Government take over of 401K Plans
By bobmnu
@bobmnu (8157)
United States
January 13, 2009 12:29pm CST
There are some in Congress that are proposing the government take control (all money would be given to the government and future payment would be made to the government) of all 401K plans and in return people would be given a guaranteed interest of 3% on the money paid it to the plans. It is not clear if the government plan would be taxed now or later and the interest taxed when you start receiving payments.
I set up a simple spread sheet to see what I would make if my SS payments had been earning interest. Taking my SS statement of wages taxes I took the income and took 12.4% (employee and employer share) and figured 3% (proposed rate of return by government) 5% (very conservative investing in stock market over working career) 7% (taking conservative to moderate risks in the stock market over working career) and 12% (moderate risk in stock market over working career).
Based on my SS statement I will collect about $1500.00 at age 62, $1750.00 at age 66. Using those number and assuming I could have invested the money over the same period of years I could retire and collect for life:
Amount SS 3% 5% 7% 12%
$1500 62 88 60 51 42
1750 66 93 62 52 43
I don't know about you but I do not want the government handling my money. Remember that SS is only a compact between generations and you have no right to collect the money you have paid in to the system. I wish I had my money to invest. Even with the down market I am earning 9% return on my investments. I would be in great shape over SS and the new Government plan.
Would you trust the government with your total retirement savings?
2 people like this
4 responses
@ladyluna (7004)
• United States
14 Jan 09
Hello Bobmnu,
I seem to be missing your calculations. OK, $1500 @62 and $1750 @65 -- would you please explain the #s 88,60,51,42,93,62,&52? Maybe it's just 'cause I'm tired, but I'm really not seeing where you're going with your figures. Would you please indulge a tired, 'ol gal?
Of course I would never want government to manage my money. They've bankrupted Social Security and Medicare, and have been unable to balance a budget in over a decade! They are the biggest culprit of 'debt economics', and their brilliant answer to compounding poor economic policy is to print more fiat currency. All the while, funding their pork on the backs of the 'strawman' taxpayer.
Hubby & I will never surrender our retirement accounts to Mdm. Pelosi voluntarily. In fact, we have ceased dollar cost averaging until this unconstitutional power grab is stompd out by decency and sound judgement.
To add insult to injury: with an already shrinking economy, shrinking because of a failure of the American People to adequately save for themselves, and both the citizen and the government participating in unhealthy 'debt economics', the morons on The Hill are proposing all manner of foolhearty suggestions that will only further decrease personal savings and disincentivize private investment. If I tried to imagine a worse possible 'plan' for the economy I couldn't!
Like you, I'd sure have liked to have had access to any part of that 12% over the past thirty years!
1 person likes this
@bobmnu (8157)
• United States
14 Jan 09
I had a chart set up bu it did not come through the way I wanted it to.
If I want to receive $1500 at retirement I would have to be 62 on SS, age 88 under the 3% return the government is proposing, age 60 under &5 investment rate and age 42 for the 12% investment rate. To receive $1750 a month for life I would have to reach age 66 to collect that much from Social Security, age 93 at 3% interest paid, at 5% I could retire at age 62, and at 7% interest I could retire at 52, and at 12% I could retire at age 42.
This is to show what you could earn by investing with the private sector over the years as opposed to depending on the government.
2 people like this
@ladyluna (7004)
• United States
14 Jan 09
Good morning Bobmnu,
Thanks for the clarification! If anyone else still has any doubts, then perhaps this will demonstrate just how rotten the 3% option is:
The current cost of living is floating between 5.5% and 9%, depending on which variables are considered in the statistics. Earning 3% or even 5% puts everyone who would blindly trust the government to take care of them in an upsided down scenario. If a savings plan cannot beat the cost of living, then it's a fool's game, at best!
Pelosi's plan is just one more example of a Ponzi scheme. She proposes robbing Peter to pay Paul, i.e. taking some people's money with a promise to pay a specified dividend or return, while placing that money elsewhere to pay off those who have already coughed up their ante and are due a payoff. Gee, isn't that what Madoff is under house arrest for? Why is Madoff facing charges for doing what the federal government and Union Pension Plans have been doing since FDR first pitched the scheme? Hmmm???
1 person likes this
@Destiny007 (5805)
• United States
14 Jan 09
The government has no business even considering taking over ANY investment plans/// they have screwed up our economy bad enough without giving them something else to mess up.
The government will never match the free market in performance, and if they would not have interfered in it our economy would not be in the mess it is today.
1 person likes this
@bobmnu (8157)
• United States
15 Jan 09
According to some in power this is the Governments money because if you are making money on your investments the Government can do better with things with that money than you can. There have been comments out of the congressional offices that 401Ks, Flex Plans and IRA's are costing the government money. According to this the government feels that they are entitled to the money you are making. Something is wrong with this.
1 person likes this
@anniepa (27955)
• United States
15 Jan 09
First of all let me say that I don't necessarily trust the government with my savings but I think I trust the private sector even less. I do have one question...is the 3% interest the minimum, meaning everyone would be GUARANTEED at least that but it could be more? In that case I have a feeling most of those who now have nothing would feel pretty good about having all the money they saved plus 3%.
I guess you can put me down as "undecided".
Annie
@bobmnu (8157)
• United States
16 Jan 09
This idea came out of a Congressional study group (whatever that is) and No member of Congress is taking credit for this either. From what I understand you would be guaranteed a flat 3% rate no matter what the economy was doing. To me what adds credibility to this is that earlier Speaker Pelosi wanted to place a tax on the sale of stock. She wanted a 95% tax on the profit or gain. Her reason was that 5% was a reasonable profit for people and the government needed the money. Also several members of Congress have said such things as the 401K and IRA's are tasking money from the government. This disturbs me that we have elected officials that feel the government is entitled to our money. I would like to see the tax structure changed to a flat tax with payment due a week before the election.
@Arkie69 (2156)
• United States
13 Jan 09
It's about time the government got off their buts and started earning their money we are paying them. I would trust the government with my money a lot more than I would the private sector. They just showed us how smart they are. The government needs to take control of a lot more than that and stop a lot of the greed that is hurting us all.
Art
1 person likes this
@bobmnu (8157)
• United States
14 Jan 09
Arkie you need to read the letter that comes with you SS Statement. SS is Defined as a COMPACT between generations. The Government can end it at any they choose. With more people starting their own business and they could save 20 to 30% if SS is ended. I have paid in to SS for over 30 years and I am told that when I start receiving SS my income will be limited. These restrictions and this is on money that I earned and paid for over the years.
I will trust my money to the private sector and not the government.
2 people like this
