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Congress mulls major 401(k) changes

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Special K

Diamond Member
Jun 18, 2000
7,098
0
76
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.
What difference does it make if you pay taxes before investing the money or after? A Roth IRA has you pay the taxes up front, and the 401k has you pay taxes when you withdraw the money. Both of them grow tax-free. Mathematically, it shouldn't matter unless you anticipate being in a different tax bracket when you retire vs. when you are contributing to the accounts.

Many people view the Roth IRA as a hedge against higher tax rates.
 

Pliablemoose

Lifer
Oct 11, 1999
25,195
0
56
Originally posted by: Special K


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?
Yes, for instance my mother hasn't touched the principle in her 401k, she' living off her SS and withdrawls from her 401k that are actually less than the interest she's earning.

Congress is looking at those net eggs and tyring like hell to figure out how to tax that principle if it's not touched.

People are living longer and tend to be frugal in their retirement...
 

JS80

Lifer
Oct 24, 2005
26,260
4
81
Don't these Congressmen value their lives? Stuff like this is how revolutions get started.
 

StageLeft

No Lifer
Sep 29, 2000
70,150
2
0
Originally posted by: Pliablemoose
Originally posted by: Special K


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?
Yes, for instance my mother hasn't touched the principle in her 401k, she' living off her SS and withdrawls from her 401k that are actually less than the interest she's earning.

Congress is looking at those net eggs and tyring like hell to figure out how to tax that principle if it's not touched.

People are living longer and tend to be frugal in their retirement...
Why can't they get it when she dies? They'll probably need it more then anyway if they continue to fvck everyone on spending.

 

Special K

Diamond Member
Jun 18, 2000
7,098
0
76
Originally posted by: Skoorb
Originally posted by: Pliablemoose
Originally posted by: Special K


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?
Yes, for instance my mother hasn't touched the principle in her 401k, she' living off her SS and withdrawls from her 401k that are actually less than the interest she's earning.

Congress is looking at those net eggs and tyring like hell to figure out how to tax that principle if it's not touched.

People are living longer and tend to be frugal in their retirement...
Why can't they get it when she dies? They'll probably need it more then anyway if they continue to fvck everyone on spending.
Won't it become part of her estate and handed down to her beneficiaries? IIRC, the first $2 million of an estate is exempt from the estate tax. There are probably other loopholes to make an even greater amount exempt.
 

Wheezer

Diamond Member
Nov 2, 1999
6,731
1
0
when you die, if you have a life insurance is the money paid to the beneficiary taxable income?

if not, then why not invest part of that 401k into a hefty life insurance policy?

keep enough to live off of and to invest and put the rest into a policy, that way when you are gone...your loved ones are not going to get fucked the way they would if they try and get the balance of your 401k.
 

winnar111

Banned
Mar 10, 2008
2,847
0
0
Originally posted by: Wheezer
when you die, if you have a life insurance is the money paid to the beneficiary taxable income?

if not, then why not invest part of that 401k into a hefty life insurance policy?

keep enough to live off of and to invest and put the rest into a policy, that way when you are gone...your loved ones are not going to get fucked the way they would if they try and get the balance of your 401k.
Life insurance proceeds are not taxable.
 

Thump553

Lifer
Jun 2, 2000
11,893
1,229
126
People are getting way, way off track with wild speculation about the government trying to seize nest eggs, etc. Go back and read the first post and the link in it and figure out what the real issue is.

As I've already intimated, I think the intention of this proposed change is to get 401(k)s out of stocks (because allegedly too speculative) and into bonds and the like. Hardly socialism by any stretch. A major change to the 401(k) rules, but not earth shaking.

Can you imagine if all the $ in 401(k)s has to be pulled out of stocks immediately? Another major hit down and further destabilization of the stock markets.

And stop treating all proposed legislative changes as a done deal. Haven't you people ever heard of a trial balloon? lThat's not the way the legislative process works. If you don't like this proposal, fire off an email to your Representative and Senators. Bitching and moaning about "creeping socialism" is an unproductive waste of time.
 

PingSpike

Lifer
Feb 25, 2004
21,537
419
126
Originally posted by: Skoorb
I have wondered before what stops the gov from, in the case of a roth, backtracking and deciding "Oh sorry these are taxable, but only at 10%, so don't complain too much or it will be 20%, now fug off".

I cannot get the link to work and i don't know how much traction this has but if they fvck around with 401k they better let us lock-in what's already in them and keep them there until they expire however many decades down the line.
Nothing of course. You can't tax people with no money, so when they run out of people to tax they'll just revoke their promise and go after the money that does exist. Hell, they'll probably do it before then. I mean...how many people actually save? Not many. The unwashed masses certainly will just vote to steal your savings when the piggy bank is empty. You drove used cars all your life and lived in a trailer while everyone else bought a new car every two years and bought a McMansion? Fuck you you rich fat cat! Stop being so greedy!
 

Legend

Platinum Member
Apr 21, 2005
2,254
1
0
They won't tax Roth accounts on withdrawals. That would be a clear violation of Expos Facto clause in the Constitution. That alone wouldn't be enough to stop them, but when you start taking money very clearly from the public, a lot of people will get angry.
 

chrisho

Member
Jun 17, 2008
63
0
0
Originally posted by: Zorba
There is no way congress will ever completely screw 401k or Roth, they are way too popular. It would be political suicide to screw with them.
This all depends on who is in power. Honestly, I think an all Democratic controlled government wouldn't stop. They are experts at class warfare and will find a way to convince below average Americans that its a win. It was how income tax was originally sold to the common man, it was pure class warfare and we see where that got us.

This is scary. This is also a trial balloon. You notice none of the current D leadership has commented, let alone said anything against it. They are going to float quite a few more of these to see which will stick.

If they touch 401k the market will tank so hard it would make your head spin. Too many "average" Americans are invested in 401k one way or another. Too many pension plans rely on the market that if 401k lost their "security" from government taxation that the whole pension system would collapse as well.

Welcome to hell, we thought Bush was bad with economics but I am afraid we haven't see anything yet. He might have busted the budget but loons like this will break our personal budgets
 

Thump553

Lifer
Jun 2, 2000
11,893
1,229
126
Originally posted by: Legend
They won't tax Roth accounts on withdrawals. That would be a clear violation of Expos Facto clause in the Constitution. That alone wouldn't be enough to stop them, but when you start taking money very clearly from the public, a lot of people will get angry.
That's nonsense as far as your Constitutional interpretation goes, the Roth IRA is not a contract between you and the government and changing the way it is taxed does not affect the contract with the custodial institution.

It is correct that that changing the tax law in that way would be extremely unpopular. But I personally am not all that comfortable assuming the fact situation and tax laws will be the same in a couple of decades as they are now.

 

PingSpike

Lifer
Feb 25, 2004
21,537
419
126
Originally posted by: Thump553
Originally posted by: Legend
They won't tax Roth accounts on withdrawals. That would be a clear violation of Expos Facto clause in the Constitution. That alone wouldn't be enough to stop them, but when you start taking money very clearly from the public, a lot of people will get angry.
That's nonsense as far as your Constitutional interpretation goes, the Roth IRA is not a contract between you and the government and changing the way it is taxed does not affect the contract with the custodial institution.

It is correct that that changing the tax law in that way would be extremely unpopular. But I personally am not all that comfortable assuming the fact situation and tax laws will be the same in a couple of decades as they are now.
Even if it was...the constitution hasn't seemed to have gotten in the way of a lot of things recently that it should have.

Plus, while it will piss a lot of people off...most people don't save anything, hell...a lot of people don't even no what a roth is. They'll throw their full moron support behind the notion.
 

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