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Congress mulls major 401(k) changes

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Genx87

Lifer
Apr 8, 2002
41,063
495
126
Originally posted by: dmcowen674
Originally posted by: Genx87
Originally posted by: quest55720
Originally posted by: RichardE
Originally posted by: Double Trouble
This is the kind of stuff we have to look forward to when you have an all-democrat congress and president. Clearly, those "rich people" have used this incredible loophole to steal from the poor, they need to be punished for saving. I say we just take away their 401(k) and call it part of their "patriotic duty" to help the country. Then we can take all that 401(k) money and distribute it to those "disenfranchised" people who never saved anything.
If it passes republicans are going to have to vote for it, and a republican president will have to approve it.

Not if this comes up next year. There is 100% chance Obama wins. There is a 50% chance the dems will get 60 seats in the senate. There is a good chance this shit could pass with out 1 single republican vote. Obama would rubber stamp it in a second. It is shit like this why we need split government. I rather like my 401k the way it is personally.
I talked about this a few months ago. A defacto dictatorship if Obama gets the super majority.
and it wasn't a Bush/Republican dictatorship? :confused:
Your confusion is noted but expected. Did Bush ever enjoy a super majority?

If not consider it a rubberstamp.
 

dmcowen674

No Lifer
Oct 13, 1999
54,894
46
91
www.alienbabeltech.com
Originally posted by: Genx87
Originally posted by: dmcowen674

I talked about this a few months ago. A defacto dictatorship if Obama gets the super majority.
and it wasn't a Bush/Republican dictatorship? :confused:
Your confusion is noted but expected.

Did Bush ever enjoy a super majority?

If not consider it a rubberstamp.
[/quote]

Yes, for 6 solid years

History will show it forever.
 

Genx87

Lifer
Apr 8, 2002
41,063
495
126
Originally posted by: dmcowen674
Originally posted by: Genx87
Originally posted by: dmcowen674

I talked about this a few months ago. A defacto dictatorship if Obama gets the super majority.
and it wasn't a Bush/Republican dictatorship? :confused:
Your confusion is noted but expected.

Did Bush ever enjoy a super majority?

If not consider it a rubberstamp.
Yes, for 6 solid years

History will show it forever.
[/quote]
You obviously dont know what a super majority is nor what powers it wields.
 

KB

Diamond Member
Nov 8, 1999
5,195
243
106
I expected this of our government. Congress wants more money to spend on pork, so they want their taxes now, not after someone starts taking the money out. They also recognize that if people lose a lot of money in their 401k they may never get any taxes at all. And they could care less about the changes to 401k because they will all get government pensions. They don't realize that 401ks aren't just for the rich.
 

vi edit

Elite Member
Super Moderator
Oct 28, 1999
61,339
5,187
126
From what I am able to make out of that article they are considering two different things:

1) Elimanating (or reducing) the pre-tax savings of a 401k for people above some specified bracket.

2) Offering some sort of a buyout for exisiting 401ks in exchange for low risk, low income government money.

3) Some combination of the two?

The first one sounds like a money desperate government trying to find ways to cover their own bills.

The second one is a knee jerk reaction that ultimately keeps your money flatlined. Yeh you won't lose 25% of your account in a year, but you also won't ever see more than 5% in any given year either. Over the course of 40 years I'll take my chances. And I say this watching my own accounts drop 10's of thousands over the last couple weeks.
 

Thump553

Lifer
Jun 2, 2000
11,941
1,274
126
I see a lot of angry sentiment here, but frankly I'm at a total loss to see any "socialism." Is every tax policy change that may work against your personal interests a evil form of socialism?

The original post is very sparse on facts, but from it I gleaned:

1) The US presently subsidizes the 401(k) system by giving it tax preference treatment. This costs the county $80 billion so far.

2) Not in the post-it's a fact that 401(k)s invested in stock equities have tanked as of late.

3) The Congressional proponents of this tax law change want to change the tax preference so only accounts invested in some sort of bond account or possibly an annuity (or something like it, very unclear).

The purpose of this proposed change is to limit the tax preference to more stable financial vehicles, apparently. An admirable purpose-not one I agree with at all-but certainly not socialism. I think there are abuses in the 401(k) system-primarily in the advice area-but people should be free to choose relatively speculative investments if they wish.

Learn to look at the actual facts and principles of proposals rather than just putting silly labels on them.

Disclosure-I don't have a 401(k), never worked for an employer that offered one. I do have traditional IRAs-never invested in Roth IRAs because of concerns that the tax laws would change to the negative between when I invested and when I retire (perhaps an overly conservative position).
 

retrospooty

Platinum Member
Apr 3, 2002
2,031
74
86
Originally posted by: Thump553
I see a lot of angry sentiment here, but frankly I'm at a total loss to see any "socialism." Is every tax policy change that may work against your personal interests a evil form of socialism?

"socialism" and the evils of it is just another right wing talking point. They like to equate anything the govt. does to equalize an overwhelmed, or even corrupted (as in healthcare) system as "socialism". They cry "socialism" as a scare tactic and then run with it. "WE ARE CREEPING TOWARD SOCIALISM, ITS THE END OF THE WORLD"

Just breath, relax and dont be so dramatic... and if you dont like it, dont support it and dont vote for people that do.
 

Drakkon

Diamond Member
Aug 14, 2001
8,401
1
0
How does the gov consider itself to be "subsidizing" the accounts? because they allow them to take place without being taxed initially?
They actually haven't really invested anything (other than study earmarks) to actually run the accounts have they?
 

ayabe

Diamond Member
Aug 10, 2005
7,449
0
0
Originally posted by: Genx87
Originally posted by: dmcowen674
Originally posted by: Genx87
Originally posted by: quest55720
Originally posted by: RichardE
Originally posted by: Double Trouble
This is the kind of stuff we have to look forward to when you have an all-democrat congress and president. Clearly, those "rich people" have used this incredible loophole to steal from the poor, they need to be punished for saving. I say we just take away their 401(k) and call it part of their "patriotic duty" to help the country. Then we can take all that 401(k) money and distribute it to those "disenfranchised" people who never saved anything.
If it passes republicans are going to have to vote for it, and a republican president will have to approve it.

Not if this comes up next year. There is 100% chance Obama wins. There is a 50% chance the dems will get 60 seats in the senate. There is a good chance this shit could pass with out 1 single republican vote. Obama would rubber stamp it in a second. It is shit like this why we need split government. I rather like my 401k the way it is personally.
I talked about this a few months ago. A defacto dictatorship if Obama gets the super majority.
and it wasn't a Bush/Republican dictatorship? :confused:
Your confusion is noted but expected. Did Bush ever enjoy a super majority?

If not consider it a rubberstamp.
Same difference. You are technically correct but the net effect was the same. There basically wasn't a single thing Bush didn't get, aside from trying to destroy SS, which the R's in Congress weren't on board for.

This is just a scare tactic to be frank, yeah let's make sure to elect the interior of the two candidates because of Congress. Not a very compelling argument.

 

Pliablemoose

Lifer
Oct 11, 1999
25,195
0
56
What congress & the IRS are pissed over is that retirees are not taking out the untaxed principle, typically they're taking out the interest, so they want to figure out how to tax that untouched principle.

They'll get it eventually too, a couple more economic turndowns, and everything is on the table fr the rat bastards.

The bailout was wildly unpopular & they passed it, since 1/3 of employeed folk participate and a lot of unemployed or ineligible folk feel left out, there will be more support for IRA reform.

:(
 

Thump553

Lifer
Jun 2, 2000
11,941
1,274
126
Originally posted by: Drakkon
How does the gov consider itself to be "subsidizing" the accounts? because they allow them to take place without being taxed initially?
* * */q]


Yes. 401(k)s are what is commonly known as a tax preferred vehicle-the tax laws are written to encourage people to go that route, presumably for some beneficial social purpose greater than simple collection of tax revenue would be. Apparently the proponents of this change feel 401(k)s, to retain their tax advantage, should be restricted to more conservative investments only.

Essentially when a program like this is set up the legislative intent is that the $80 billion in foregone tax revenue is overbalanced by the social good of the program.

Capital gains taxes are another great example-we currently tax (long term) capital gains at a much lower rate than ordinary income to encourage long term capital investment.
 

Special K

Diamond Member
Jun 18, 2000
7,098
0
76
Originally posted by: Drakkon
How does the gov consider itself to be "subsidizing" the accounts? because they allow them to take place without being taxed initially?
They actually haven't really invested anything (other than study earmarks) to actually run the accounts have they?
This is what I want to know. See my question above. A 401k is a tax-deferred account. You pay taxes on the withdrawals as if they were ordinary income.
 

Genx87

Lifer
Apr 8, 2002
41,063
495
126
Originally posted by: ayabe
Originally posted by: Genx87
Originally posted by: dmcowen674
Originally posted by: Genx87
Originally posted by: quest55720
Originally posted by: RichardE
Originally posted by: Double Trouble
This is the kind of stuff we have to look forward to when you have an all-democrat congress and president. Clearly, those "rich people" have used this incredible loophole to steal from the poor, they need to be punished for saving. I say we just take away their 401(k) and call it part of their "patriotic duty" to help the country. Then we can take all that 401(k) money and distribute it to those "disenfranchised" people who never saved anything.
If it passes republicans are going to have to vote for it, and a republican president will have to approve it.

Not if this comes up next year. There is 100% chance Obama wins. There is a 50% chance the dems will get 60 seats in the senate. There is a good chance this shit could pass with out 1 single republican vote. Obama would rubber stamp it in a second. It is shit like this why we need split government. I rather like my 401k the way it is personally.
I talked about this a few months ago. A defacto dictatorship if Obama gets the super majority.
and it wasn't a Bush/Republican dictatorship? :confused:
Your confusion is noted but expected. Did Bush ever enjoy a super majority?

If not consider it a rubberstamp.
Same difference. You are technically correct but the net effect was the same. There basically wasn't a single thing Bush didn't get, aside from trying to destroy SS, which the R's in Congress weren't on board for.

This is just a scare tactic to be frank, yeah let's make sure to elect the interior of the two candidates because of Congress. Not a very compelling argument.
At anytime the democrats wanted to grow a backbone they could filibuster Bush. There is a difference. In a super majority democrat congress + Obama. Anything Obama sends down the pipe the democrats would be able to pass without a filibuster threat.

I am not making an argument against voting for Obama. But it is a clear difference between a rubberstamp and a super majority.

 

Special K

Diamond Member
Jun 18, 2000
7,098
0
76
Originally posted by: Pliablemoose
What congress & the IRS are pissed over is that retirees are not taking out the untaxed principle, typically they're taking out the interest, so they want to figure out how to tax that untouched principle.

They'll get it eventually too, a couple more economic turndowns, and everything is on the table fr the rat bastards.

The bailout was wildly unpopular & they passed it, since 1/3 of employeed folk participate and a lot of unemployed or ineligible folk feel left out, there will be more support for IRA reform.

:(
Anything you take out of a 401k is taxable as ordinary income.
 

Dufusyte

Senior member
Jul 7, 2000
659
0
0
The 401k program helped create the Stock Bubble, since it encourages workers to pump a portion of their earnings into the Stock Market each paycheck.

If any reform of the 401k system changes this (i.e. stops taking a portion of workers income and pumping it into the stock market) then this will take a significant source of funding out of the stock market. Less money flowing into stock market = lower prices of stocks.

fwiw.
 

Pliablemoose

Lifer
Oct 11, 1999
25,195
0
56
Originally posted by: Special K
Originally posted by: Pliablemoose
What congress & the IRS are pissed over is that retirees are not taking out the untaxed principle, typically they're taking out the interest, so they want to figure out how to tax that untouched principle.

They'll get it eventually too, a couple more economic turndowns, and everything is on the table fr the rat bastards.

The bailout was wildly unpopular & they passed it, since 1/3 of employeed folk participate and a lot of unemployed or ineligible folk feel left out, there will be more support for IRA reform.

:(
Anything you take out of a 401k is taxable as ordinary income.
Right, but if the majority of 401K holders don't ever touch the principle, congress & the IRS are looking at the principle that's not taxed.
 

rchiu

Diamond Member
Jun 8, 2002
3,846
0
0
I don't get it. 401k is just an account. You can invest the money in that account in anything you want. Including money market if you want to. There are plenty of bond funds, municipal funds, conservative stock funds and other stuff to choose from.

What's the deal with equating 401k to the stock market?
 

vi edit

Elite Member
Super Moderator
Oct 28, 1999
61,339
5,187
126
Originally posted by: rchiu
I don't get it. 401k is just an account. You can invest the money in that account in anything you want. Including money market if you want to. There are plenty of bond funds, municipal funds, conservative stock funds and other stuff to choose from.

What's the deal with equating 401k to the stock market?
I have no idea what the real % is, but I would hazard to guess that an overwhelming majority of 401k owners are largely invested in the stock market(s) in some shape or form. That could be in the form of index funds, target date funds, or sector oriented ones.

401k's are "main streets" access to "wall street".
 

ElFenix

Elite Member
Super Moderator
Mar 20, 2000
101,626
5,923
126
it'd be awesome if they turn the 401k into a giant robbery system like social security. hmmm... 'guaranteed' 1.5% that is guaranteed only to not keep up with inflation (after all, you don't have a property right in social security) or an account that over a lifetime will enrich me and allow me to leave something to my family?
 

rchiu

Diamond Member
Jun 8, 2002
3,846
0
0
Originally posted by: vi edit
Originally posted by: rchiu
I don't get it. 401k is just an account. You can invest the money in that account in anything you want. Including money market if you want to. There are plenty of bond funds, municipal funds, conservative stock funds and other stuff to choose from.

What's the deal with equating 401k to the stock market?
I have no idea what the real % is, but I would hazard to guess that an overwhelming majority of 401k owners are largely invested in the stock market(s) in some shape or form. That could be in the form of index funds, target date funds, or sector oriented ones.

401k's are "main streets" access to "wall street".
Well then that's a problem with the people making that investment decisions. The options is there, they just need to be educated on how to invest.

I don't need congress to take away the option to invest on stock with my 401k. What happens to personal responsibility for your own investment choices?
 

ElFenix

Elite Member
Super Moderator
Mar 20, 2000
101,626
5,923
126
Originally posted by: rchiu
What happens to personal responsibility for your own investment choices?
personal responsibility went up in flames in 1998 when the republicans stopped acting like republicans. they continued to clothe themselves in the speech of republicans, but haven't accomplished anything. and now, because of the california housing market's irrational exuberance, we've hit some rough economic times and so people have come to this delusion that it's better for the government to make decisions.
 

Vic

Elite Member
Jun 12, 2001
48,699
9,899
136
Originally posted by: ElFenix
it'd be awesome if they turn the 401k into a giant robbery system like social security.
Or they could just junk 401ks entirely, and people would have to pay taxes on all their income before investing it, like they did before the 401k tax break was put in place in 1980.
 

Special K

Diamond Member
Jun 18, 2000
7,098
0
76
Originally posted by: Pliablemoose
Originally posted by: Special K
Originally posted by: Pliablemoose
What congress & the IRS are pissed over is that retirees are not taking out the untaxed principle, typically they're taking out the interest, so they want to figure out how to tax that untouched principle.

They'll get it eventually too, a couple more economic turndowns, and everything is on the table fr the rat bastards.

The bailout was wildly unpopular & they passed it, since 1/3 of employeed folk participate and a lot of unemployed or ineligible folk feel left out, there will be more support for IRA reform.

:(
Anything you take out of a 401k is taxable as ordinary income.
Right, but if the majority of 401K holders don't ever touch the principle, congress & the IRS are looking at the principle that's not taxed.
My point was that even the interest and dividends are taxed as ordinary income. Any money coming out of a 401k account is taxed as ordinary income.

Or are you saying congress is mad because people are not running their 401k accounts down to $0 during retirement, and are instead saving most of it?
 

ElFenix

Elite Member
Super Moderator
Mar 20, 2000
101,626
5,923
126
Originally posted by: Vic
Originally posted by: ElFenix
it'd be awesome if they turn the 401k into a giant robbery system like social security.
Or they could just junk 401ks entirely, and people would have to pay taxes on all their income before investing it, like they did before the 401k tax break was put in place in 1980.
i'd be in favor of that if they rationalized the taxing scheme for investments.
 

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