I realize that Social Security isn't going to be there for me when I retire; and that my Social Security payments are nothing but an additional income tax. I realize that there is literally no money
in the Social Security Trust. Literally. Fine.
While the Social Security scheme is crooked and corrupt, I have been able to tolerate it for one reason - my 401(k).
With my 401(k), I'm able to contribute pre-tax dollars to a retirement account that will actually be there when I retire. Or if it's not there, it will be gone due to my choices rather than the choices of my morally-bankrupt leaders in Congress.
I'm not alone: 33% of people in my "irresponsible, slacker" generation (21-to-30 year olds) contribute money to a 401(k). As people get older, a greater proportion of them contribute to their 401(k)s. Who, after all, really believes that Social Security will provide them a decent standard of living?
But having people accept personal responsibility for their own retirement has outraged liberals:
Powerful House Democrats are eyeing proposals to overhaul the nation’s $3 trillion 401(k) system, including the elimination of most of the $80 billion in annual tax breaks that 401(k) investors receive.
Their plan for you and me?
Under Ghilarducci’s plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5 percent of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3 percent a year, adjusted for inflation.
Yes, the same government who (mis)managed the Social Security Trust worse than anyone on Wall Street could, wants to establish another trust - with tax increases to boot. The same government that has proven itself a horrible steward of my money wants even more of it. And they are literally trying to make me dependent on the government.
The Democrats angle is that my 401(k) contributions are tax-subsidized:
“I want to stop the federal subsidy of 401(k)s,” [Teresa] Ghilarducci said in an interview. “401(k)s can continue to exist, but they won’t have the benefit of the subsidy of the tax break.”
While [House Education and Labor Committee Chairman George] Miller stopped short of calling for Ghilarducci’s plan at the hearing last week, he was clearly against continuing tax breaks as they currently exist.
That's ignorant, completely moronic, and so beyond-the-pale wrong (or so beyond-the-pale dishonest, in Ghilarducci's case, since she is an economist!) that anyone who says it should not be allowed to discuss financial issues - let alone create national policy.
First, they are lying about "federal subsidies." Do these scoundrels have no concept of "the future"? My 401(k) will get taxed. When I retire and start taking distributions, I'll pay taxes on those distributions. (Chances are, I'll be taxed at a much higher marginal tax rate than I'm taxed at today.)
Second, taxpayers, far from giving me a break, will reap greater rewards when I retire. Why? Simple. Because I'll have more money to initially invest due to today's tax avoidance, I'll be able to take larger future returns than I would otherwise been able to take. Which means more tax dollars to the government. But, yes, the government will need to wait to get its money.
Again, this is so basic that I feel like I'm insulting you by even stating it. Do I really need to say that, in twenty years, a dollar invested today will be worth more than seven-five cents invested today? Of course not.
But our leaders do not understand basic economics. They do not that a larger principal today means a a much larger future balance, due to the "magic" of compounding interest.
That, or they are lying. Their real end-game is to tax 401(k) contributions, and then tax 401(k) distributions. Taxing people at both ends of the transaction, in addition to leaving them with less after-tax money to invest, will disincentivize people from having their own retirement accounts. In fact, for lower-wager works, it will be impossible to pay Social Security taxes, the additional 5% tax, and then have money left over for a retirement fund that is something more than an I.O.U. Which is the Democrat's real goal.
The government does not want any of us to have retirement funds. They want us completely and totally dependent on the Leviathan.
Wealth provides independence. Independent people make bad subjects. And so, Democrats will do everything within their power to disempower us.
The attack on our 401(k)s is but one arrow shot at individual liberty, personal responsibilty, and personal freedom. With Obama in office, the sky will be filled with arrows. It will be interesting to see who survives.