Seeking Alpha

David Crosetti's  Instablog

David Crosetti
Send Message
I was born and raised in California. I worked in the family business for a number of years and then decided to spread my wings and try working for someone else. My first significant job was with Frito Lay. After a stint in the salty snack business, I transitioned to the beverage industry,... More
  • Guaranteed Retirement Accounts: Good Idea Or Not? 59 comments
    Apr 30, 2013 1:10 PM

    Introduction: 

    In 2007, an organization called The Economic Policy Institute issued a policy paper, written by a college professor named Teresa Ghilarducci. The paper was titled: "Guaranteed Retirement Accounts: Toward Retirement Income Security. "

    There were three major points being made in that paper.

    First, tax breaks given by retirement vehicles such as 401k programs and IRA's were unfair because the primary beneficiaries of those programs are wealthy people

    Second, when tax breaks are given to individuals, the money that is placed into 401k programs and IRA accounts prohibit the government from collecting more tax revenues

    Third, the middle class and the poor need to have a better retirement system than the current 401k plans and IRA accounts and those should be run by the government and not be left to individuals who are not equipped to manage their own retirement funds

    What You Should Know:

    While the conversation about retirement plans and how we might make them better for all Americans has gone largely unnoticed by most people, over the last 6 years, different "think tanks" have quietly been examining the inequality of our current retirement programs and looking for a "different way" to fund American retirement.

    As recently as this year, the President suggested in his budget that there should be limits on the amount of money that an individual should be able to shelter in a retirement account and that there should be a limit as to how much income that retirement account should provide.

    What I Know:

    In a New York Times article, written July 21, 2012, Ms. Ghilarducchi makes these points:

    Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts. The specter of downward mobility in retirement is a looming reality for both middle- and higher-income workers. Almost half of middle-class workers, 49 percent, will be poor or near poor in retirement, living on a food budget of about $5 a day.

    To maintain living standards into old age we need roughly 20 times our annual income in financial wealth. If you earn $100,000 at retirement, you need about $2 million beyond what you will receive from Social Security.

    My plan calls for a way out that would create guaranteed retirement accounts on top of Social Security. These accounts would be required, professionally managed, come with a guaranteed rate of return and pay out annuities. This is a sensible way to get people to prepare for the future. You don't like mandates? Get real. Just as a voluntary Social Security system would have been a disaster, a voluntary retirement account plan is a disaster.

    So, what exactly is Ms. Ghilarducci's plan to save American retirement? From that policy paper:

    Workers and their employers would each contribute 2.5% of pay to an individual GRA. The government would provide an annual $600 credit (indexed for inflation) to offset workers' 2.5% contribution.

    The contributions would accumulate in a federal retirement fund that would earn a 3% inflation-adjusted minimum return, which is pegged to the long-term growth rate of the U.S. economy.

    Account balances would be converted into annuities that would provide a life-long stream of income at retirement. Workers could opt out of a GRA if they participated in a qualified pension or savings plan that met new federal standards.

    Now, going a little further into the proposal we find this:

    By design, GRA account balances would be converted into inflation-indexed annuities that, together with Social Security, would provide workers with adequate retirement incomes after a lifetime of work.

    For example, an average earner who earns $40,000 per year would accumulate $152,095 in a GRA and receive a life-long stream of income of $10,366 per year adjusted for inflation. With Social Security, this would replace 71% of pre-retirement income.

    A high earner (with an annual income of $60,000) would attain a 61% total replacement rate, because he or she would receive a lower Social Security benefit relative to income, whereas a low earner ($20,000 per year) would attain a much-needed higher replacement rate of 89%.

    In order to guarantee the solvency of this plan into the future:

    Only the federal government has the size, stability and long-term investment horizon to smooth investment returns and provide a minimum rate-of-return guarantee. Contributions and investment earnings would accumulate in a federal fund, called the Guaranteed Retirement Account fund.
    This fund would be professionally managed like any large, pooled pension fund and would be overseen by an independent board of trustees appointed by the president and Congress. The funds would be invested in a balanced, conservative investment portfolio that could include American infrastructure bonds.

    Summary and Conclusion:

    There is no doubt that many Americans are not prepared for retirement. For any number of reasons, Americans approaching retirement age are beginning to realize that many of them have a significant problem--not enough money.

    While on the surface, a Guaranteed Retirement Account sounds like a good idea. The devil is in the details, however.

    It concerns me that someone who is called a "high earner", that is someone who makes $60,000 a year would get less in retirement under this plan than someone who makes $40,000 a year.

    It concerns me that the plan targets a 3% return on investment money in the GRA fund.

    It concerns me that the money in the fund is going to be managed "like any large pooled pension fund and overseen by an independent board of trustees appointed by the President and Congress."

    It concerns me that the money will be invested in a "balanced, conservative investment portfolio that could include American infrastructure bonds."

Back To David Crosetti's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (59)
Track new comments
  • mbn
    , contributor
    Comments (424) | Send Message
     
    My concerns are simple:

     

    If the Government is managing it, I don't want it. I do not trust the folks in the White House or Congress to have the Nation's best interest at heart - I suspect these funds will be used to balance the budget, or some other tom-foolery. These funds will end up in a pool that is in as bad shape as Social Security is in now.
    30 Apr 2013, 01:19 PM Reply Like
  • David Crosetti
    , contributor
    Comments (10223) | Send Message
     
    Author’s reply » mbn:

     

    We have already seen what government run programs give us. The kicker on this program is that your retirement would be annuitized. Upon your death, the money would go back to the government.

     

    You can't leave it to your spouse (who will have her own annuity) or your children.

     

    Dave
    30 Apr 2013, 06:32 PM Reply Like
  • dan1944
    , contributor
    Comments (54) | Send Message
     
    ve: Although my heart goes out to the ones that are reaching retirement without an adequate nest egg, in most cases the size of the nest egg is dependent upon the life choices that the individual has made throughout life. I, like many others, do not like, nor want, the government to attempt to "equalize life". Life in general is what you make it. Many of these analyses by the "think tank" are conducted by good meaning people but most of them focus on the fairness of the outcome and not the fairness of the input. Referring back to those pesky life choices, I for one was not raised with a silver spoon in my mouth and soon learned that fact quickly. Hence, when I was working, studying, saving many were out partying and living a good life. Now many are analyzing the results and are amazed at what they find. Do Tell....
    30 Apr 2013, 01:43 PM Reply Like
  • David Crosetti
    , contributor
    Comments (10223) | Send Message
     
    Author’s reply » 1944:

     

    We all know folks who have no retirement savings at all. Life is about choices we make--good or bad.

     

    Sometimes you have to have incentives that make it almost impossible for someone to NOT save money.

     

    However, I think we have to lose this entitlement mentality that we have developed over the last 40 years.

     

    Dave
    30 Apr 2013, 06:34 PM Reply Like
  • Norman Tweed
    , contributor
    Comments (7358) | Send Message
     
    Dave,

     

    I agree with mbn. The congress has raided Social Security funds to balance the budget and exempted high earners $250k and above from paying Social Security tax above a certain threshold. This is just another slush fund for the elite and a tax on the working class who can't be trusted to manage their own money.

     

    If the think tank really cared about the working class, they would teach them how to invest. Some of the funds that sponsor the think tank could be used for sample investments to illustrate how workers should invest their funds for retirement.
    30 Apr 2013, 01:51 PM Reply Like
  • David Crosetti
    , contributor
    Comments (10223) | Send Message
     
    Author’s reply » Norman:

     

    Think tanks look for ways to increase their power and stature. They are often misguided as they are sometimes running on ideology.

     

    Dave
    30 Apr 2013, 06:34 PM Reply Like
  • Miz Magic DiviDogs
    , contributor
    Comments (4188) | Send Message
     
    So instead of redesigning the current government-run Social Security so it solves the problem, she wants to create a completely new government-run program in addition to the already government-run program and readjust that one. Yeah, makes perfect sense.

     

    Miz
    30 Apr 2013, 01:54 PM Reply Like
  • PendragonY
    , contributor
    Comments (5451) | Send Message
     
    Gotta love liberals, any problem can' be solved with a new government program and taking more cash out of my pocket. And that includes problems created by previous government programs.

     

    I can't beleive that the average worker has only $30K in a retirement account. One 401(k) that I left at an employer several years back has $60K in it (and I haven't been contributing to it for close to 10 years or managing it). I am currently putting $25K or so into my current emplouyers plan (including company match).

     

    Also gotta love how much liberals claim they care about the regular guy when they also think he is too stupid to care for himself!
    30 Apr 2013, 03:00 PM Reply Like
  • Miz Magic DiviDogs
    , contributor
    Comments (4188) | Send Message
     
    Pend, she must have gotten the number from somewhere, and it's not too different from others I've heard tossed around. It's extremely sad, but it really isn't surprising, considering how many people are jobless and had their homes foreclosed, etc. Many regular folks in this area drained their savings and retirement accounts to try to keep their homes and stay afloat, sadly.

     

    Miz
    30 Apr 2013, 03:26 PM Reply Like
  • PendragonY
    , contributor
    Comments (5451) | Send Message
     
    Miz,

     

    Its not that I don't believe the numbers, its that I don't believe that so many people could be so foolish. Its pretty easy to save more than $30K for retirement. At several points we had it pretty tight, but never burned down our retirement savings.
    30 Apr 2013, 04:00 PM Reply Like
  • Miz Magic DiviDogs
    , contributor
    Comments (4188) | Send Message
     
    I hear ya, Pend. I went through some pretty tight spots over the years, too, and always considered retirement to be sacrosanct. But I never came close to losing my home. That might have been a game-changer.
    30 Apr 2013, 04:06 PM Reply Like
  • David Crosetti
    , contributor
    Comments (10223) | Send Message
     
    Author’s reply » Miz:

     

    One more government program!

     

    Dave
    30 Apr 2013, 06:35 PM Reply Like
  • David Crosetti
    , contributor
    Comments (10223) | Send Message
     
    Author’s reply » P:

     

    I don't know if that number is correct, but it sure appeals to the emotions of this argument.

     

    Facts aren't as important as "fairness" sometimes.

     

    Dave
    30 Apr 2013, 06:36 PM Reply Like
  • jaych79
    , contributor
    Comments (506) | Send Message
     
    They need to teach investing in school. The problem is people tend to think you need to be rich in order to invest or they don't really care to invest now and instead of putting away X amount each week, they just buy new widgits and wingdings to keep up with the Joneses. Many also just bank on Social Security, food stamps, and their children to care for them. It seems many just don't really care about the future, only the now.

     

    Allow the government to control a retirement account as described above and it will just turn into another cookie jar for other programs. It will turn into what Social Security is today. Perhaps people can just take responsibility for their lives. High schools need to be teaching ways to invest such as DGI, real estate, etc. Instead kids today just get a visit to their school from a teller of a local bank to show them how to "save" and maybe balance a check book.
    30 Apr 2013, 01:56 PM Reply Like
  • David Crosetti
    , contributor
    Comments (10223) | Send Message
     
    Author’s reply » Jay:

     

    There is a lot of things we should be teaching in school, besides the things we are teaching. My wife was a teacher, but is now an administrator. While we are pretty conservative in Mississippi, we still get the Federal spin on education with Common Core.

     

    Dave
    30 Apr 2013, 06:37 PM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (12743) | Send Message
     
    "They need to teach investing in school."

     

    The same school whose teachers are members of unions and might be employees of the government (i.e. all public school teachers are employees of city or state government)? :-(
    1 May 2013, 01:43 PM Reply Like
  • Rhianni32
    , contributor
    Comments (1995) | Send Message
     
    Yes because all teachers are terrible Robert.
    1 May 2013, 04:46 PM Reply Like
  • rnsmth
    , contributor
    Comments (1923) | Send Message
     
    Unions and government are big investors - partly through their pension funds.

     

    I don't see any connection between the need to teach personal finance in schools and the fact that many of the teachers work in a union environment and/or are employed by public employers.
    1 May 2013, 05:37 PM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (12743) | Send Message
     
    "Unions and government are big investors - partly through their pension funds."

     

    One of the worst cases of underfunded pension plans is the State of Illinois.

     

    "I don't see any connection between the need to teach personal finance in schools and the fact that many of the teachers work in a union environment and/or are employed by public employers."

     

    I didn't say there was a connection between the *need* to teach personal finance. I said I would not want my children to be educated on finance by employees of the government who clearly cannot manage the finances of the government.
    1 May 2013, 06:11 PM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (12743) | Send Message
     
    I'm a teacher. I'm not (that) terrible. :-)
    1 May 2013, 06:11 PM Reply Like
  • rnsmth
    , contributor
    Comments (1923) | Send Message
     
    Yeah, but Illinois is not the only public pension. FWIW, the Illinois University System Retirement program was worse than than the general state system. I took a lump sum with I left SIU

     

    <<I said I would not want my children to be educated on finance by employees of the government who clearly cannot manage the finances of the government. >>

     

    Teachers do a lot but as far as I know they so not have any responsibility for managing the finances of government. There are some governmental units that do an excellent job of managing their finances. The Portland Community College district is one example of excellence.
    1 May 2013, 06:21 PM Reply Like
  • rnsmth
    , contributor
    Comments (1923) | Send Message
     
    :) - good. I had some pretty terrible teachers at every level from grade school to my Ph.D. program, but the overwhelming majority of them were pretty darn good. I have done a good job of teaching the few graduate classes I have had the privilege of teaching
    1 May 2013, 06:22 PM Reply Like
  • rnsmth
    , contributor
    Comments (1923) | Send Message
     
    It is not just pension systems that have had troubles due to the Great Recession. I was at a meeting at the Ford Foundation headquarters in NYC in early 2009. Their endowment had taken a 30-40% hit as a result of the meltdown. Did not affect our grant, but it sure had the potential to affect funding of future grants.
    1 May 2013, 06:26 PM Reply Like
  • Stephen J Melnykevich
    , contributor
    Comments (1227) | Send Message
     
    I'm an employee of the government and I can manage my own finances just fine. I'm also in a union. I don't think it is really about what group you are with. It's more about motivation to take care of yourself and not rely on others.

     

    I respect teachers, government employees, doctors, CEO's and lawyers as long as you serve to your best ability and with moral direction.

     

    OK maybe I lied, not so much lawyers.
    1 May 2013, 09:19 PM Reply Like
  • Stephen J Melnykevich
    , contributor
    Comments (1227) | Send Message
     
    Thank you for your service, I think teachers are under-appreciated. I've dated quite a few to show my appreciation.
    1 May 2013, 09:20 PM Reply Like
  • David Crosetti
    , contributor
    Comments (10223) | Send Message
     
    Author’s reply » Stephen:

     

    Nothing better! Maybe nurses.

     

    Dave
    2 May 2013, 07:19 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (12743) | Send Message
     
    "I'm an employee of the government and I can manage my own finances just fine."

     

    Stephen, I wasn't saying anything about how government employees manage their own personal finances. I was saying that government employees do not seem to be doing a good job managing *government* finances.
    2 May 2013, 10:53 AM Reply Like
  • Stephen J Melnykevich
    , contributor
    Comments (1227) | Send Message
     
    We see what State Governments have done to pension plans on that level. I have seen multiple changes to my own plan. My lack of faith in the solvency of that plan is what caused me to fully fund a Roth IRA at the same time I began my job.

     

    With the federal government, we will see the same issues that plague state and local plans. First it will be changes to amounts needed to fund it, changes to how progress is measured, tapping the large pool for budgetary reasons, etc, etc.

     

    The government has a poor track record (i.e. Medicare, social security).

     

    I do understand there is a need to address both the equality issues as well as the fact that many Americans simply aren't prepared. Starting with government plans may not be the right answer.
    30 Apr 2013, 02:31 PM Reply Like
  • Miz Magic DiviDogs
    , contributor
    Comments (4188) | Send Message
     
    I'm afraid you're only too right, Stephen.

     

    No easy answers, are there?

     

    Miz
    30 Apr 2013, 03:20 PM Reply Like
  • Stephen J Melnykevich
    , contributor
    Comments (1227) | Send Message
     
    There never are.

     

    Starting with a public conversation might be a good place to start.
    30 Apr 2013, 03:55 PM Reply Like
  • David Crosetti
    , contributor
    Comments (10223) | Send Message
     
    Author’s reply » Stephen:

     

    I would agree.

     

    Dave
    30 Apr 2013, 06:37 PM Reply Like
  • rnsmth
    , contributor
    Comments (1923) | Send Message
     
    <<The government has a poor track record (i.e. Medicare, social security). >>

     

    A poor track record? No, the track record is excellent.

     

    There are some challenges in the medium-term future. Those challenges are not terribly difficult to meet. That means that politicians may have a difficult time agreeing to something not to difficult to meet the challenges.
    1 May 2013, 09:26 PM Reply Like
  • doubleguns
    , contributor
    Comments (7891) | Send Message
     
    Wait till all social security payments must be cut to fund this every increasing debt the govt takes on. Pensions every where will see cuts. Federal pensions absolutely.

     

    IMF working paper conclusion.

     

    We find that, under our baseline scenario, a full elimination of the fiscal andgenerational imbalances would require all taxes to go up and all
    transfers to be cut immediately and permanently by 35 percent. A delay in the adjustment makes it more costly

     

    This was from 2010 figures.The debt is bigger, more money has been paid out. It could be approaching 50% by now.

     

    http://bit.ly/UvT7kZ
    2 May 2013, 07:02 AM Reply Like
  • BigIslandBum
    , contributor
    Comments (408) | Send Message
     
    <rant>
    What has happened to taking personal responsibility? We've turned into a society that thinks we should get rewarded for spilling hot coffee on our self.

     

    Life is a series of interesting decisions, take responsibility for your choices.
    </rant>
    30 Apr 2013, 03:47 PM Reply Like
  • jaych79
    , contributor
    Comments (506) | Send Message
     
    There is a saying that I live by... "Pay now and play later or play now and pay later" Either way you will pay. I am paying now and getting it out of the way. I am setting up my multiple streams of income so that I may play in retirement later without worry. I believe they call it delayed gratification. People these days take the money they should be investing and buy cars they don't need, taking vacations out of their means, and having to have the latest and greatest everything. It really is sad that people cannot control their decisions better than what they do and then turn around and blame someone else in the end.
    30 Apr 2013, 03:51 PM Reply Like
  • PendragonY
    , contributor
    Comments (5451) | Send Message
     
    Heck Jay,

     

    I just played a little less now (and in the past) so I could pay then and play even more in the future.
    30 Apr 2013, 04:02 PM Reply Like
  • Miz Magic DiviDogs
    , contributor
    Comments (4188) | Send Message
     
    Big I, I think it happened along about the time Dr Spock showed up and claimed that disciplining children would forever warp them. Therefore, they never learned responsibility and consequences.

     

    Miz
    30 Apr 2013, 04:10 PM Reply Like
  • Smarty_Pants
    , contributor
    Comments (2781) | Send Message
     
    "It concerns me that someone who is called a "high earner", that is someone who makes $60,000 a year would get less in retirement under this plan than someone who makes $40,000 a year." - Dave Crosetti

     

    The high earner will still have a larger total income, just a smaller percentage of pre-retirement income.

     

    61% of $60,000 = $36,600
    71% of $40,000 = $28,400
    89% of $20,000 = $17,800

     

    The truly sad part is that by saving $250 per month (5% of $60,000 pay), and investing it at a 7.5% CAGR (very do-able with DGI), the worker could accumulate more than enough money to pay dividends of $39,000 annually (at a 4% yield), without the need to also pay government "fund managers" to administer the program.

     

    What an incredibly bad plan a government administered savings program would be.

     

    But we already knew that....
    30 Apr 2013, 05:02 PM Reply Like
  • Stephen J Melnykevich
    , contributor
    Comments (1227) | Send Message
     
    "The truly sad part is that by saving $250 per month (5% of $60,000 pay), and investing it at a 7.5% CAGR (very do-able with DGI), the worker could accumulate more than enough money to pay dividends of $39,000 annually (at a 4% yield), without the need to also pay government "fund managers" to administer the program. "

     

    Excellent point. Just excellent.
    30 Apr 2013, 05:52 PM Reply Like
  • FreeStateYank
    , contributor
    Comments (803) | Send Message
     
    And when one dies, the gov't retains the annuity. No thanks. This is more of a gov't funding project. I also suspect some of these so-called academic experts would love to have the gov't get their hooks on all of those 401k's out there... No thanks to that, also.
    30 Apr 2013, 06:46 PM Reply Like
  • rnsmth
    , contributor
    Comments (1923) | Send Message
     
    I have some of my money in a program run by the Oregon Investment Council. It is the Individual Account Plan portion of my hybrid retirement account.

     

    At this link are the results since it was started in 2004

     

    http://1.usa.gov/Z9Pp22

     

    I am okay with that. I will start withdrawing it when I retire later this year, and I am thinking of rolling it to my IRA over a 5 year period. About 20% of their investments are in private equity funds, and I do not have access to those as a middle income investor. The alternative would be to roll it all over at the same time.

     

    I have advocated for investing an increasing proportion of Social Security tax payments in a similar way. Certainly a investment council like Oregon's could do better than US Treasuries.
    30 Apr 2013, 08:45 PM Reply Like
  • Smarty_Pants
    , contributor
    Comments (2781) | Send Message
     
    "Certainly an investment council like Oregon's could do better than US Treasuries." - rnsmth

     

    The eventual problem with any required Federal Government retirement system is that they WILL be investing most of your retirement money in special non-marketable Treasury issues, just like they do for Social Security.

     

    Of course the "non-marketable Treasury issues" are really just IOUs. Your 'investment' money goes into the general fund and gets spent immediately, just like Social Security money does today. This is the only way the Feds can maintain the illusion of reducing the deficit, by 'investing' your retirement savings in nice, safe "bonds". Spending all the Social Security receipts isn't doing the trick any more, so they need another source of funding, and your retirement savings are now in their cross-hairs.

     

    Count on it.
    1 May 2013, 08:05 AM Reply Like
  • doubleguns
    , contributor
    Comments (7891) | Send Message
     
    THE WAY OF THE SHEEPLE!!

     

    When they took the social security money I said nothing, When they came for the rich peoples pensions again I said nothing, when they indexed social security I again said nothing, but when they came for my pension.....I was shocked I tell you, just shocked.
    1 May 2013, 08:48 AM Reply Like
  • HackFab
    , contributor
    Comments (983) | Send Message
     
    If the answer is more government, then it must have been a really stupid question.....
    1 May 2013, 11:44 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (12743) | Send Message
     
    HackFab, that is brilliant! :-)
    1 May 2013, 01:45 PM Reply Like
  • Rhianni32
    , contributor
    Comments (1995) | Send Message
     
    Professionally managed huh. Well if Wall Street can't get funds to charge management of asset fees voluntarily they have lobbyists that will get your money the hard way.
    1 May 2013, 01:16 PM Reply Like
  • rnsmth
    , contributor
    Comments (1923) | Send Message
     
    I am not sure if this particular plan is a good idea, like Dave wrote the devil is in the details.

     

    I do know that unless something is done to shore up the retirement security of folks currently in the work force, the nation is likely to have an increasingly impoverished senior citizenry in the future.

     

    Some here may be willing to say - well, they made their choices and now they have to live with the results of those choices, but......
    I am pretty sure that this would not be the overall reaction of the country.
    1 May 2013, 01:28 PM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (12743) | Send Message
     
    "In 2007, an organization called The Economic Policy Institute issued a policy paper, written by a college professor named Teresa Ghilarducci. The paper was titled: "Guaranteed Retirement Accounts: Toward Retirement Income Security. ""

     

    Only practitioners of the Dismal Science could be as wrong as the author of the cited paper, Ms. Ghilarducci. See my comments below.

     

    "There were three major points being made in that paper.

     

    First, tax breaks given by retirement vehicles such as 401k programs and IRA's were unfair because the primary beneficiaries of those programs are wealthy people"

     

    Retirement vehicles are not a "tax break". They are a way to *defer* taxes, not *avoid* taxes.

     

    Other than real estate, I suspect that most of the folks who might consider themselves "wealthy" are those that have saved a lot and invested a lot into their IRA's and 401K's, so these plans HELP people become wealthy.

     

    "Second, when tax breaks are given to individuals, the money that is placed into 401k programs and IRA accounts prohibit the government from collecting more tax revenues"

     

    Right, and we all know that the primary reason we exist on this earth is to work hard in order to "allow" the government to "collect more tax revenues" from our incomes. :-(

     

    "Third, the middle class and the poor need to have a better retirement system than the current 401k plans and IRA accounts and those should be run by the government and not be left to individuals who are not equipped to manage their own retirement funds"

     

    Only an economist could put the words "better retirement system" and "run by the government" in the same sentence. :-(
    1 May 2013, 01:39 PM Reply Like
  • PendragonY
    , contributor
    Comments (5451) | Send Message
     
    Not sure how they can claim that deferring taxes on money that mostly would be taxed at capital gains or dividend rates till later and then taxing it at regular income rates is a tax break for the rich!
    1 May 2013, 01:46 PM Reply Like
  • HackFab
    , contributor
    Comments (983) | Send Message
     
    "Not sure how they can claim...."

     

    Talking points created by the same people that claimed Benghazi was just a civil demonstration.....
    1 May 2013, 02:56 PM Reply Like
  • toddzila
    , contributor
    Comments (7) | Send Message
     
    Really?
    2 May 2013, 06:23 AM Reply Like
  • Smarty_Pants
    , contributor
    Comments (2781) | Send Message
     
    "In 2007, an organization called The Economic Policy Institute issued a policy paper, ... titled: "Guaranteed Retirement Accounts: Toward Retirement Income Security. "

     

    Title translation into layman's terms:

     

    "How to get habitual savers to pay for the retirement of habitual squanderers."

     

    Naturally not every so-called "poor" person is a squanderer. Some wind up there through no fault of their own and probably deserve a hand with necessary expenses (think widows, orphans, and those who suffer debilitating injuries or illnesses). Most likely this could be paid for by family members or via charitable contributions from those who have more than enough for their own needs, as it was throughout history.

     

    However those who chose spending over savings when they had an option deserve to learn why squandering was a bad choice. Any expectation of a comfortable retirement on their part deserves little consideration on the part of savers.

     

    Unfortunately a squanderer's vote counts every bit as much as a saver's vote and as we have seen in recent history, the people voted into office frequently cater to the squanderers at the expense of the savers, until the entire system implodes of its own weight.

     

    There is no magic pixie-dust which pays for things we cannot afford the old-fashioned way, depite claims to the contrary by most of our elected officials. One day our country as a whole will regret the debt run up in our name by those elected to office.

     

    Eventually the Piper must be paid.
    1 May 2013, 03:02 PM Reply Like
  • rnsmth
    , contributor
    Comments (1923) | Send Message
     
    This stuff is all important, but right now:

     

    I have a chicken/coconut milk curry simmering on the stove, a glass of pretty fair Pacific Northwest Cab in the glass and a beautiful wife out in a nice seating are in the back yard.

     

    I am going to join her :)
    1 May 2013, 07:59 PM Reply Like
  • David Crosetti
    , contributor
    Comments (10223) | Send Message
     
    Author’s reply » r:

     

    Sounds like you have your priorities in the right place. Never let a moment go to waste.

     

    Dave
    2 May 2013, 07:22 AM Reply Like
  • Will ferguson
    , contributor
    Comment (1) | Send Message
     
    The problem is that, 401ks were never meant or created for the average worker. They were created for CEO's who are already set financially. We all saw with the wall street crash which was not the fault of some middle class worker living above there means. 401k companies did not even start being forced to let there customers know how much in fee's one is being charged. Its crazy how no one here seems to even know that years ago it was already understood retirements was to be funded by a 3 legged stool: A pension, social security and savings. Then companies started switching to 401ks without there ever being a debate on what should be done.
    27 Aug 2013, 10:18 PM Reply Like
  • PendragonY
    , contributor
    Comments (5451) | Send Message
     
    "The problem is that, 401ks were never meant or created for the average worker. They were created for CEO's who are already set financially. "

     

    That just isn't true. At least when first created, there were very stict limits on the plans so that the highest paid employees didn't get a significantly disproportionate share of the company matching funds. Depending on what the highly paid employees contributed, the company might be required to given the lower paid employees a better matching deal. And there were also strict dollar limits on maximum company match as well. The 401(k) was definately designed for use by the average worker.
    28 Aug 2013, 09:19 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (12743) | Send Message
     
    "The problem is that, 401ks were never meant or created for the average worker. They were created for CEO's who are already set financially."

     

    That's not true. It is the exact opposite. 401K's were created for ALL employees.
    29 Aug 2013, 01:00 PM Reply Like
  • David Crosetti
    , contributor
    Comments (10223) | Send Message
     
    Author’s reply » Will:

     

    That's not exactly correct. When 401k's started, there were limits based on salary that an individual could contribute to his 401k. The purpose of the limits was to keep higher paid executives from having an advantage over lower paid workers.

     

    The 401k evolved into a replacement for the company pension. Companies used to hound employees to invest in the program,. because the more participation the more the contribution limits were raised.

     

    Good program that got better over the years.
    27 Aug 2013, 10:26 PM Reply Like
  • doubleguns
    , contributor
    Comments (7891) | Send Message
     
    The other advantage of the 401K is if you left a company you were not cut from a pension because you did not qualified yet. Now it travels with you so you are not a slave to a company just for the pension your hoping to get.
    28 Aug 2013, 08:45 AM Reply Like
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.