RSSThe 401k Disaster In The Making
Robert Rohlfing | January 5, 2009
The coming redistribution of YOUR WEALTH will be achieved through the government takeover of 401k plans to help pay for the bailouts. The plan that is being thrown around in congress at the moment was in part from the framework of a plan written by Teresa Ghilarducci who is an economist at the New School for Social Research in New York , some of what the plan entails is as follows:
Employees would make mandatory contributions equal to at least 5 percent of the earnings. Workers could contribute higher amounts if they wish.
Those contributions would be offset by a $600 federal tax credit each participant would receive.
As with a 401(k) plan, workers would have individual accounts they could track. The balance of each account would depend on each worker’s contributions and income level.
The Social Security Administration would handle account management, and the Thrift Savings Plan — a well-regarded retirement plan for federal employees — would manage the money.
Participants would be guaranteed a fixed rate of return that exceeds inflation by 3 percent. For instance, if inflation stood at 2 percent, the worker would earn 5 percent; if inflation reached 3.5 percent, the worker would earn 6.5 percent. Participants could receive an inflation-beating return above 3 percent if the government’s investment returns were high enough.
At retirement, participants’ account balances would be converted into a lifetime stream of income that adjusts for inflation. There would be options to take partial lump sum payments, opt for lower payments in return for survivor benefits and, upon death, leave a portion of a financial account balance.
Given the track record of the government in handling finances this should be alarming to all who has ever contributed to such programs , one needs to realize that when you look at these investments you don’t look at them in the short term or the here and now and that is the hope that many in congress would like for people to do with the current economic downturn. 401k plans historically have had a return rate of at least 10% on a average through the lifetime of the investment , where as this proposal being thrown around in congress will “guarantee” a rate of return of 3% over inflation.
That sounds great doesn’t it you are “guaranteed” a 3% return on your investment all the while you give up the other 7% in the hopes that the government will manage your money efficiently , does Fannie May or Freddie Mac come to mind or the insolvency of the social security program come to mind when you look to the government to control the outcome of your finances and to handle your money wisely ?
What the government looks at is the $80 Billion in tax breaks that 401’s generate as a untapped source of income in there coffers not the fact that this money is now in the control of the individual , the control to plan independent of the government for your retirement . Even in the financial climate we are currently in people can find safe investments within their 401’s that at the moment might not make some of the higher percentages of returns that happen in economic upturns , but still return more than 3% and if you are one of those that are nearing retirement it is your personal responsibility (notice I mentioned YOUR PERSONAL RESPONSIBILITY NOT THE GOVERNMENT) to transfer the money to less risky investments as you near your retirement age .
401k’s, 403b’s etc… were set up to supplement what meager return you will get back from social security investment , it allows the individual to contribute what they deem that they are able to not what is mandated unlike the proposal put forth . They have historically return on a higher margin than what you will get from your dollar for dollar investment and return that you get from Social Security. And most of all it is not thrown in with the general fund to be squandered on other programs that has nothing to do with your survival in the years of your life that you look so forward to enjoying.
What the overriding plan of this is to redirect trillions of dollars of workers’ savings from private investments to fund the ballooning government deficit. And with Social Security the government could borrow and spend all the annual proceeds over and above any payout to retirees , some of this is key in the plan to redistribute wealth that has been bantered about , and to fund the massive expansion of government programs, subsidies and tax “cuts” promised by Barack Obama.
Just as LBJ did when he started “borrowing” money from the Social Security program to pay for the war in Vietnam and what every president has followed with by continuing the practice of “borrowing” money from the program that now is broke , we will see the same results when this take over of the largest pool of private savings in the U.S., to be redirected some $3 trillion to government spending. Just as the promise to pay out that the government currently does with the Social Security , we will be left at the mercy of the government to payout from the only source we have now independent of governmental control.
Rob
Contributor's website: http://www.thedrumbeatofliberty.com
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