Gutting the 401k: The Stupid Party Strikes Again

 

There are days when I think that the mainstream Republicans have a death wish. First, after years of promising to repeal and replace Obamacare, when they get a majority in both Houses and a cooperative President, they do nothing. Nothing in that regard, next to nothing in any other regard. A Supreme Court Justice, yes. A handful of Appeals Court judges. Otherwise, niente. It is as if they are happier in the minority than in the majority.

And when they come to tax reform, what is their big idea? To cut corporate taxes, which would be a boon, and to make up for the revenue losses that this would entail not by cutting expenditures but by gutting the 401k . The fact that their proposal that tax-free contributions to this retirement-savings vehicle be cut to $2400 a year has Wall Street up in arms bothers me not one whit. It is not the task of the US government to feed the greed of a particular industry.

It is its effect on the ordinary joe that I have in mind. I mean the fella who plays by the rules, works hard, and socks money away for his retirement, using the 401k. If self-reliance is a virtue and if promoting individual self-reliance serves the public good, as it surely does, then the provisions within the tax code providing for the 401k are among that code’s best provisions. From the perspective of macroeconomics, the 401k promotes capital formation. From the perspective of public policy, it reduces dependency. What’s not to like?

Moreover, subverting the 401k is bad politics. If Wall Street is up in arms, think about the fury that legislation of this sort will elicit from the ordinary joe once he feels the pinch. Are the Republicans in Congress so beholden to the Chamber of Commerce that they have forgotten their party’s base? If they gut the 401k, in 2018, they will lose both the House and the Senate in a landslide. Is there no one in the Republican Party’s congressional leadership who has any sense?

Published in Domestic Policy
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  1. Skyler Coolidge
    Skyler
    @Skyler

    Paul A. Rahe: Is there no one in the Republican Party’s congressional leadership who has any sense?

    I’m embarrassed you even ask that question.

    • #1
  2. Cato Rand Inactive
    Cato Rand
    @CatoRand

    I wouldn’t worry about it.  It’ll happen right after they shut down the Social Security system.  Any benefit that’s practically universal is untouchable.

    I half wish that wasn’t true.  I’m not a fan of using the tax code to distort incentives and alter behavior.  But even so, this isn’t exactly the first place in the tax code to stick that purist stake in the ground.  The fact is most people under save and the employer managed automatic nature of 401(k) saving is at least something.  For a lot of people, it’s the only systematic, consistent long term saving they do.  So it’s not exactly the worst distortion in the tax code.

    • #2
  3. Gumby Mark Coolidge
    Gumby Mark
    @GumbyMark

    Surely, you’re joking!

    • #3
  4. Western Chauvinist Member
    Western Chauvinist
    @WesternChauvinist

    No! Say it isn’t so!! Does this mean they’ve given up eliminating the state deduction, too? Pandering to Californians and New Yorkers, who will never, ever vote for them anyway? Sounds like the GOP. Knuckleheads.

    • #4
  5. JcTPatriot Inactive
    JcTPatriot
    @JcTPatriot

    Paul, first of all, I’ll always speak up when someone tries to blame the entire GOP for what McCain, Collins, and Murkowski did to the Obamacare repeal. To say the Republicans “did nothing” is not factual, and you know it. The House passed a good bill with most or all Republicans voting yes. That is not nothing. When it got to the Senate, again, all Republicans were going to pass it except the usual two, Collins and Murkowski, both of them unreliable RINOs at best. We said that’s fine, Pence will be the tie-break and we’re done. Then John McCain (probably after meeting in the coat-closet with Schumer and Pelosi) stepped up and gave America his middle finger followed by his thumbs-down.

    If you feel the need to Post something, can you please not embellish your story with things that aren’t factual? The Republicans did a lot, not “nothing” and you mislead your readers by saying that.

    Ok, now, about the 401(k) – I agree this would be a bad thing, as I contribute about 12% to mine, so this would make a big change to my lifestyle, as I would have to build an IRA rather than a 401(k) with my money.

    However, can you inform us where, exactly, you saw this in print? Please provide the link, because I have only seen it one time, in an AP wire story last week, reprinted in WaPo and their left-leaning brothers. I’ve been looking for it ever since and can’t find it. I think a link to the actual “proposal that tax-free contributions to this retirement-savings vehicle be cut to $2400 a year” would be much appreciated, so I can be as outraged as you. I will write a letter to Cruz and Cornyn (I’m from Texas) and to Trump and Pence, once I have the proof in hand.

    If you are only going to quote the AP story, I think a retraction would be nice.

    • #5
  6. Paul A. Rahe Contributor
    Paul A. Rahe
    @PaulARahe

    Cato Rand (View Comment):
    I wouldn’t worry about it. It’ll happen right after they shut down the Social Security system. Any benefit that’s practically universal is untouchable.

    I half wish that wasn’t true. I’m not a fan of using the tax code to distort incentives and alter behavior. But even so, this isn’t exactly the first place in the tax code to stick that purist stake in the ground. The fact is most people under save and the employer managed automatic nature of 401(k) saving is at least something. For a lot of people, it’s the only systematic, consistent long term saving they do. So it’s not exactly the worst distortion in the tax code.

    My view exactly.

    • #6
  7. JcTPatriot Inactive
    JcTPatriot
    @JcTPatriot

    I did some more research and looked at WSJ, which you mentioned, but I don’t have a subscription, so all I got was this snippet, which appears to be pure opinion based on a rumor they supposedly heard:

    “Congressional Republicans are looking for ways to generate revenue to support broad reductions in individual tax rates. One idea is to limit the amount of pretax money households can sock away for retirement saving. Such a move would likely generate significant political blowback, but it hasn’t been explicitly ruled out, stirring worry among industry…”

    Really? “One idea?” One idea that “hasn’t been explicitly ruled out”?

    Once again, one-source gossip becomes outrageous news. Aren’t we all a little tired of this nonsense?

    • #7
  8. Paul A. Rahe Contributor
    Paul A. Rahe
    @PaulARahe

    JcTPatriot (View Comment):
    Paul, first of all, I’ll always speak up when someone tries to blame the entire GOP for what McCain, Collins, and Murkowski did to the Obamacare repeal. To say the Republicans “did nothing” is not factual, and you know it. The House passed a good bill with most or all Republicans voting yes. That is not nothing. When it got to the Senate, again, all Republicans were going to pass it except the usual two, Collins and Murkowski, both of them unreliable RINOs at best. We said that’s fine, Pence will be the tie-break and we’re done. Then John McCain (probably after meeting in the coat-closet with Schumer and Pelosi) stepped up and gave America his middle finger followed by his thumbs-down.

    If you feel the need to Post something, can you please not embellish your story with things that aren’t factual? The Republicans did a lot, not “nothing” and you mislead your readers by saying that.

    Ok, now, about the 401(k) – I agree this would be a bad thing, as I contribute about 12% to mine, so this would make a big change to my lifestyle, as I would have to build an IRA rather than a 401(k) with my money.

    However, can you inform us where, exactly, you saw this in print? Please provide the link, because I have only seen it one time, in an AP wire story last week, reprinted in WaPo and their left-leaning brothers. I’ve been looking for it ever since and can’t find it. I think a link to the actual “proposal that tax-free contributions to this retirement-savings vehicle be cut to $2400 a year” would be much appreciated, so I can be as outraged as you. I will write a letter to Cruz and Cornyn (I’m from Texas) and to Trump and Pence, once I have the proof in hand.

    If you are only going to quote the AP story, I think a retraction would be nice.

    First, the bill that McCain stopped was a nothing bill that kept the worst part alive — the Medicaid expansion. Second, the AP is reliable on matters like this. See also https://www.nytimes.com/2017/10/20/us/politics/republicans-tax-401-k.html.

    • #8
  9. Aaron Miller Inactive
    Aaron Miller
    @AaronMiller

    Paul A. Rahe: And when they come to tax reform, what is their big idea? To cut corporate taxes, which would be a boon, and to make up for the revenue losses that this would entail [….]

    The notion that a long overdue reduction to double taxation requires increasing taxes elsewhere while Republicans neither pass a budget nor cap the debt ceiling is absurd.

    • #9
  10. JcTPatriot Inactive
    JcTPatriot
    @JcTPatriot

    I found some more of the WSJ story – gotta love the Internet – and it looks like this:

    “Lobbyists and others in the retirement and financial services industries who have spoken to congressional staff and committee members say lawmakers are looking at proposals that would allow 401(k) participants to contribute significantly less than what is currently allowed in a traditional tax-deferred 401(k). An often mentioned amount is $2,400 a year. It isn’t clear whether that would only apply to 401(k)s or IRAs or both.”

    Now in my book, that’s nothing but gossip.

    We’ve got “lobbyists and others” who have spoken to “staff” and etcetera say lawmakers are “looking at proposals”… and “An often mentioned amount is $2,400 a year”…

    Really? This compelled you to write a post claiming the GOP is “Gutting The 401(k)”, sir?

    Even if this gossip was correct, I did quick math in my head and that is a very tiny amount of tax savings compared to the blowback it would cause, and I don’t believe there is a Congressman alive (on either side of the aisle) who would go for it and expect to be re-elected. Nope, this is just anti-GOP red meant thrown out there to be regurgitated by those trying to drive a wedge between the GOP and Americans.

    • #10
  11. Paul A. Rahe Contributor
    Paul A. Rahe
    @PaulARahe

    Aaron Miller (View Comment):

    Paul A. Rahe: And when they come to tax reform, what is their big idea? To cut corporate taxes, which would be a boon, and to make up for the revenue losses that this would entail [….]

    The notion that a long overdue reduction to double taxation requires increasing taxes elsewhere while Republicans neither pass a budget nor cap the debt ceiling is absurd.

    Yes, indeed. And that is exactly what the Republicans did when they took over in Michigan a few years back. They cut the state’s bloated corporation tax and added a new tax on retirement income. More recently, they have added what amounts to a sales tax on items bought over the internet from out of state.

    • #11
  12. livingthehighlife Inactive
    livingthehighlife
    @livingthehighlife

    When I was  young, ambitious and ready to conquer American industry, I maxed out my 401k every year.  My employer at the time had a generous matching, and for a number of years I contributed well over this stupid, idiotic and arbitrary number the GOP pulled from their posterior.

    It’s for this reason I won’t have to depend on the soon-to-be-bankrupt Social Security that they same stupid GOP won’t do anything to fix.

    So, screw us now or screw us later.  Makes a helluva campaign slogan, Republicans.

    • #12
  13. Paul A. Rahe Contributor
    Paul A. Rahe
    @PaulARahe

    JcTPatriot (View Comment):
    I found some more of the WSJ story – gotta love the Internet – and it looks like this:

    “Lobbyists and others in the retirement and financial services industries who have spoken to congressional staff and committee members say lawmakers are looking at proposals that would allow 401(k) participants to contribute significantly less than what is currently allowed in a traditional tax-deferred 401(k). An often mentioned amount is $2,400 a year. It isn’t clear whether that would only apply to 401(k)s or IRAs or both.”

    Now in my book, that’s nothing but gossip.

    We’ve got “lobbyists and others” who have spoken to “staff” and etcetera say lawmakers are “looking at proposals”… and “An often mentioned amount is $2,400 a year”…

    Really? This compelled you to write a post claiming the GOP is “Gutting The 401(k)”, sir?

    Even if this gossip was correct, I did quick math in my head and that is a very tiny amount of tax savings compared to the blowback it would cause, and I don’t believe there is a Congressman alive (on either side of the aisle) who would go for it and expect to be re-elected. Nope, this is just anti-Trump red meant thrown out there to be regurgitated by those trying to drive a wedge between the GOP and Trump

    Anti-Trump? There is nothing in any of the reports about Donald Trump. And I wrote about the Republicans in Congress, not Donald Trump. That they are toying with such an idea tells us a lot about them.

    And don’t tell me that it is impossible. As I remarked in my last comment, they did the like in Michigan.

    Look, they had six years in which to sort out what they would do with Obamacare, and when they got the chance to act this past January they had no plan. Since then, they have been trying on various ideas for size. I find it telling, by the way, that you mention Murkowski, Collins, and McCain but not Rand Paul.

    • #13
  14. James Gawron Inactive
    James Gawron
    @JamesGawron

    Paul,

    There really is no other explanation for this than political cowardice. They don’t want to cut any spending because the Democrats & Media will scream bloody murder. So instead they damage their own best supporters and wreck a really useful program for everyone.

    They stink.

    Regards,

    Jim

     

    • #14
  15. JcTPatriot Inactive
    JcTPatriot
    @JcTPatriot

    Paul A. Rahe (View Comment):
    Anti-Trump? There is nothing in any of the reports about Donald Trump. And I wrote about the Republicans in Congress, not Donald Trump. That they are toying with such an idea tells us a lot about them.

    And don’t tell me that it is impossible. As I remarked in my last comment, they did the like in Michigan.

    Look, they had six years in which to sort out what they would do with Obamacare, and when they got the chance to act this past January they had no plan. Since then, they have been trying on various ideas for size. I find it telling, by the way, that you mention Murkowski, Collins, and McCain but not Rand Paul.

    Thank you, I corrected my comment.

    The United States Congress changed tax laws in Michigan? Got a link for that? Or are you saying the Congressional GOP thinks exactly like Rick Snyder, and thinks America needs the same fixes as Michigan?

    I guess I am behind on my research. I was not aware Rand Paul, who I dislike, voted against the Obamacare repeal. I know he was against Graham-Cassidy, but that’s another can of worms. I was talking about the July vote.

    My comment stands, sir. Saying they had no plan in January is vastly different from saying the GOP has done “nothing in that regard.”

    • #15
  16. JcTPatriot Inactive
    JcTPatriot
    @JcTPatriot

    James Gawron (View Comment):
    Paul,

    There really is no other explanation for this than political cowardice. They don’t want to cut any spending because the Democrats & Media will scream bloody murder. So instead they damage their own best supporters and wreck a really useful program for everyone.

    They stink.

    Regards,

    Jim

    It’s gossip, Jim. Until you see a proposal on paper, instead of “my brother’s wife’s sister who knows a janitor who works in the Capitol” gossip, don’t be so quick to hate. This story doesn’t pass the smell test. Well actually it does. It smells exactly like Fake News. It smells exactly like the lies thrust upon us by the MSM over the past 15 months.

    • #16
  17. MJBubba Inactive
    MJBubba
    @MJBubba

    JcTPatriot,  Professor Rahe was commenting on the Republicans in Congress, not on President Trump, so please don’t make this about President Trump.

    Otherwise, it looks to me that you are correct in identifying this as a fake news media construct.   The New York Times article cited by Professor Rahe says “rumors have circulated for months,” and then goes on to give quotes they got from calling some financial industry guys, including one identified as “a former Senate staffer.”   There is no real news in that story.

    The article from the New York Post is just as bad.   They are simply recycling old rumors in new articles that say nothing but portray Congressional Republicans as bad guys.

    Of course, and, by the way, we have trashed Congressional Republicans ourselves many times at Ricochet, so although this is fake news from stem to stern, the target seems to be deserving.

     

    • #17
  18. JcTPatriot Inactive
    JcTPatriot
    @JcTPatriot

    MJBubba (View Comment):
    JcTPatriot, Professor Rahe was commenting on the Republicans in Congress, not on President Trump, so please don’t make this about President Trump.

    Otherwise, it looks to me that you are correct in identifying this as a fake news media construct. The New York Times article cited by Professor Rahe says “rumors have circulated for months,” and then goes on to give quotes they got from calling some financial industry guys, including one identified as “a former Senate staffer.” There is no real news in that story.

    The article from the New York Post is just as bad. They are simply recycling old rumors in new articles that say nothing but portray Congressional Republicans as bad guys.

    Of course, and, by the way, we have trashed Congressional Republicans ourselves many times at Ricochet, so although this is fake news from stem to stern, the target seems to be deserving.

    Good points, Mr. Bubba. I have corrected my comments related to Trump.

    I can’t agree that saying the GOP has done “nothing” is something they deserve. Both the House and Senate wrote recalls for Obamacare, and voted on them. They are moving forward on the Budget and the tax cuts. I would like to see more action on nominees, but a lot of that is on Democrat stonewalling. If Professor Rahe had said he was unhappy with the progress of the Congress, he would have gotten a “hear hear!” from me.

    • #18
  19. MJBubba Inactive
    MJBubba
    @MJBubba

    @JcTPatriot,

    Oh, yes;  we are all very impatient.   We have a GOP President, Senate and House, and we were expecting more.

    But we are also largely unaware of the progress that has been made.   The Media-Democrat Complex will not cover conservative victories by Team Trump; they are still peddling fake accounts of chaos at the White House.   And our leading conservative niche-media outlets are so anti-Trump that they don’t cover them either.

    Which is why I have been so appreciative of your recent series of posts about wins by Team Trump.   Thanks for those posts.   They give us something to smile about.

     

    • #19
  20. James Gawron Inactive
    James Gawron
    @JamesGawron

    JcTPatriot (View Comment):

    James Gawron (View Comment):
    Paul,

    There really is no other explanation for this than political cowardice. They don’t want to cut any spending because the Democrats & Media will scream bloody murder. So instead they damage their own best supporters and wreck a really useful program for everyone.

    They stink.

    Regards,

    Jim

    It’s gossip, Jim. Until you see a proposal on paper, instead of “my brother’s wife’s sister who knows a janitor who works in the Capitol” gossip, don’t be so quick to hate. This story doesn’t pass the smell test. Well actually it does. It smells exactly like Fake News. It smells exactly like the lies thrust upon us by the MSM over the past 15 months.

    JcT,

    As long as it isn’t a trial balloon. I’ll accept your judgment. The MSM is the real source of ‘disinformation’.

    Regards,

    Jim

    • #20
  21. Paul A. Rahe Contributor
    Paul A. Rahe
    @PaulARahe

    JcTPatriot (View Comment):

    Paul A. Rahe (View Comment):
    Anti-Trump? There is nothing in any of the reports about Donald Trump. And I wrote about the Republicans in Congress, not Donald Trump. That they are toying with such an idea tells us a lot about them.

    And don’t tell me that it is impossible. As I remarked in my last comment, they did the like in Michigan.

    Look, they had six years in which to sort out what they would do with Obamacare, and when they got the chance to act this past January they had no plan. Since then, they have been trying on various ideas for size. I find it telling, by the way, that you mention Murkowski, Collins, and McCain but not Rand Paul.

    Thank you, I corrected my comment.

    The United States Congress changed tax laws in Michigan? Got a link for that? Or are you saying the Congressional GOP thinks exactly like Rick Snyder, and thinks America needs the same fixes as Michigan?

    I guess I am behind on my research. I was not aware Rand Paul, who I dislike, voted against the Obamacare repeal. I know he was against Graham-Cassidy, but that’s another can of worms. I was talking about the July vote.

    My comment stands, sir. Saying they had no plan in January is vastly different from saying the GOP has done “nothing in that regard.”

    You know the answer to the question you asked. So why ask it? The Republicans in Michigan did this, and I am suggesting that the Republicans in Washington are cut from the same cloth. The reports I cited suggest as much.

    My larger point stands. The Republicans have fooled around and thus far they have done nothing. We can play word games if you wish. But what I have in mind when I say that they have done nothing is that they have passed no significant legislation. You seem to think that when they are fooling around they are doing a lot.

    I would not level the same charge against Donald Trump. But there are limits on what a President can do without the help of Congress.

    My observation that the Republicans had no plan in January helps explain why they have done nothing since.

    • #21
  22. MJBubba Inactive
    MJBubba
    @MJBubba

    Yes.  It was clear that Republican leadership expected to be dealing with a President Hillary.   But we are nearly a year since the election and they are still dithering.

    John McCain gets plenty of individual blame, but there ought to be other bills on President Trump’s desk.

    • #22
  23. livingthehighlife Inactive
    livingthehighlife
    @livingthehighlife

    This is not fake news.  It very well might be a smoke screen or a trial balloon, but several articles I’ve read say there are conversations about offsetting tax cuts, and the 401k contribution tax is one idea.

    Lobbyists and others in the retirement and financial services industries who have spoken to congressional staff and committee members say lawmakers are looking at proposals that would allow 401(k) participants to contribute significantly less than what is currently allowed in a traditional tax-deferred 401(k). An often mentioned amount is $2,400 a year.

    Nothing is sure to happen, nothing is certain, it’s all still in flux.  The fact it’s even being floated as an option is stupid.

     

    • #23
  24. MJBubba Inactive
    MJBubba
    @MJBubba

    livingthehighlife (View Comment):
    This is not fake news. It very well might be a smoke screen or a trial balloon, but several articles I’ve read say there are conversations about offsetting tax cuts, and the 401k contribution tax is one idea.

    Lobbyists and others in the retirement and financial services industries who have spoken to congressional staff and committee members say lawmakers are looking at proposals that would allow 401(k) participants to contribute significantly less than what is currently allowed in a traditional tax-deferred 401(k). An often mentioned amount is $2,400 a year.

    Nothing is sure to happen, nothing is certain, it’s all still in flux. The fact it’s even being floated as an option is stupid.

    Here is the only real news in the article you linked:

    Members of the House Ways and Means Committee are widely expected to release a version of the tax bill by mid-November. Specifics on a wide range of issues remain unclear. Emily Schillinger, a spokeswoman for the Ways and Means Committee, declined to comment.

    Everything else is old rumors plus some new opinions.

    • #24
  25. JcTPatriot Inactive
    JcTPatriot
    @JcTPatriot

    livingthehighlife (View Comment):
    This is not fake news. It very well might be a smoke screen or a trial balloon, but several articles I’ve read say there are conversations about offsetting tax cuts, and the 401k contribution tax is one idea.

    Lobbyists and others in the retirement and financial services industries who have spoken to congressional staff and committee members say lawmakers are looking at proposals that would allow 401(k) participants to contribute significantly less than what is currently allowed in a traditional tax-deferred 401(k). An often mentioned amount is $2,400 a year.

    Nothing is sure to happen, nothing is certain, it’s all still in flux. The fact it’s even being floated as an option is stupid.

    I love getting replies to my comments, but I wish folks would read what I wrote before replying. As I said in my very first comment, “…because I have only seen it one time, in an AP wire story last week, reprinted in WaPo and their left-leaning brothers.” Which is how you saw it in “several articles” you’ve read.

    Then you quote (from MarketWatch, which merely reposted the WSJ story) the exact quote I quoted in my second comment, which I ripped to sheds as gossip from sources unknown, which is exactly the kind of gossip we have been slammed with for the last 15 months. It is Fake News intended to drive a wedge. It’s so cute that MarketWatch added a nice picture of Republicans – holding documents, even! – to try to add credence to their reposted gossip. Classy.

    To give Market Watch a little more credit, while NY Post called it a “Proposal” and the WSJ said the GOP “Could” make a change, MarketWatch only said, “There’s Talk” in their title, so they were the most honest about it. One of the reasons I decided to take this up with Professor Rahe was his title, “Gutting the 401k” – where did that come from?

    A couple months ago, I challenged someone to trace back a piece of gossip they quoted as “fact” on here. It went like: CNN-> MSNBC -> Politico -> HuffPo -> Buzzfeed -> some guy on Twitter -> and so on. They are all quoting each other, but nobody quotes the source.

    I’m not claiming to be innocent – I fall for it too, and have embarrassed myself in the past. I think that may be the exact reason why I now never accept a story at first glance, unless it actually has the name of a person providing the information. The MSM proved, with the James Comey story, that they have no qualms quoting liars as reliable sources.

    • #25
  26. Robert McReynolds Inactive
    Robert McReynolds
    @RobertMcReynolds

    Rumor or not, there is a concerted effort among official Washington, both policy types and academics, who want to tax money that would be deferred as 401k contributions. I can dig up the evidence in the morning since I’m on my phone.

    • #26
  27. JcTPatriot Inactive
    JcTPatriot
    @JcTPatriot

    Robert McReynolds (View Comment):
    Rumor or not, there is a concerted effort among official Washington, both policy types and academics, who want to tax money that would be deferred as 401k contributions. I can dig up the evidence in the morning since I’m on my phone.

    I would appreciate you passing that along, but don’t bother if it doesn’t name names; it just more of the same gossip. It’s to laugh, because it doesn’t amount to very much money, and as I said in my first comments, the blowback from trying to do it would not be worth it. Anyone voting for that Bill would lose their next election.

    All I have heard is that they are looking in the right direction: The State Income Tax Deduction. I have always hated that because I live in Texas. To me, California residents want ME to pay for them living in a state full of Socialists! “It’s a beautiful state” they tell me. Well that’s fine, but if you think it is all that, pay the insanity taxes for living there. I think Texas is prettier, and I’m not ruled by Communists living here.

    It is time to stop making Red states pay a subsidy to Blue states with high income taxes. Taxed Enough Already!

    • #27
  28. Ruthenian Inactive
    Ruthenian
    @Ruthenian

    Robert McReynolds (View Comment):
    Rumor or not, there is a concerted effort among official Washington, both policy types and academics, who want to tax money that would be deferred as 401k contributions. I can dig up the evidence in the morning since I’m on my phone.

    I think it is not just the revenue they want to generate. I think that the party of the government can’t stand the idea that there could be people that are not dependent on the government for their retirement.

    I visit Europe at least once a year, and a frequent question I am asked concerns retirement age; it comes sounding something like this “At what age can you retire?” My answer that that the age depends on when one has gathered sufficient funds to live the desired life style for the rest of his life causes consternation. The question is than reformulated as “At what age are you allowed to retire?” Once I started “peeling the onion,” I realized that most of my European interlocutors can’t just retire when they have sufficient funds. Most of them are forced to work to certain age before the laws of their country “permit” them to quit. And these are often people with advanced degrees working in both private and government entities. They are required to contribute to government mandated insurance plans that have formulas that determine how much they will be entitled to receive when they reach the mandated retirement age.

    Of course this is an observation based on conversations in a handful of countries, but the impression these conversations left on me was the government control of the retirement age for large swaths of population.

    Perhaps it has changed, but in one past example the retirement age was not just the age one must reach before retirement, it was also the age past which one was not allowed to work so labor market would open for the younger newcomers to the work force. This stupid law caused a productive Nobel Prize winner moving from France to US where he could continue working past the age of 65.

    401k is a vehicle that allows folks to plan their future without regard what the government mandates. I guess we can’t have that.

     

    • #28
  29. JcTPatriot Inactive
    JcTPatriot
    @JcTPatriot

    Ruthenian (View Comment):

    Robert McReynolds (View Comment):
    Rumor or not, there is a concerted effort among official Washington, both policy types and academics, who want to tax money that would be deferred as 401k contributions. I can dig up the evidence in the morning since I’m on my phone.

    I think it is not just the revenue they want to generate. I think that the party of the government can’t stand the idea that there could be people that are not dependent on the government for their retirement.

    I visit Europe at least once a year, and a frequent question I am asked concerns retirement age; it comes sounding something like this “At what age can you retire?” My answer that that the age depends on when one has gathered sufficient funds to live the desired life style for the rest of his life causes consternation. The question is than reformulated as “At what age are you allowed to retire?” Once I started “peeling the onion,” I realized that most of my European interlocutors can’t just retire when they have sufficient funds. Most of them are forced to work to certain age before the laws of their country “permit” them to quit. And these are often people with advanced degrees working in both private and government entities. They are required to contribute to government mandated insurance plans that have formulas that determine how much they will be entitled to receive when they reach the mandated retirement age.

    Of course this is an observation based on conversations in a handful of countries, but the impression these conversations left on me was the government control of the retirement age for large swaths of population.

    Perhaps it has changed, but in one past example the retirement age was not just the age one must reach before retirement, it was also the age past which one was not allowed to work so labor market would open for the younger newcomers to the work force. This stupid law caused a productive Nobel Prize winner moving from France to US where he could continue working past the age of 65.

    401k is a vehicle that allows folks to plan their future without regard what the government mandates. I guess we can’t have that.

    Good information, thank you for that. I work for a global company, so any chance I get to talk to someone in another country about non-work subjects, I do. The people in Brazil frightened me as the Socialist trap closes around them after they ousted Dilma, while the folks in Europe make me sad for the trap they are in, paying excessive taxes for “free” stuff they really don’t want any more.

    Remember, Ruthenian, that this story about the 401(k) is not true. They’re not coming after your retirement. It’s just gossip spread by an MSM with nothing to say.

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  30. Cato Rand Inactive
    Cato Rand
    @CatoRand

    Ruthenian (View Comment):
    I think it is not just the revenue they want to generate. I think that the party of the government can’t stand the idea that there could be people that are not dependent on the government for their retirement.

    I visit Europe at least once a year, and a frequent question I am asked concerns retirement age; it comes sounding something like this “At what age can you retire?” My answer that that the age depends on when one has gathered sufficient funds to live the desired life style for the rest of his life causes consternation. The question is than reformulated as “At what age are you allowed to retire?” Once I started “peeling the onion,” I realized that most of my European interlocutors can’t just retire when they have sufficient funds. Most of them are forced to work to certain age before the laws of their country “permit” them to quit. And these are often people with advanced degrees working in both private and government entities. They are required to contribute to government mandated insurance plans that have formulas that determine how much they will be entitled to receive when they reach the mandated retirement age.

    Of course this is an observation based on conversations in a handful of countries, but the impression these conversations left on me was the government control of the retirement age for large swaths of population.

    Perhaps it has changed, but in one past example the retirement age was not just the age one must reach before retirement, it was also the age past which one was not allowed to work so labor market would open for the younger newcomers to the work force. This stupid law caused a productive Nobel Prize winner moving from France to US where he could continue working past the age of 65.

    401k is a vehicle that allows folks to plan their future without regard what the government mandates. I guess we can’t have that.

    You can actually plan your future just fine without a tax advantaged retirement account if you’re intentional about it.  We don’t need 401(k)s to “allow” us to do that.

    Their main virtue is in the “nudge factor.”  They make a certain level of saving and investing simple and expected, which makes it more likely.  But if you have a goal and are willing to work toward it conscientiously, the lack of a 401(k) won’t even be a speed bump on your road to getting there.

    Indeed, I sometimes think that even the “nudge factor” is a double edged sword.  It encourages people to do at least some saving yes, but also gives a lot of people the (often false) sense that they’re doing enough.

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