The govt. wants your 401(k) plan

Nov. 30, 2012

Katy Grimes: With the recent Democratic reelection win by the Obama administration, get ready for more than tax increases.

The government now wants your private 401(k) retirement plan.  “As Washington debates what to do about the fiscal cliff that it foolishly created, many potential sources of new revenue will be thrown on the table. One of them is likely to be 401(k) plans,” Investor’s Business Daily reported Thursday.

“Retirement is an American’s reasonable expectation. We put money into investment plans so that our work today funds our hard-earned leisure of tomorrow. But many in Washington see our investment accounts not as the expressions of well-planned, disciplined decisions but as untapped reservoirs of wealth they can drain to fix the problems that they caused.”

There’s a great deal of money saved by private sector employees in 401(k) plans. But liberals in government say that these retirement accounts aren’t fair, and that they are the retirement plans of the wealthy.

More than 60 million American workers have a 401(k), 403(b) or 457(b) plans. But taxing these accounts or lowering the amount that can be contributed to them tax-free would do little to close the deficit and cut the debt, IBD said.

“Total assets in 401(k)s are roughly $3 trillion. So even if they were seized in their entirety, they would merely retire less than 19% of Washington’s $16.3 trillion debt.”

Since first election Barack Obama, his government liberals have been saying that our 401(k) exist on the backs of the poor, as if they had all the money and it was stolen by the rest of us.

The truly scary part is that I have no doubt that a majority of the people who voted to reelect Obama will not have a problem with the government claiming ownership of Americans’ 401(k) plans.  It’s the only fair way to level the playing field.

“But many in Washington see our investment accounts not as the expressions of well-planned, disciplined decisions but as untapped reservoirs of wealth they can drain to fix the problems that they caused,”

The war on women is nothing. “The war on retirement, particularly 401(k)s, is quiet now. But that’s because it’s a cold war,” IBD said.

In 2008,  Teresa Ghilarducci, an economist from the New School, first suggested to Congress the idea going after 401(k)s. One of California’s Congressmen, George Miller, a Democrat, loved the idea. “George Miller, who runs a congressional committee, Democrat in California, came out with the first notion of just getting rid of your being able to deduct for your income your contribution to your 401(k)…” He said we have to eliminate the ‘401(k) tax subsidy’ back in 2008,” Rush Limbaugh reported on his radio show Thursday.

Did Miller call this a “tax subsidy?”

“The government’s losing $80 billion by allowing you to deduct from your gross income, your taxable income, whatever you contribute to your 401(k), and they wanted to take that away. They had a hearing. They actually had a hearing on this back in 2008 where they heard from this professor. Ghilarducci appeared and she said, ‘I’ve got a better plan,'” Limbaugh reported.

“What we want to do, we want to take your 401(k) at its August level, before the crash. We’ll give you that equivalent and put it in your Social Security account, essentially, and we’re going to invest that money that we take from your retirement account, your 401(k), at its August level. We’re going to buy government bonds with it, which will guarantee you 3% — and then we will require that you put 5% of your pay into your 401(k) although it’s not yours anymore,” Ghilarducci said to Congress.

IBD warned that the hostilities might be closer than many of us think. “The American Society of Pension Professionals and Actuaries launched on Monday, according to Reuters, “a media campaign intended to educate U.S. employers and workers that the federal government might consider changing the tax benefits of retirement savings accounts.”

“A website set up by the ASPPA advises account holders to tell lawmakers to ‘keep their hands off your retirement savings’ and explains that ‘Congress needs to reduce the deficit, and part of deficit reduction will most likely be ‘tax reform’ that increases tax revenue’ — the strong suggestion being that Washington is coming after Americans’ 401(k)s,” IBD said.

Read more here:

Be sure to read the comments left by readers on the IBD story.


Write a comment
  1. Dyspeptic
    Dyspeptic 30 November, 2012, 09:42

    I have been predicting this for a decade. A blind man could see this scam coming a mile away. Anyone who thinks the middle class is safe from the rapacious Obamanoid mob is dumb as a brick. When the dust settles after 4 more years of The Dear Leader and his fanatical mob the middle class will be even poorer, more in debt and trapped in a federalized healthcare system.

    Don’t worry though, because you will have lots of shiny new promises 🙂

    Reply this comment
  2. Don
    Don 30 November, 2012, 10:53

    I have also been telling people for years this was coming and noone listens. Now Hitler is here.

    Reply this comment
  3. SkippingDog
    SkippingDog 30 November, 2012, 12:31

    Just another rehash mishmash of completely separate ideas. Eliminating the tax deduction for 401’s doesn’t do anything different than a Roth IRA does now. The second and separate idea of granting pre-crash value to a 401 account and providing an annuity in return isn’t even at the level of serious discussion among legislators.

    Nothing here but a transparent attempt to churn up some fear and confusion among people.

    Reply this comment
  4. Hondo
    Hondo 30 November, 2012, 13:11

    Dyspeptic is right. We saw this coming a mile off. But, as I said before the election, Romney ran the worst campaign ever. He, literally ran no adds before September, so he had to pay 5 times as much for a 30 second add in October as Obama paid for in July. It was so bad I have to wonder if Romney was part of the Obama campaign.
    Obama care should have been taken apart and shredded in 30 second adds. Romney said nothing. Whyyyyyyyy.

    Reply this comment
  5. Dyspeptic
    Dyspeptic 30 November, 2012, 13:34

    “Nothing here but a transparent attempt to churn up some fear and confusion among people.”

    Eliminating the tax deductibility for 401k’s increases taxable gross income which would increase income taxes for middle class filers. If implemented it wouldn’t be voluntary like a Roth IRA and it would increase middle class taxes, which Skippy’s cherished Demogoguecrats say they don’t want to do. If they really don’t want to do it then why do they keep bringing it up, studying it and letting left wing eggheads propose it to Congress?

    These sorts of policies are always introduced a bit at a time to gauge reaction and get the public used to the idea. Next up will be eliminating the tax deferment for dividend income and capital gains in these accounts because that is a tax cost to the almighty Federal Government. All in the name of fairness of course.

    The only people who think this is a good idea or nothing to worry about are public pension parasites with defined benefits at taxpayers expense or those who are as thick as a brick. Skippy, you know you fit at least one of those categories.

    Reply this comment
  6. SkippingDog
    SkippingDog 30 November, 2012, 20:23

    Sorry, Dyspeptic. Even though I have one and benefit from it, I recognize that the 401k scheme is just a tax sheltered way for me to avoid taxes on the $22,500 I’ve been socking away for the past several years. I get to do that because after retiring from my public service position after more than 30 years, I went to work for a nice private organization. Not only do I get nearly free employer sponsored health insurance for my family, but I also get access to this 401k scheme. Both of these are really income, so I believe that my health benefits and 401k contributions should be taxable – and so should yours.

    Reply this comment
  7. SeeSaw
    SeeSaw 30 November, 2012, 22:07

    You should be ashamed to print such junk. I have a 457(b) that has been feeding me every month for the last five years. It is there until I have drawn it all out–I pay taxes on the amount I receive every year. The government is not going to lay a hand on it!

    Reply this comment
  8. SkippingDog
    SkippingDog 1 December, 2012, 02:21

    Nobody is trying to take your 457 or my 401, SeeSaw. The only thing even being discussed now is either reducing or eliminating the tax deduction we get for our contributions. Unless you’re working, you’re not making any 457 contributions and are paying taxes on the distributions you receive anyway.

    I’m perfectly willing to pay taxes on the contributions I’m making to my 401k, and understand that the only taxes I’ll owe later will be those on the accrued interest I receive with my distributions when they eventually start.

    Reply this comment
  9. matt
    matt 1 December, 2012, 07:37

    They don’t have to outright confiscate the money! They just have to wait for a market crash and then “save retirement” by forcing us to buy “safe” heavily watered-down treasury bonds. This will allow the government to kick the can for another 4 or so years. It will look like you still own something in your account…but you don’t.

    Reply this comment
  10. Sean Morham
    Sean Morham 1 December, 2012, 09:55

    I can see California going after no state income tax on 401k contributions, at least on the private sector employees. It is a great idea, just transfer the money to Calpers and Calstrs. I should be a representative in Sacramento.
    Gotta grab what you can.

    Reply this comment
  11. Ridge Runner
    Ridge Runner 7 April, 2013, 17:36

    I’m considering dumping out my 401k. Screw those pirates. I stopped putting money in my 401k and use the funds to purchase rare coins. Not for gold and silver value but for antiquity value. I refuse to give them anymore of my money.

    Reply this comment
  12. Willard R. Brumbaugh,LUTCF
    Willard R. Brumbaugh,LUTCF 15 May, 2013, 06:00

    This may appear to be self-serving, but a viable alternative as a ‘safe harbor’ from Federal confiscation is properly designed life insurance. It is well-demonstrated by those who fully understand life insurance products that these can net out a higher after-tax yield than Qualified Plans.

    Reply this comment
  13. Non Partisan Patriot
    Non Partisan Patriot 7 October, 2013, 12:37

    Willard, what you protect from the federal government in life insurance policies, you pay to the insurance companies.

    Reply this comment
    • Uncle Rick
      Uncle Rick 14 October, 2013, 11:09

      Non Partison,

      Willard is right. Please note that he said “those who fully understand life insurance products”. Read “Becoming Your Own Banker” for details. It’s not what most people expect.

      Reply this comment
      • Willard R Brumbaugh, LUTCF
        Willard R Brumbaugh, LUTCF 12 August, 2017, 17:15

        Thank you, Uncle Rick.

        Two books written by Pamela Yellen explain the same concept as Nelson Nash, but with a super-charged variation. This is described in “The Bank On Yourself Revolution.

        It also describes what I have been explaining for years before I had heard of her.

        You may be interested in a report that I have linked to my website: As of today August 12, 2017, there are a few fixes I need to make. On page 44, the name should have been Ted Benna.

        Reply this comment
  14. Uncle Rick
    Uncle Rick 14 October, 2013, 11:07

    Doesn’t anyone — especially SkippingDog — see that these discussions are missing the most basic, crucial points?

    If I work and earn money, whose money is it? Mine, of course. Does any person have the legitimate, natural right — call it ‘power’ — to take any portion of my money from me by force? Certainly not; that’s theft.

    So, can any such person delegate or hire another to take my money? No, that’s still theft.

    So, can the state take my money by force, for ‘the common good’, without committing theft? Not really, in most cases. All the state’s powers are delegated to it by the people. Since the people (notionally the total of all persons) do not have that power, they cannot delegate it to the state.

    That doesn’t mean that all taxes are a form of theft; we need the state for certain tasks and we therefore need to fund it accordingly. But the need of the state for funds does not legitimize all means of acquiring them nor all sources from which they may be acquired.

    These matters must be addressed and settled without violating fundamental principles before proceeding, yet no effort has ever been made to do this. We all seem to assume that the state (most people erroneously say ‘government’) has essentially unlimited authority to take from us whatsoever the agents of the state choose to take, and the only thing to be settled is what the people will tolerate.

    I doubt that one person in ten thousand can state, in a simple declarative sentence, the fundamental principle of taxation in a free republic.

    Reply this comment

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