Why be personally responsible in saving for retirement?

[Exterous]

More accurate statement:

The Obama administration proposed that you would only be allowed to keep enough in tax-sheltered accounts "to finance an annuity of not more than $205,000 per year"
http://blogs.marketwatch.com/encore/2013/04/10/obama-budget-would-cap-iras-at-3-million/

My response:

a) Social Security pays out a lot less than $17,000 a month to retirees.

It's currently $3million. The biggest issue I have with this is how it is all setup. The figure is tied to annuities. Annuities fluctuate with interest rates. The figure also has a inflation adjustment. A rapid spike in inflation will cause the cap to go down. How much depends on the inflation adjustment and what (if anything) its tied to

The whole thing will be needlessly complex given that I don't think its going to generate nearly as much money as the White House claims - unless they implement it retroactively (which would be a huge dick move).

I'd be willing to bet the White House estimates are based on how much this tax would net are under the current tax-advantaged account balance situation and projected growth based on historical norms. You think those people with over $3million in these accounts aren't smart enough to know or hire someone who knows how to take advantage of the numerous other tax advantaged options (annuities, charity annuities, municipal bonds, insurance etc) and will blindly continue to contribute to taxed accounts when non-taxed options are available? I sincerely doubt it.

That said I do think just planning on relying on the government to take care of you in retirement is a bad idea given the lifestyle (or lack there of) this would provide

It's a very classist to state that that poor people choose to be that way. That is the myth of meritocracy - the belief that hard work equals success. It doesn't. Many people in this country work extremely hard and are unable to break out of poverty. For some, that poverty has lasted generations. Institutionalized and cultural racism, classism, ableism, sexism, heterosexism, ageism all create real barriers to financial success in this country. To say you could simply "choose" to overcome those obstacles is absurd. It takes extreme resiliency to overcome those barriers. Let's say you have none of these barriers - you are still faced with the reality that our society's entire economic system is driven by the idea of "winners" and "losers."

As someone who has worked with kids in a very poor area near Detroit I can assuredly tell you that many families just don't give a shit about working hard to try and improve their situation. Do I think that's everyone? No - but it is a cultural issue that needs to be addressed

I actually don't see an issue with putting a cap on tax advantaged accounts so long as that's understood from the get go. Now they're changing the rules. People who have invested could have and probably WOULD have put their money elsewhere had they known the cap was in place....
How can we trust that the government won't change the rules and just take ALL of our retirement money. Why would they take what i earn after having told me "don't worry, it'll be safe here"

Given the history of changes to retirement accounts I think it would be a huge folly to assume any current status quo would be guaranteed to continue in the future. Not an argument for right or wrong but be aware that any investment option tied to government laws are subject to change at any time by the government. Thats why many max out the IRA contributions now as we have no guarantee that this will continued to be allowed in the future

 

[Brovane]

Why should I delay my gratification, saving for years and years to make sure that I'm comfortable in my old age when the "government" can decide that I don't NEED that much money in my IRA (greater than 3 mil) and tax it away. I didn't buy a nice house, a nice car, or live a lavish lifestyle for 30 years so that i would be comfortable when i retire . . . and then get slapped in the face.

on the other hand, i could live it up and not save a dime and when i retire qualify for public benefits and survive on someone else's hard work...

what is the incentive to be responsible in this case? I'm seeing more and more reasons that there is no need to be responsible for yourself, it's always up to someone else. I understand that we live in a society but there has to be some expectation of personal responsibility. at what point can government decide i don't NEED something for which i worked for and sacraficed in order to achieve?

So how did people save for retirement before IRA's existed? IRA's where only introduced in 1974.

 

[Carmen813]

Edited out.

 

[Craig234]

Carmen, I saw your post before you removed it, and compliments on good points.

 

[Steeplerot]

Carmen, I saw your post before you removed it, and compliments on good points.

Poked my head on here for kicks, this guy raises the bar.

 

[JoeMcJoe]

I don't think the OP holds much merit. It completely ignores that there's no prohibition on saving more than 3 million; merely that there's a limit to the generosity of the government in not taxing a significant chunk of income.

Stop using logic, that isn't fair!

 

[JEDIYoda]

You've used that stat before, that 90% of the elderly lived in poverty before SS was created. Got a source? Wikipedia states that just over 50% lived in poverty at that time, which isn't great, but is less than 90%.

exactly...I can tell you that 90% figure is just not true at all!

 

[JEDIYoda]

Carmen, I saw your post before you removed it, and compliments on good points.
__________________

Carmen is one sharp cookie!!!

 

[lotus503]

I wonder what percentage of the population has 3mil in an Ira.

I suspect it's vey very very very very low.

I simply can't be upset that there is a proposed cap on the amount that can be tax exempt.

 

[soulcougher73]

Handing a person money to allow them to stay at the same level destroys the desire to move out of such an environment.

I think the problem is we are TOO generous with our hand outs. If our hand outs were more about just basic survival they might work harder to get out of it. Instead of EBT/food stamps etc. Set up government food centers that give out bread/water/basic neccessities to keep you alive, but not afford any luxury.

I think that would provide a lot of incentive to strive for more. But instead they get homes, cell phones, cars, steaks, cigs, alcohol etc. on someone elses dime.

 

[SparkyJJO]

I think the problem is we are TOO generous with our hand outs. If our hand outs were more about just basic survival they might work harder to get out of it. Instead of EBT/food stamps etc. Set up government food centers that give out bread/water/basic neccessities to keep you alive, but not afford any luxury.

I think that would provide a lot of incentive to strive for more. But instead they get homes, cell phones, cars, steaks, cigs, alcohol etc. on someone elses dime.

Bingo, way too much leeway. I could see a little more than just bread and water because, well, that's not going to be the most healthy diet. But excess stuff most certainly should be disallowed. No alcohol, no desserts, no prime cut meats, etc. If you want the nicer things, pay for it yourself, not on someone else's dime.

 

[Craig234]

Bingo, way too much leeway. I could see a little more than just bread and water because, well, that's not going to be the most healthy diet. But excess stuff most certainly should be disallowed. No alcohol, no desserts, no prime cut meats, etc. If you want the nicer things, pay for it yourself, not on someone else's dime.

Too bad this isn't sarcasm, instead of scumbaggery. I'm leaning towards a poor person shooting you for the cash in your wallet as appropriate.

These comments are inappropriate. People are allowed to have different viewpoints than yours. --ck

 

[Chaotic42]

I was wondering whether I should use a tax-deferred 401k or not, but I can't help thinking that although I may pay taxes now, I don't trust the government not to change its mind and tax me at 59.5 anyway.

 

[shadow9d9]

I was wondering whether I should use a tax-deferred 401k or not, but I can't help thinking that although I may pay taxes now, I don't trust the government not to change its mind and tax me at 59.5 anyway.

If you are that paranoid, then you should hide it in a booby trapped safe spot in your house...

 

[shortylickens]

Behold the fowls of the air: for they sow not, neither do they reap, nor gather into barns; yet your heavenly Father feedeth them. Are ye not much better than they?

 

[Lithium381]

I wonder what percentage of the population has 3mil in an Ira.

I suspect it's vey very very very very low.

I simply can't be upset that there is a proposed cap on the amount that can be tax exempt.

You can't be upset because it doesn't affect you? What if you'd been saving all your life and saved up 1.5 million, then 5 years before retirement the government 'changed its mind' and put a cap at 200k on your retirement fund? Is that not a violation of trust? If you had known in your youth there was a 200k cap, would you not have spent your money elsewhere saving for retirement?

 

[Anarchist420]

I definitely agree with the OP, but the centralized banking system makes it so that it's hard to accumulate and keep wealth... that is, no matter how rich you are, you can't just save your money and grow richer. Gold is taxed, the Fed distorts the housing market, and the fractional reserve banking system means that the banks own your deposits and that loaning out your own cash doesn't guarantee you a profit no matter how you do it.

Factor in taxes and people can't pay their debts off so they have to borrow more money and pay more interest on it.

 

[fskimospy]

I definitely agree with the OP, but the centralized banking system makes it so that it's hard to accumulate and keep wealth... that is, no matter how rich you are, you can't just save your money and grow richer. Gold is taxed, the Fed distorts the housing market, and the fractional reserve banking system means that the banks own your deposits and that loaning out your own cash doesn't guarantee you a profit no matter how you do it.

Factor in taxes and people can't pay their debts off so they have to borrow more money and pay more interest on it.

I wouldn't worry about how hard it is to accumulate wealth. You would need to get a job first.


------------------------------------
This is an attack/slight against the poster and violates the spirit of DC.

EK
Admin

 

[SparkyJJO]

Too bad this isn't sarcasm, instead of scumbaggery. I'm leaning towards a poor person shooting you for the cash in your wallet as appropriate.

Seriously?

Plenty of perfectly acceptable and healthy food is available without jumping to prime meat cuts or excess on taxpayers' dime. Certainly zero need of extra niceties like desserts and beer and stuff like that. Not with taxpayer money. If you call that "scumbaggery" well, you need to reevaluate your position as that is ridiculous.

And wishing my death over that? Wow.

 

[shadow9d9]

You can't be upset because it doesn't affect you? What if you'd been saving all your life and saved up 1.5 million, then 5 years before retirement the government 'changed its mind' and put a cap at 200k on your retirement fund? Is that not a violation of trust? If you had known in your youth there was a 200k cap, would you not have spent your money elsewhere saving for retirement?

Nothing would be retroactive, including things on the table now, so what are you going on about?

 

[shadow9d9]

Seriously?

Plenty of perfectly acceptable and healthy food is available without jumping to prime meat cuts or excess on taxpayers' dime. Certainly zero need of extra niceties like desserts and beer and stuff like that. Not with taxpayer money. If you call that "scumbaggery" well, you need to reevaluate your position as that is ridiculous.

And wishing my death over that? Wow.

No one wished your death over it. He is saying that if a large portion of the population is depressed and desperate, crime will go up. Punish people enough and you will suffer as well.

 

[SparkyJJO]

No one wished your death over it. He is saying that if a large portion of the population is depressed and desperate, crime will go up. Punish people enough and you will suffer as well.

I'm sorry, that doesn't fit what he said at all. I said no excess like desserts or prime meat cuts when on welfare. I'm not saying starve people. I'm not saying to punish them. Just no excess stuff on taxpayer dime. His response is far from what you're claiming. Read it again:

Too bad this isn't sarcasm, instead of scumbaggery. I'm leaning towards a poor person shooting you for the cash in your wallet as appropriate.

I hardly think shooting me over some cake is ever "appropriate." I'm on the low end of the lower-middle class anyway, so I'm quite far from being a rich person, and rarely carry much cash with me.

I thought the discussion club was supposed to not have garbage like this in it, but more of a real discussion. Yeah... maybe not. Stay classy Craig

 

[Mursilis]

No one wished your death over it. He is saying that if a large portion of the population is depressed and desperate, crime will go up. Punish people enough and you will suffer as well.

Didn't some study find that crime rates really didn't increase (and in fact may have gone down) during the current Great Recession? I remember Richard Cohen wrote about it in the Washington Post about a year ago, stating that maybe there is a much more of a moral component to crime than liberals are willing to admit. It was an interesting perspective coming from someone who will never be confused for a social conservative.

 

[Mursilis]

I wonder what percentage of the population has 3mil in an Ira.

I suspect it's vey very very very very low.

I simply can't be upset that there is a proposed cap on the amount that can be tax exempt.

Those are similar to my thoughts. I wasn't getting terribly worked up over this, and I'm still not bothered by it, but I read some interesting numbers on how much it would bring in. According to Fred Hiatt in the Washington Post, the projected additional revenue is $9B over 10 years. In other words, less than a billion a year. Of course, when your gov't is perpetually in the red, every bit helps, but wow, it seems like Obama has spent a lot of political capital on something which won't actually raise much money.

 

[JTsyo]

You can't be upset because it doesn't affect you? What if you'd been saving all your life and saved up 1.5 million, then 5 years before retirement the government 'changed its mind' and put a cap at 200k on your retirement fund? Is that not a violation of trust? If you had known in your youth there was a 200k cap, would you not have spent your money elsewhere saving for retirement?

OP, there something you just aren't getting. The government is not going to take all the money over 200K. They are going to tax it. Same as they would have taxed it if you knew there was a 200K limit. Also these are tax deferred, you are going to pay taxes on them anyway. It's good since you can make gains on what you would have paid as taxes.

One question I have is, is it just the principal that is taxed at income rates or gains too, for tax deferred accounts? Are the gains at the capital gains rate?