general, retirement funds aren't "in play" during bankruptcy proceedings, so the government is basically encouraging me to declare bankruptcy rather than attempt to meet my obligations through other means using MY OWN MONEY.

What kind of sense does that make?

I guess as much sense as a government thinking they can keep piling on trillions and trillions of dollars in debts and never have to pay the piper.

Mayberry said...

I ditched the 401k years ago...

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