Add this to the list of things the government is flipping us the bird on: Economists want to kill our retirement accounts. Their reasoning? They say it will produce a $200 billion tax bonanza. They want to use that money to stave off the day of reckoning for Social Security. For real. You can't make this stuff up. See the link at bottom.
Okay - $200 Billion IS a large number, despite naysayers who might claim this is “chump change” because our national debt is 150X higher ($34 Trillion). But if we wanted to find an extra $200 billion to reduce the national debt, there are a BUNCH of easier ways to do it, instead of robbing people who followed the government's advice and opened retirement accounts. A complete list of big budget items would take more space than we have here, so let's just review the highlights: the USA has 800+ military bases worldwide; the Department of Transportation spends $200 million annually, but doesn't actually make any planes, trains, or automobiles. The federal government sends $1.2 trillion "transfer payments" to the states each year. In addition, there's $500 billion in federal spending on education aid NOT sent to the state politicians. $500 million for SNAP/Food stamps, and other Washington safety net programs. So, there's a lot of places congress could look at. Places more lucrative than shutting down 401K/IRA accounts for a $200 million windfall.
Economists want us to hear their clever reasoning: they discovered that all those 401K accounts are held by the top 50% of workers. This sounds intriguing, until you remember that the bottom half of all US workers don't pay ANY income tax at all. They get complete refunds if they even need to file. The bottom half of workers thus have zero incentive to use a tax deferred 401K program to save for their future. They're just trying to put food the table each week. Tax strategies aren't even on the radar scope if you don't pay taxes in the first place.
Okay, brainiac economists – I concede that virtually all 401K/IRA accounts are held by people who actually earn enough to owe some income tax. Will you fess up that the other half of Americans don't pay taxes at all? It doesn't seem like people will sign up for robbing the top half, every time some guy with a calculator discovers the top half has more than half of the money, houses, and cars. Did these economists flunk statistics 101 in college?
I'm just sayin' . . .
What if the government abolished your 401(k)? Economists say accounts aren't worth it (msn.com)