Here They Come! Why Congress Might Have to Mess with the 401(k) | TigerDroppings.com

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Taxing Authority
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Here They Come! Why Congress Might Have to Mess with the 401(k)



Fiscal Cliff: Why Congress Might Have to Mess with the 401(k)

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quote:

One of the earliest fears about tax-favored savings accounts like IRAs and 401(k) plans was that when this pool of savings grew large enough Congress would not be able to resist tapping it to help solve the nation’s debt problems. We’re about to find out if those fears—persistent for decades—have been justified.

Everything including the sacred mortgage deduction is on the table as lawmakers wrestle with the fiscal cliff, a year-end avalanche of scheduled spending cuts and tax increases. With a combined $10 trillion sitting in IRAs and 401(k) plans, retirement accounts make a juicy target. Some of this money has never been taxed, and under current law never will be.

To maintain this savings incentive the government “spends” $100 billion a year in the form of tax breaks to those who stash money in these kinds of accounts. Now, a new study suggests this tax incentive does little to change saving behavior. Some lawmakers, no doubt, are wondering: Why keep an expensive tax incentive that does not incent?


quote:

The study, reported in The New York Times, comes from Raj Chetty and John N. Friedman of Harvard, Soren Leth-Petersen and Tore Olsen of the University of Copenhagen, and Torben Heien Nielsen of the Danish National Center for Social Research. It looked at data from Denmark, where the pension system is similar to that in the U.S., and found that every dollar that government spent on tax breaks increased total savings by about one penny.
Anyone care to point out the PAINFULLY obvious flaw with this "conclusion"?

Get the rich...
quote:

That’s not much of a payoff. Meanwhile, the Tax Policy Center in Washington has found that about 80% of retirement savings benefits flow to the top 20% of earners. Eliminating the deduction for retirement savings would hit the well-off disproportionately, a condition with a lot of appeal in the current political climate.


quote:

So hold on to your wallet. Congress has many options when it comes to tapping this vast reservoir. It could eliminate the deduction altogether or just for top earners, further restrict the amount that is deductible (currently $17,500; for those over 50, $23,000), start taxing retirement savings growth, or take back the part that has grown tax-free.




This post was edited on 11/29 at 1:12 pm



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Powerman
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Corpus Christi, TX
Member since Jan 2004
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re: Here They Come! Why Congress Might Have to Mess with the 401(k)


quote:

Some of this money has never been taxed, and under current law never will be.







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mtntiger
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Asheville, NC
Member since Oct 2003
9266 posts

re: Here They Come! Why Congress Might Have to Mess with the 401(k)


Well, the one thing that jumped out to me is the statement that 401(k) money and the like will never be taxed, and that is false.

That money gets taxed when it's withdrawn from the account, and before it's passed on to heirs. It's just not taxed NOW.






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buddhavista
Member since Jul 2012
3543 posts

re: Here They Come! Why Congress Might Have to Mess with the 401(k)


quote:

Get the rich...
quote:
That’s not much of a payoff. Meanwhile, the Tax Policy Center in Washington has found that about 80% of retirement savings benefits flow to the top 20% of earners. Eliminating the deduction for retirement savings would hit the well-off disproportionately, a condition with a lot of appeal in the current political climate.

Is top 20% of the country the "rich"? The top 20% income level would be roughly 100K+, which is pretty low to be considered rich.
quote:

It could eliminate the deduction altogether or just for top earners, further restrict the amount that is deductible (currently $17,500; for those over 50, $23,000), start taxing retirement savings growth, or take back the part that has grown tax-free.

I don't think this is a terrible idea to be honest, and I suspect I would get lumped into the "top" earner category. Although I hardly see myself as that.






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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120715 posts

re: Here They Come! Why Congress Might Have to Mess with the 401(k)


quote:

That’s not much of a payoff. Meanwhile, the Tax Policy Center in Washington has found that about 80% of retirement savings benefits flow to the top 20% of earners. Eliminating the deduction for retirement savings would hit the well-off disproportionately, a condition with a lot of appeal in the current political climate.


I like how they consider the top 20% of people to be well off

Being a 20% isn't anything special. I'm probably a 20%er as far as income goes and I honestly wonder if I'll retire before the average dip shite






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constant cough
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Lafayette
Member since Jun 2007
37120 posts

re: Here They Come! Why Congress Might Have to Mess with the 401(k)


I don't have a 401K so I don't care, right? I mean that's how we look at political matters these day isn't it?





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Layabout
UNO Fan
Baton Rouge
Member since Jul 2011
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re: Here They Come! Why Congress Might Have to Mess with the 401(k)


quote:

Some of this money has never been taxed, and under current law never will be.

How would it never be taxed? It's taxed when it's withdrawn, either by you or your heirs.

The tax-deferred savings program began in 1978 so until recently money has been pouring into these accounts and very little has been taken out and taxed. That is changing as people retire and begin withdrawing their savings and paying taxes not only on the amount they originally sheltered, but also the compounded appreciation in the value of the accounts. It may now be close to revenue neutral from the government's standpoint.






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tigeraddict
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re: Here They Come! Why Congress Might Have to Mess with the 401(k)


quote:

I don't think this is a terrible idea to be honest, and I suspect I would get lumped into the "top" earner category. Although I hardly see myself as that.



401k accounts get taxed when you withdraw from them, so any growth in the account will get taxes as well.

The government is basically giving you an option to defer payment of the taxes until you can actually use the money. Same effect if the government went to a national sales tax (or a consumption type tax) you will only get taxed when you use your money.






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BugAC
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Baton Rouge
Member since Oct 2007
18724 posts

re: Here They Come! Why Congress Might Have to Mess with the 401(k)


Here's a simple question. Why won't the fricking worthless democrats stop spending my fricking money???

I 100% hate all liberals.



This post was edited on 11/29 at 1:46 pm


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TJG210
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New Orleans
Member since Aug 2006
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re: Here They Come! Why Congress Might Have to Mess with the 401(k)


More government sanctioned theft wahoooo!!!!! The government is like a damn casino with a rake, you earn income from your job....it's taxed.....you take the remaining to the store and purchase goods, you're taxed again.....same with investments. By the time you're fine, you're left with a pitulance. I'm really surprised there aren't many more tax scofflaws than there is currently.





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buddhavista
Member since Jul 2012
3543 posts

re: Here They Come! Why Congress Might Have to Mess with the 401(k)


quote:

The government is basically giving you an option to defer payment of the taxes until you can actually use the money. Same effect if the government went to a national sales tax (or a consumption type tax) you will only get taxed when you use your money.


sure, but this is still engineering and distortion of the tax code to enable what congress deems is a good idea.






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ehidal1
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Chief Boot Knocka
Member since Dec 2007
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re: Here They Come! Why Congress Might Have to Mess with the 401(k)


you know that those fricking politicans are drooling while they look at the money sitting in retirement accounts. it's only a matter of time...





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C
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The Woodlands, TX
Member since Dec 2007
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re: Here They Come! Why Congress Might Have to Mess with the 401(k)


quote:

I like how they consider the top 20% of people to be well off


Well that saw that the "top 1%" didn't cause much upheaval. Then they expanded it to the top 5%. Still got Obama elected. Now they are reaching for the top 20%. You begin to see the fall of democracy and why "when they came for my neighbor, and I said nothing" has a lot of truth to it when you decide to fight for freedom.






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Ace Midnight
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Currently asymptomatic
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re: Here They Come! Why Congress Might Have to Mess with the 401(k)


quote:

you know that those fricking politicans are drooling while they look at the money sitting in retirement accounts. it's only a matter of time...


They could pay off half the debt with all that money.






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buddhavista
Member since Jul 2012
3543 posts

re: Here They Come! Why Congress Might Have to Mess with the 401(k)


quote:

Why won't the fricking worthless democrats stop spending my fricking money???

well spending bills must originate from the house. The republicans held the house from 1995-2007, and then picked it up again in 2011.

So.......I am not sure you can say it was the democrats just spending your money.






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CarrolltonTiger
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New Orleans
Member since Aug 2005
46304 posts

re: Here They Come! Why Congress Might Have to Mess with the 401(k)


quote:

you know that those fricking politicans are drooling while they look at the money sitting in retirement accounts. it's only a matter of time...


eliminating this incentive to save seems more equitable than raising taxes on income of all (savers and non-savers)

It doesn't sound like they are expropriating or taking away anyone's savings, just changing (eliminating) the incentive

Eliminate deductions and cut spending and our saving might be protected from inflation a more insidious tax.







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BugAC
LSU Fan
Baton Rouge
Member since Oct 2007
18724 posts

re: Here They Come! Why Congress Might Have to Mess with the 401(k)


quote:

buddhavista


Who is proposing ideas of raiding private retirement accounts?
Who is proposing to raise taxes on the top 1,2, or 5% of income earners?

I'm not going to play this, "well they are all the same" cop out game, to make myself seem angry at government in general. I am starting to despise all liberal democrats first. For they are the ones more likely to take my hard earned fricking money to someone else so they can get a vote. Once i'm done with the democrats, then i will discuss the retard GOP who go along with the democrat spending ways. But for now, the bigger threat to my money and my retirement is liberal democrat scum, and the idiots that vote them in office.






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TJG210
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New Orleans
Member since Aug 2006
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re: Here They Come! Why Congress Might Have to Mess with the 401(k)


I wonder if those crooked bastards will put a stipulation in this bill like obamacare where they will exempt themselves?





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buddhavista
Member since Jul 2012
3543 posts

re: Here They Come! Why Congress Might Have to Mess with the 401(k)


quote:

Who is proposing ideas of raiding private retirement accounts?


The article doesn't point to any legislators supporting this idea.
quote:

Who is proposing to raise taxes on the top 1,2, or 5% of income earners?


Actually I believe that John Boehner said revenue was on the table a few weeks ago. Now, he used weasel words and its more about loopholes than rate increases. But he still said it.
quote:

I'm not going to play this, "well they are all the same" cop out game, to make myself seem angry at government in general.

why not? The problem is clearly congress. They control the purse strings.
quote:

I am starting to despise all liberal democrats first.

of course you are. You despised them before, based off your posts, you are going to despise them now.
quote:

But for now, the bigger threat to my money and my retirement is liberal democrat scum, and the idiots that vote them in office.

I think you are erecting strawmen here. I don't disagree the democrat party is awful. But the republican party loves big spending too. Hell, do you remember the election just recently? Romney suggested several increases to spending!!!!!

Go ahead with your anger towards democrats. Its not going to do anything for you.






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ehidal1
Michigan Fan
Chief Boot Knocka
Member since Dec 2007
17840 posts
 Online 

re: Here They Come! Why Congress Might Have to Mess with the 401(k)


quote:

I wonder if those crooked bastards will put a stipulation in this bill like obamacare where they will exempt themselves

my thoughts exactly. they will exclude themselves on this as well.






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