Good Bye 401k tax breaks?

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Is this the kind of stuff we can expect to be possibly pushed through if Obama is elected?

House Democrats contemplate abolishing 401(k) tax breaks

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.

House Education and Labor Committee Chairman George Miller, D-Calif., and Rep. Jim McDermott, D-Wash., chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.

A plan by Teresa Ghilarducci, professor of economic-policy analysis at The New School for Social Research in New York, contains elements that are being considered. She testified last week before Mr. Miller's Education and Labor Committee on her proposal.


At that hearing, the director of the Congressional Budget Office, Peter Orszag, testified that some $2 trillion in retirement savings has been lost over the past 15 months.
Under Ms. 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% 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% a year, adjusted for inflation.


The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.


"I want to stop the federal subsidy of 401(k)s," Ms. 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."


House Democrats contemplate abolishing 401(k) tax breaks - InvestmentNews
That is an taking away $80 billion in tax breaks to mostly middle class workers.

The congress 16 years ago when Clinton was elected was not as liberal as today's is. What something like that could do to the stock market would make the last month look like a minor adjustment. If you have liberals in charges of the White House and both houses, we could see things like this and a lot worse. Supposedly there is already a new Health Care plan in the works.

Though I guess it could help some of us with annuity sales.
 
"I want to stop the federal subsidy of 401(k)s," Ms. 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."

Well now, she ain't a member of congress, so it doesn't matter what she thinks.

5% mandatory savings in 3% t-bonds. lol. That won't go far.

Reminds me of social security privatization: command economics.
 
I think it's more funny "workers are required to contribute".

I see the hammer & sickle flag-a-wavin!!!
 
Well now, she ain't a member of congress, so it doesn't matter what she thinks.

5% mandatory savings in 3% t-bonds. lol. That won't go far.

Reminds me of social security privatization: command economics.

But Miller & McDermott are. They are looking to her for advice. Miller supports getting rid of the 401K tax break. Feel free to read the whole article in the link. The fact that they are even considering such a plan is pretty disturbing.

And this type of plan is not anything close to the privatization of Social Security. It is the exact opposite. It is the Socialization of the Private Retirement Savings. It is Government wanting to take control 5% more of your your money.
 
But Miller & McDermott are. They are looking to her for advice. Miller supports getting rid of the 401K tax break. Feel free to read the whole article in the link. The fact that they are even considering such a plan is pretty disturbing.

And this type of plan is not anything close to the privatization of Social Security. It is the exact opposite. It is the Socialization of the Private Retirement Savings. It is Government wanting to take control 5% more of your your money.

And then there is the whole aspect of diverting the entire pension fund investment landscape from stocks and mutual funds over to government bonds. I can't even fathom what that means for the economy which depends on private sector investment. Sounds like they want to divert all the money over to government bonds so the government can have more cash to buyout more parts of the economy. Can you spell socialism boys and girls?
 
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Can you spell socialism boys and girls?

Congress is looking to go crazy:

Frank is calling for a 25% cut in military spending:

SouthCoastToday.com: Frank envisions post-election stimulus from Democrats

Kennedy is working on a health plan...his aids are saying "The money will appear"

The Associated Press: Kennedy focuses from home on health care overhaul

Then of course they want to gag free speech with the Fairness Doctrine...

ABQNews - Updated at 12:05pm -- Bingaman Still Getting Heat Over 'Fairness'

Does anyone really think Obama would stand in the way of any of these?:no:
 
Though I guess it could help some of us with annuity sales.
Just wondering how or if this legislation would affect private insurance company annuities? Would it be a next (easy?) step for the government to "redirect" (confiscate) those also? Or are private annuties a different animal, and safer? Just wondering what the veterans think, I'm new to annuities and would like to be as truthful as possible if or when my prospects and clients ask about this.
 
Just wondering how or if this legislation would affect private insurance company annuities? Would it be a next (easy?) step for the government to "redirect" (confiscate) those also? Or are private annuties a different animal, and safer? Just wondering what the veterans think, I'm new to annuities and would like to be as truthful as possible if or when my prospects and clients ask about this.

We already know that Obama has talked about a tax plan which would disallow capital gains, meaning, converted to ordinary income. That was his original idea, he seems to have backed off a bit and is going back to the 28% mark (for now).

While there may not have been anything specific stated about annuities or insurance as tax-deferral and potentially tax-free income streams, at this point, nothing is off the table. Just be prepared for total upheaval.
 
Just wondering how or if this legislation would affect private insurance company annuities? Would it be a next (easy?) step for the government to "redirect" (confiscate) those also? Or are private annuties a different animal, and safer? Just wondering what the veterans think, I'm new to annuities and would like to be as truthful as possible if or when my prospects and clients ask about this.

Don't see how gov could 'redirect' annuities. The issue will be marginal tax rates on ordinary income. The plus side of an increase in captial gains rates, for selling annuities, is that some on the investment side like to poo-poo annuities because they are taxed as ordinary instead of at the currently low cap gains rate.

When the current tax law sunsets, long-term cap gain rates will revert to 20%. If they go back up to ~29% - like they were for most of the '90s, then most folk who would buy an annuities will likely be better off tax-wise than being in a mutual fund. Of course, we don't know what the marginal rate will be in ten years, so unless you want to have an academic discussion with clients instead of selling an annuity, I wouldn't bother with the navel gazing.
 
Don't see how gov could 'redirect' annuities. The issue will be marginal tax rates on ordinary income. The plus side of an increase in captial gains rates, for selling annuities, is that some on the investment side like to poo-poo annuities because they are taxed as ordinary instead of at the currently low cap gains rate.

When the current tax law sunsets, long-term cap gain rates will revert to 20%. If they go back up to ~29% - like they were for most of the '90s, then most folk who would buy an annuities will likely be better off tax-wise than being in a mutual fund. Of course, we don't know what the marginal rate will be in ten years, so unless you want to have an academic discussion with clients instead of selling an annuity, I wouldn't bother with the navel gazing.
As it stands now, 401k distributions - taxed at ordinary? or cap gains rate? Thanks in advance for your help.

...unless you want to have an academic discussion with clients instead of selling an annuity, I wouldn't bother with the navel gazing.
Agreed!
 
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