Possibility of the government raiding 401Ks?

[valeriana]

I've read a few articles about this. What are the chances of this actually happening? I am pretty young, not 30 yet, and I only have around 35K in mine.

[SVT]

I'd say slim to none.

[buster]

Any politician who voted to do something like that would not get re-elected. I'd say the chances are slim to none.

[DVM gone riding]

I think it is a scare tactic of the extreme far right. How would that even work, you select how to invest your 401k and most of us have it in the market so its not like they can just "take" the money for a while. Now one thing I could see happening is a "guaranteed" return for investing your 401k in the government.

[Deleted]

It's happening in Hungary.

www.hurriyetdailynews.com/n.php?n=hungary-approves-pension-fund-overhaul-2010-12-14

If you don't turn your private savings over to the government, you don't get the State pension. Of course, the people who have saved the most will just keep tgeir money because they'll do better than the state pension plus whatever the state decides to dole out to them.

Never say never.

[jimb]

Apr 24, 2011 22:30:40 GMT -5 @valeriana said:

I've read a few articles about this. What are the chances of this actually happening? I am pretty young, not 30 yet, and I only have around 35K in mine.

The US gubbament is not going to take over our 401(k)s. This is fear-mongering sensationalist journalism apparently twisting around some past hearings into whether the government should offer some kind of guaranteed low-risk or no-risk option (such as treasury notes or some other government backed securities) for people who don’t want to take as much risk with their own investments in the private sector ... brought about by the market crash.

Apr 25, 2011 6:38:14 GMT -5 @athena53 said:

It's happening in Hungary.

www.hurriyetdailynews.com/n.php?n=hungary-approves-pension-fund-overhaul-2010-12-14

If you don't turn your private savings over to the government, you don't get the State pension. Of course, the people who have saved the most will just keep tgeir money because they'll do better than the state pension plus whatever the state decides to dole out to them.

Never say never.

It’s also mighty misleading to claim that Hungary forcibly took away everybody’s private pensions. Remember, they were essentially socialists until fairly recenty ... not capitalists like the US has been since the revolutionary war a while back.

According to many more objective news sources, Hungary has a government pension, and 10 years ago created a private pension option … somewhat along the line of the talks of privatizing social security that we heard a lot about in the US before the market crash of 2001 demonstrated that a lot of people would lose money.

It look like they found out that in tough economic times, the government can’t guarantee a state pension to people who partially opted out of it … much like it appears that the US government would end up having to subsidize social security without any contributions to fund it from people who lost theirs when their private SS funds failed in a market crash.

It appears they what they recently did was give the small number of people ( about 3 million) who had been trying out the new-to-Hungary private pensions for the last 10 years a choice of keeping it or reverting back to the government pension... but not having both.


www.bloomberg.com/news/2010-11-24/hungary-to-strip-private-pension-fund-members-of-state-pensions-benefits.html

blogs.wsj.com/emergingeurope/2010/11/24/hungary-forces-private-pension-fund-members-back-to-state-scheme/

jimb

[hoops902]

Agree with Jimb that it's not really comparable to raiding 401k's. It's more comparable to giving people a privatized Social Security option if they'd like it. Then when that option doesn't work out so well telling those people that they're willing to take them back to the government run Social Security system as long as they take all of their privatized social security money and put it back into the government system. If you don't want to, you don't have to. The government can't afford to let you partially take your social security money private, and partially stay government guaranteed. So they give the option of being 100% in either system.

Far from raiding 401k's, closer to raiding Social security, but I wouldn't even go so far as to say it's that.

[formerexpat]

Then when that option doesn't work out so well telling those people that they're willing to take them back to the government run Social Security system as long as they take all of their privatized social security money and put it back into the government system.

You say it as though you believe the government option would definitely be better than the private option?

The private option, if set up intelligently would be far superior to the government run option. Not even close.

[hoops902]

Apr 25, 2011 8:49:17 GMT -5 formerexpat said:

Then when that option doesn't work out so well telling those people that they're willing to take them back to the government run Social Security system as long as they take all of their privatized social security money and put it back into the government system.

You say it as though you believe the government option would definitely be better than the private option?

The private option, if set up intelligently would be far superior to the government run option. Not even close.

It's not about which option is "better". They don't have the option of keeping it partial government run partial privately run. Even if the private option is better, it might not be better once they take into account that they're going to lose their government portion.

I may have worded it poorly. From all accounts the option that didn't work out well was the government side in trying to guarantee people partial payment while not having the full amount to back them. The government system failed, and they're now telling those who went private that the only way to get their government funded money is to go fully with the government. If given the choice, I would assume the private option is far more lucrative for the individuals...if given the choice between losing their government funded side completely, or giving the money back that they've only had privatized for a few years...I would imagine a lot of them are finding they need the full amount and give the government the private side back.

That's why I said it's closer to raiding SS. They're goign to take those people's state run pensions (the SS comparable) and use those partial amounts to subsidize the people who kept all their money with the state. People who want to get back fully into the state system have to bring back all their privatized pension money. (It's just not like 401k's, 401k's are voluntary, these are just privately run pensions...but not voluntary retirement plans).

[phil5185]

It’s also mighty misleading to claim that Hungary forcibly took away everybody’s private pensions. Remember, they were essentially socialists until fairly recenty ... not capitalists like the US has been since the revolutionary war a while back.

But you may have noticed that Obama is racing toward Socialism at a rate far faster than anything experienced since the Rev War?

[tskeeter]

I can't imagine our government doing something as straight forward as raiding 401K accounts. I think that attack on the "not poor" will come through more "means based" government benefits and and increased taxes on those who are actually funding the operation of our governments.

If you've "played by the rules" and saved and invested for a comfortable retirement, I believe you will find that a larger and larger portion of you income will be devoted to taxes and your Medicare benefits, etc. will require larger and larger contributions from you because you have a higher retirement income that the person who spent every dime they every earned. In our world of ever increasing political pandering to those who make poor decisions, those who make poor decisions will be protected from the consequences of those decisions by politicians who will make sure that the self indulgent, who made poor decisions, can live very nearly as well as those who made good decisions and sacrificed to try to ensure they would have a comfortable future.

[Savoir Faire-Demogague in NJ]

The govt can easily "raid" 401Ks and IRAs, by means testing Social Security.... for example, if you have, lets say $500,000 in retirement funds, you will be denied monthly social security retirement benefits. Note, that is just a "for instance".
Pretty simple, this could get implements without anyone even realizing it until it is too late.

[hoops902]

Apr 25, 2011 17:27:31 GMT -5 Savoir Faire-Demogague in NJ said:

The govt can easily "raid" 401Ks and IRAs, by means testing Social Security.... for example, if you have, lets say $500,000 in retirement funds, you will be denied monthly social security retirement benefits. Note, that is just a "for instance".
Pretty simple, this could get implements without anyone even realizing it until it is too late.

I understand your logic, but I think labeling that instance as "raiding your 401k" is less an accurate description than a good hot button phrase to scare people. It's obviously more akin to raiding social security (which yes would mean you have to use your own 401k for retirement). But tossing around "government raiding your 401k" has enough of a specific connotation I think it's more scare tactic than accurate description of what would happen.

[Gardening Grandma]

The govt can easily "raid" 401Ks and IRAs, by means testing Social Security.... for example, if you have, lets say $500,000 in retirement funds, you will be denied monthly social security retirement benefits. Note, that is just a "for instance".

While I understand that the above is just an example, I seriously doubt that it could "easily" be done. The senior population, stays pretty up to date on those sorts of developments, and they do vote!

[Savoir Faire-Demogague in NJ]

I understand your logic, but I think labeling that instance as "raiding your 401k" is less an accurate description than a good hot button phrase to scare people.


It is a back door way of doing it. The end result is nearly the same.

So, if someone pissed all their money away, never put a dime into a retirement plan, they collect SS, and the responsible individual cannot collect.

[Savoir Faire-Demogague in NJ]

While I understand that the above is just an example, I seriously doubt that it could "easily" be done. The senior population, stays pretty up to date on those sorts of developments, and they do vote!


The currently retired senior population is relying on pensions and SS. It is the boomers who are relying on 401K/IRAs... the general population is too ignorant to realize what is happening.

[hoops902]

"It is a back door way of doing it. The end result is nearly the same."

I agree, I'm just saying I think there's a far more accurate description for the action than "raiding your 401k". I'm not saying using the term might not be good to keep them from doing something that has such a negative connotation...I'm just saying choosing to call it that vs something more direct is obviously a tactic to scare people as opposed to a tactic to accurately label what's going on. Though they probably need to be scared about it.

[formerexpat]

The govt can easily "raid" 401Ks and IRAs, by means testing Social Security.... for example, if you have, lets say $500,000 in retirement funds, you will be denied monthly social security retirement benefits. Note, that is just a "for instance".
Pretty simple, this could get implements without anyone even realizing it until it is too late.

They already do this now.

Your combined income, according to SS = AGI + nontaxable interest + 1/2 of SS benefits.

If this number is >$32 but <$44k, then 50% of your benefits are taxable, if >$44k, then 85% of your benefits are taxable.

A person with a $800k account yielding 4% with a $1k per month SS check would hit this threshold. Not rich by any means. I believe this isn't indexed for inflation either, so it's going to capture more and more people [and maybe the formula adjusted?] in the future.

[Sum Dum Gai]

While I understand that the above is just an example, I seriously doubt that it could "easily" be done. The senior population, stays pretty up to date on those sorts of developments, and they do vote!

It would depend on how it was packaged. By itself it sounds like something that people would hate, however, if you package it right that baby could sell. For example, we all know that SS is currently on an unsustainable path. The trust fund will be gone by 2037, or whatever the specific date is. As a way to fix that a politician could propose that we either lower payments across the board, or lower payments to those that have significant assets to support themselves with. They're already rich, they don't need the money, and nobody wants to cut the payments to seniors that have nothing else to rely on. I can picture the TV ads already. Seniors who are just barely scraping by talking about how they'll lose the homes they spent decades paying for. I'm tearing up just thinking about it. Since most people don't save enough, or anything for retirement, they figure it won't affect them anyway. Yeah, I could see public sentiment getting behind means testing SS. It's not as hard a sell as you might think, even to quite a big chunk of seniors, depending on how you package it of course.

[Savoir Faire-Demogague in NJ]

A person with a $800k account yielding 4% with a $1k per month SS check would hit this threshold. Not rich by any means. I believe this isn't indexed for inflation either, so it's going to capture more and more people [and maybe the formula adjusted?] in the future.


Diabolical, ain't it... but I am talking not about taxation of retirement income...but out right denial of SS benefits. But I get your point.

[Savoir Faire-Demogague in NJ]

It's not as hard a sell as you might think, even to quite a big chunk of seniors, depending on how you package it of course.



I wonder if pension benefits would also be included in any retirement funds numbers?

[formerexpat]

but I am talking not about taxation of retirement income...but out right denial of SS benefits. But I get your point.

The government is much more cunning than to simply outright deny SS benefits; at least to your generation.

Now to generation Y, that's a different story. My money would be on manipulation of the tax code to further deteriorate the benefits for your generation.

[Sum Dum Gai]

Taxing SS is an outright denial of part of your SS benefit. They aren't denying 100% of the benefits, but they're 100% denying some of the benefits. They've been doing it for a while now, and I don't remember the hordes of angry seniors swamping the polls to call for politicians blood.

[fairlycrazy23]

Politician: It is horrible how much wealth the American people have lost in there 401k because of losses in the Stock Market, we have to do something, so I propose the securing for the future bill, this bill would require at least 30% of all 401ks to be invested in Treasury Bills, this will insure that at least 30% of there retirement investments will be safe.

[cronewitch]

this bill would require at least 30% of all 401ks to be invested in Treasury Bills, this will insure that at least 30% of there retirement investments will be safe.

I would stop investing in a 401K plan if 30% has to be risk on something that doesn't even keep up with inflation. You need to be rich to live on interest income or have a lot of other income. Their is about a 100% chance of never saving enough to retire if you aren't allowed to invest but just save. Inflation over a lifetime will eat any interest gains. I need to earn at least 2-3% above inflation to make any headway.

My mom refused to invest or allow dad to invest so now at 84 she is finding the few hundred thousand she saved is worth almost nothing to generate income. My brother is taking her to his investment guy and she may allow some of her money to grow. If you put 200K in the bank you only get about 2K a year income it is like you never bothered to save at all. She has her pension and one from dad and a few hundred a year in SS to make her pension and SS equal what she would have gotten as a widow who didn't work. She also get paid for a mortgage she is holding and another loan so she gets more income than she needs since she doesn't have a car or any medical expense.

[Mardi Gras Audrey]

Apr 25, 2011 17:43:40 GMT -5 formerexpat said:

[
They already do this now.

Your combined income, according to SS = AGI + nontaxable interest + 1/2 of SS benefits.

If this number is >$32 but <$44k, then 50% of your benefits are taxable, if >$44k, then 85% of your benefits are taxable.

A person with a $800k account yielding 4% with a $1k per month SS check would hit this threshold. Not rich by any means. I believe this isn't indexed for inflation either, so it's going to capture more and more people [and maybe the formula adjusted?] in the future.

So the key to avoid this is to squirrel everything into a roth, that way none of the proceeds or withdrawls will show up as AGI and you will be "poor eoungh" to collect 100% of SS without paying taxes on it. I would liken this to the current 529 plans and how they impact financial aid (I have been told that it is considered that they don't exist for financial aid purposes... even though a svaings account with the same amount of $$ will drastically lower a student's eligibility for fin aid). Kinda makes you wonder, doesn't it? The govt sets up these tax loopholes (529s, 401ks, roths, etc) and then doesn't take those assets into account when you have to use it for the very thing it is intended for (Roths=retirement, 529s=education)... Are politicians this crazy or am I missing something?

[Wisconsin Beth]

"So the key to avoid this is to squirrel everything into a roth, that way none of the proceeds or withdrawls will show up as AGI and you will be "poor eoungh" to collect 100% of SS without paying taxes on it. I would liken this to the current 529 plans and how they impact financial aid (I have been told that it is considered that they don't exist for financial aid purposes... even though a svaings account with the same amount of $$ will drastically lower a student's eligibility for fin aid). Kinda makes you wonder, doesn't it? The govt sets up these tax loopholes (529s, 401ks, roths, etc) and then doesn't take those assets into account when you have to use it for the very thing it is intended for (Roths=retirement, 529s=education)... Are politicians this crazy or am I missing something? "

My DH explains it sort of like this. The pols think of something and Congress passes it. THEN the IRS gets the final law and starts to figure out the real tax stuff. So a 2 page thing from Congress can equal a 100 pages from the IRS. He used to record-keep 401Ks and he is extremely glad to be in IT now instead. ;D

[Wisconsin Beth]

Besides, I fully expect Congress to find a way to tax Roths. Or maybe that's going to be part of the means-testing of SS.

[Nazgul Girl]

"While I understand that the above is just an example, I seriously doubt that it could "easily" be done. The senior population, stays pretty up to date on those sorts of developments, and they do vote! "


"The currently retired senior population is relying on pensions and SS. It is the boomers who are relying on 401K/IRAs... the general population is too ignorant to realize what is happening"


I agree with S.F's take on the "raiding" of the 401k's. It will be a back-door thing through means-testing or a new tax on the Roths in the future. The changes are already happening and becoming more and more accepted by the populace.

[Nazgul Girl]

"While I understand that the above is just an example, I seriously doubt that it could "easily" be done. The senior population, stays pretty up to date on those sorts of developments, and they do vote! "


"The currently retired senior population is relying on pensions and SS. It is the boomers who are relying on 401K/IRAs... the general population is too ignorant to realize what is happening"


I agree with S.F's take on the "raiding" of the 401k's. It will be a back-door thing through means-testing or a new tax on the Roths in the future. The changes are already happening and becoming more and more accepted by the populace.