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Not So Shy About Retirement

Well, some of the Democrats in Congress are talking about scrapping the 401(K) program and replacing it with an expansion of Social Security.

After seeing my own 401(K) lose over 10% in value in the last month alone, I have a certain amount of sympathy for this. But upon further reflection, I find myself as horrified at the thought as many others.

As they said, this makes perfect sense if 1) you remember that all the money in Social Security is actually just IOUs from the government, which takes Social Security money and spends it on whatever it feels like, and B) your top priority is expanding government spending at a record rate.

But that's just politics as usual -- let's look at the actual idea and see what it's all about.

So I've lost 10% of my 401(K) in a month. That sucks, and it sucks bad.

But does it suck so bad that I want to pull out of that and replace it with a government program that will guarantee me a 3% annual rate of return? And that presumes that one can actually trust the program.

I hate to quote Paul Harvey, but he has a saying he often repeats: the stock market is a roller coaster, and on a roller coaster the only ones who get hurt are those who stand up and try to jump off.

Over time, the stock market is a pretty safe investment. It goes up, it goes down, it makes people cheerful and drives them mad if they pay too much attention to it.

I'm a good 20 years away from retiring. I'm willing to wait this out, bide my time, trust the guys at Vanguard to handle things properly as things go on. I am willing to bet that things will bounce back by the time I need my retirement money.

And if I'm wrong?

Then I'm wrong.

And I'm screwed.

But I'm willing to take that risk.

And I happen to believe that it's my right to take that risk.

One of the things that royally pisses me off about the typical Democrats, especially those that are running Congress (into the ground) right now, is that one key element of their philosophy is to protect people from the consequences of their decisions -- most often by the expedient measure of depriving them of that choice in the first place.

Here, I -- like millions of other Americans -- have chosen to show a smidgen of responsibility for ourselves and plan for our own retirement, not choosing to rely entirely on the government and Social Security (with its lockbox of "Dear American, IOU billions and billions, love and kisses, Uncle Sam" notes) to care for us when we retire.

And here we have some Democrats who, because they see some bad news in the markets and NEED TO LOOK LIKE THEY ARE DOING SOMETHING, have decided to destroy the entire 401(K) system. Because to them, it's not about fixing things,

it's about looking like they're doing what they can.

And I won't even go into the damage that would be done to the already-rocky stock market when all that private money that goes into the stock market via companies like Vanguard and Fidelity and whoever suddenly dries up as the government swoops in and sucks it up into the increased Social Security taxes.

But as I said, my main problem here is philosophical. The primary incentive here is to protect American workers -- like me -- from the consequences of a poor decision.

You know how most people learn how to make right decisions? By making wrong decisions and learning from them.

One of the things that has stuck most in my brain when it comes to things like this is a quote from Michael Jordan:

"I've missed more than 9000 shots in my career. I've lost almost 300 games. 26 times, I've been trusted to take the game winning shot and missed. I've failed over and over and over again in my life. And that is why I succeed."

(Yes, I've used it before. Sue me.)

If you don't take the chance of failing, you never really appreciate winning. There's no real sense of accomplishment if you start out knowing you'll succeed -- and you'll never learn a damned thing.

The main consequence of abolishing the 401(K) system would be to punish those who have chosen to take care of themselves, and reward those who have not. It will convert those who have tried to provide for themselves into yet

more folks who will turn to the government to take care of them in their old age.

And that means more people who will be most inclined to vote for those who have promised to take care of them, and who have grown dependent on the government.

Oh, joy. Just what we need. A whole new generation of people who hear the phrase "I'm from the government, and I'm here to help you" and think that's a GOOD thing.


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Comments (22)

"it's about looking like th... (Below threshold)
retired military:

"it's about looking like they're doing what they can."

I disagree. IMO it is all about them finding a new source of funds to spend taxpayer money on since Social security is drying up and wont be able to be used to help cover the deficit spending anymore.

With this additional money they can spend like drunken sailors for another 2 decades before it catches up to us.

The government of Argentina... (Below threshold)
DaveD:

The government of Argentina was not quite so subtle.

When IRA's and 401(k)'s wer... (Below threshold)
jc:

When IRA's and 401(k)'s were invented, one of the express purposes was to get Americans to become more interested in how the economy worked and to have a straight-forward stake in their own success and the success of our country.

Many democrats and unions opposed those efforts because they knew that they would lose control over the minds of Americans as more and more of us took an interest in the real world.

This effort is not just about money, although in the end you can expect a lot of misdirection followed by a massive rip off. At its core, this is also about making sure union thugs can always get their cut of your labor, and congresscritters can be more powerful. They are happiest when the little guy can never get ahead. It is cynical, dishonest, horrible, and unfortunately, typical behavior for the scum in question.

If nothing else they can sa... (Below threshold)

If nothing else they can say to aging worried baby bombers, look we made Social Security solvent again!!

I'll say it again, and prob... (Below threshold)
glenn:

I'll say it again, and probably not for the last time, People get the government they deserve.

At least drunken sailors sp... (Below threshold)
MPR:

At least drunken sailors spend their own money.
I was in financial services in the mid eighties and put a lot of money for clients into IRAs,Keoghs,401s and 403(b)s using mutual funds. The funds I used had been in existence since before the Great Depression and have done very well for their shareholders in up and down markets for all of these years.At the time IRAs were first available they were tax exempt and deferred. They were set up for people to put money aside for retirement because, S.S. was not going to be healthy enough. The money had been spent and was really only supposed to be a "safety net" not the only funds people would need for retirement. Then the government decided that they need to change the rules on IRAs because so many people were taking advantage of the exemption. Can't have that! So as your income went UP your exemption went DOWN. Now the government(Democrats) are looking at the money in these plans and are no doubt thinking of ways to get at it. With the governments track record I would never consider letting them "protect" my retirement. Especially with the potential Democrat control of both houses. However, if they get the control they want, we won't have a choice.

Good article Jay.<p... (Below threshold)
MF:

Good article Jay.

I dont believe in sharing my hard earned money with everyone unless it is done through charity's and churches because with those I have a 'choice' of who and how often I want to donate.
Instead I'd like to see the US tighten it's belt. I dont believe in spending money we dont have unless it's for a real emergency.
I cant say I was thrilled about the bailout either. When can we talk about and balance the budget?
I'd like to see us get back to the fundamentals of the constitution at the federal government.
I do hate that my 401K has gone down (I'm in the 45-60 age range) but I am not retiring now so that's ok. Besides it's October and an election year so I see these cyclic trends occur at these times regularly. Sure it's worse right now but this shouldnt have been a surprise to anyone.
I dont want any more government help or interference in my personal finances. I dont even expect anything when I retire other than I would like what I worked hard for and put in. I just know folks that worked hard all their lives, got sick and didnt qualify for any services because they had to wait until they had used their money.
also
I never understood why we pay taxes and if we put the money away then later we have to pay taxes again ... . Penalizing us for doing what we should and rewarding those that had bad luck or made no effort whatsoever?
That stinks!

Jay, you said: Oh, joy. Jus... (Below threshold)
Allen:

Jay, you said: Oh, joy. Just what we need. A whole new generation of people who hear the phrase "I'm from the government, and I'm here to help you" and think that's a GOOD thing.

Yes, exactly what the residents of NOLA heard from FEMA, (doing a hell of a good job Brownie) type of BS we all hear from the gov't. Boy did they get surprised, no help to speak of. Ask them if it's a good thing.

What ever happened to people helping themselves? Guess that doesn't happen anymore, does it? But right now, our gov't is set up to help the top 2% of people, and the hell with the other 98%.

You will regain the 10% of ... (Below threshold)
Scrapiron:

You will regain the 10% of the loss on the 401K. SS will never recover. If the democrats take trillions from the 'people' who scraped and saved you won't be able to locate a rusty penny of it withing 6 months. Those offshore bank accounts are still secret, ask the Kennedy's, Clinton's, Kerry's, and the other slime balls in congress who have ripped of the taxpayers. Go to congress with a hundred dollars in your pocket and in 6 years you are a multi-millionaire, all on $200K or less per year. I'd like to see a 100% audit of all the slime balls followed by a firing squad.

the stock market is a ro... (Below threshold)
wolfwalker:

the stock market is a roller coaster, and on a roller coaster the only ones who get hurt are those who stand up and try to jump off.

Sucker.

Do you actually understand what is happening in this economic crash? It's a debt purge. It's purging all the debt that has been accumulating in our economy for the last twenty years. It should have happened ten years ago, but the dot-com bubble and then the housing bubble delayed it. Easy credit is dead. The US economy is about to go stagnant, just as it did back in the late 1970s, and the world economy will soon follow. Double-digit stock market returns are a thing of the past. 20 years from now, your 401(k) probably still won't be worth what it was three months ago. (And that's assuming you haven't had to liquidate it in order to live off it after you lost your job.)

And that's only what will happen if the government does nothing. If the goddamn Vermin Party does what its senior rodents are squeaking about doing, in a year's time you won't have to worry about your stock investments, because there won't be a US stock market to invest in. When every one of the companies in which your agent at Vanguard has invested goes bankrupt, will you still think "I didn't jump off, so I haven't really been hurt?"

Scrapiron can I help pull t... (Below threshold)
jhow66:

Scrapiron can I help pull the trigger?

So let's see.....we get 3% ... (Below threshold)
ODA315:

So let's see.....we get 3% GUARANTEED by our friendly govt and they get our principle to play with.

AND we lose the tax break from our IRA/401k investing, pushing many of us into higher brackets, AND because these lefty spendoholics will print more money to perform their social reengineering, inflation will skyrocket (see Jimmah Caaatah) to 8, 9, 10% (pick your number).

We'll actually LOSE $ in the deal. All brought to us by the same gang that caused this mess in the first place.

People don't you get it? T... (Below threshold)
Thomas Jackson:

People don't you get it? The Supreme Court has ruled you have no right to Social Security. What makes you think you'll have any right to the benefits under this proposal?

And if you click your heels together and say "I believe, three times" I have some beachfront property in Utah I'm sure you'll love as well as some beachfront property in Harare.

Two words:Fair Tax... (Below threshold)

Two words:

Fair Tax

Why don't these financial w... (Below threshold)
gemma:

Why don't these financial wizards we keep re-electing start to treat their own pensions as they treat ours.....test it out Congress people....be your own guinea pigs and then...when you have spent all your own money on fluff and stuff...then and only then come for ours!!!

It gets worse...the plan pr... (Below threshold)
budahmon:

It gets worse...the plan provides for a 50% Death Tax on the account. So much for saving for your families retirement....

I think this is even more o... (Below threshold)
hcddbz:

I think this is even more of setup for a huge tax hike. Not only do you loose the tax break on 401K, but you now have mandaotry 5% deduction from your paycheck on top of the 6.2% for FICA ( takes out upto 102/106K).
FICA +401K 12.2% then 5% after 104K then you start to get taxed at the higer rate
s.
So at the lowest level now is 10% Income Tax + 7.62 FICA + Medicare =17.62 repeal the bush tax cuts and that rates jumps to the base now jumps to 15% and then add 401K.
Icome tax rate 15
FICA 7.62
401K 5
27.62%

Which would be unfare to the lowest Tax bracket so expect a progressive retierement system in 2-6 months followed by an increase in medicare for Universal healthcare. 50% Fedral withholding from the Rich. Rich being anyone make over 100K Which is compromise for Obama, I mean his father's dream was 100%.

My Mom (a yellow dog Democr... (Below threshold)
RicardoVerde:

My Mom (a yellow dog Democrat) actually got upset when I told her that I would likely draw a bigger monthly check from my IRAs and 401k compared to SS. She thought that shouldn't be allowed for some reason.
I have been curious as to just how much the recent stock drop has been from the realization that the capital gains tax is about to go up?

I posted this years ago (I ... (Below threshold)
Les Nessman:

I posted this years ago (I don't remember where) and I think I posted this a few months ago here. I think it's still relevent:

I'm putting as much as I can into my 401k provided through my job. I do this by sacrificing things I want right now.
However, I think that in 40 years, SS will be so eff'ed up that the politicians will look around and say, "Hey, look at how much Les has saved! He's got a pile of retirement money. He has more than 'enough'. Let's reduce or eliminate his SS benefits while continuing to pay people who didn't plan ahead." And so all that money that I paid in for all that time will be wasted. Plus, since I will (hopefully) have a nice nest egg saved up, I think there will be a significant tax increase on us 'rich' retirees.
I will not be surprised for events to unfold this way; in fact I mostly expect it. But, knowing myself, I will still be mightily pissed; possibly to the point of doing something 'unfortunate' in my geezer years.
You have all been warned.

If, in my dotage, I look back and think the .gov has stolen from me or my family like this, there will be trouble for the .gov officials.

We are some decades away from that, so let's work to not make it happen.

I dont 'expect' social se... (Below threshold)
MF:

I dont 'expect' social security benefits at all when I retire.
It's not like they are investing the money and it is growing. Our hard earned money is going out to others. There is no 'fund'. I wish they would not take social security out and let us invest our hard earned money for ourselves and or family's future. If later we want donate it the money to someone or organizations then that would be our 'choice'.
I dont 'expect' the government and others to take care of me and my family.

I hate it when I think of t... (Below threshold)
RicardoVerde:

I hate it when I think of things that are almost conspiracies. The increase in capital gains tax is touted as basically a tax of the rich, but in reality it is a back door tax of my IRA/401k. Most middle income Americans have access to 401k's or similar plans. Even without the outright grab proposed by Kucinic's plan, the increase in capital gains represents a further government control over your future. It will lower the growth rate of your retirement plan and in the long run make everyone more dependent on the gubmint. Add in an increase in the death tax then your options are even fewer since one way to avoid the grab would be to sink your money into an estate that would transfer to your kids upon death.

Beyond the principle of peo... (Below threshold)
Mac Lorry:

Beyond the principle of people saving for their own retirement, the IRA/401(K) system stabilizes the financial markets beyond the wildest dreams of any of the politicians who created the system. It does this by regularly injecting billions of long term investment dollars into the markets. That investment money grows the economy, creates jobs and opportunities for most Americans, not just those saving for their retirement.

If the democrats poison the IRA/401(k) system, that force for growth will cease, and with higher taxes, our economy will sputter down.

Actually, the democrats aren't trying to protect the people from themselves. They're trying to stay in power and they know that when there's no money to pay Social Security benefits thy will be held accountable by the voters. Taxing private tax deferred retirement accounts and adding an additional 5% tax on payroll will raise enough money to continue paying Social Security benefits until it's time to pay up from this new ponzi scheme.

Unfortunately, this is just one of the changes that's coming, but hey, the voters want change and they don't care too much just what the change is, well at least not yet.




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