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View Poll Results: Should Retirement Savings Plans be elimimated?
Retirement savings plans are OK as is and should not be eliminated. 11 21.57%
Retirement savings plans could be improved, but they should not be eliminated. 32 62.75%
Retirement savings plans should be eliminated and replaced by Prof. Ghilarducci's proposal. 2 3.92%
Retirement savings plans should be eliminated, but NOT be replaced by Prof. Ghilarducci's proposal 1 1.96%
Retirement savings plans should not be eliminated but Prof. Ghilarducci's plan should be made available as an alternative to them. 5 9.80%
Other—please explain in a comment. 0 0%
Voters: 51. You may not vote on this poll

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Poll: Retirement Savings Plans
Old 01-09-2009, 12:44 AM   #1
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Poll: Retirement Savings Plans

from the article:
Quote:
Powerful House Democrats are eyeing proposals to overhaul the nation's $3 trillion 401(k) system, including the elimination of most of the $80 billion in annual tax breaks that 401(k) investors receive. (snip)

A plan by Teresa Ghilarducci, professor of economic-policy analysis at The New School for Social Research in New York, contains elements that are being considered. She testified last week before Mr. Miller's Education and Labor Committee on her proposal. (snip)

Under Ms. Ghilarducci's plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3% a year, adjusted for inflation.
For purposes of the poll, the phrase "retirement savings plan" includes all tax-priveleged, self-directed accounts such as 401Ks, Traditional & Roth IRAs, 457 plans, but not taxable brokerage accounts, even if you intend to use them for retirement income.

Your thoughts?
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Old 01-09-2009, 11:48 AM   #2
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Yeah, give the money to SSA, that will help..........

Granted, improvements need to be made, but the way SSA is run its a miracle it hasn't imploded already........
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Old 01-09-2009, 12:15 PM   #3
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I feel anything you save for retirement up to a certain amount should be tax free period. But then again what do I know
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Old 01-09-2009, 01:03 PM   #4
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I am not in favor of the government or anyone else ("expert" or not) telling me how to save for retirement or changing the way I invest for retirement.
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Old 01-09-2009, 03:38 PM   #5
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$600 and 5% of income doesn't sound like enough unless the employee is very very young when starting the plan.

In my last plan, my employer contributed 25% of my gross income, and I was still able to max out an IRA.
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Old 01-09-2009, 05:40 PM   #6
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Originally Posted by CuppaJoe View Post
$600 and 5% of income doesn't sound like enough unless the employee is very very young when starting the plan.

In my last plan, my employer contributed 25% of my gross income, and I was still able to max out an IRA.
IIRC from earlier discussions, the youngest you can draw benefits under the Ghilarducci proposal is SS early retirement age, and if I understand it, there would be no tax-advantaged way to retire earlier than that. So they are figuring that people start early and work late. I won't be 62 until 3 years after I'm eligible for the maximum pension percentage from my j*b. My pension has an option which gives a higher monthly benefit until SS eligibility, but it's based on full SS retirement age. In my case that's 66 yrs, 4 months...meaning I'd have to w*rk for another 4+years, or a total of over 7 years past maximum pension eligibility and 9+ years past my planned semi-RE date. (Can you tell I'm not a big fan of this idea??)

All that time, I'd be getting cost of living adjustments, which means when I finally did retire, I'd be eligible for a considerably larger monthly pension check than if I FIRE when planned. I have a defined-benefit pension, and though the proponents of this idea claim to favor DBPs I really doubt that people delaying retirement while their monthly benefit goes up, up, up will at all help the solvency of defined benefit systems. Even at a (contractual minimum) 2% annual COLA, my salary at age 66 will be over 25% higher than it is now, plus the percentage of that salary I get as a pension will be higher than if I retire at 57. I expect to live at least into my 90's, so City Retirement will be paying that bigger check for a long, long time.
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Old 01-12-2009, 12:17 PM   #7
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I voted "eliminate retirement savings plans", assuming that means we should eliminate the tax benefits. I don't like the idea of the gov't using tax laws to "encourage" me to do things that are good for me.

The Ghilarduci plan is particularly bad because it takes almost all decisions away from the individual, and because it obligates the gov't to provide a real return of 3% on a big chunk of money.
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Old 01-12-2009, 01:57 PM   #8
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Originally Posted by Independent View Post
I voted "eliminate retirement savings plans", assuming that means we should eliminate the tax benefits. I don't like the idea of the gov't using tax laws to "encourage" me to do things that are good for me.
I'm okay with that if the same applies to pretty much all other tax breaks.

401Ks and my HSA are about the only tax "breaks" I get. I'm not over 65. I have no kids. I don't itemize deductions; every dollar I give to charity is a full dollar -- not 65 to 75 cents "after tax" like it is for itemizers.

If this tax break was taken away, I'd expect others to be as well. If they targeted the one tax break I actually get for elimination while leaving others, I wouldn't be silent about it...
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Old 01-12-2009, 02:39 PM   #9
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Quote:
Originally Posted by Independent View Post
I voted "eliminate retirement savings plans", assuming that means we should eliminate the tax benefits. I don't like the idea of the gov't using tax laws to "encourage" me to do things that are good for me.

The Ghilarduci plan is particularly bad because it takes almost all decisions away from the individual, and because it obligates the gov't to provide a real return of 3% on a big chunk of money.
You are correct. Removal of the tax benefits is what I meant.
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Old 01-12-2009, 03:00 PM   #10
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Meltdown calls 401(k)s into question - MSN Money
"Do 401k plans still make sense?" asks this article.

Interesting article. Obviously it is full of human interest anecdotes of people who were close to what they thought was their retirement, but after losing 25-35% of their 401k value, are now 5-10 years away from retirement.

Interesting bits from the article (all at the bottom of the last page ):

"Even if workers follow the golden rules of 401(k) investing -- saving early and diligently, holding a broadly diversified investment mix, never tapping their savings until retirement -- their success can still depend largely on the luck of the stock-market draw.

Boston College's retirement research center recently ran scenarios that assumed workers had contributed 6% of pay to a plan for 40 years, had invested in a target-date fund, had never touched their savings until retiring and had annuitized the assets at retirement. The chunk of pre-retirement income these savers could replace in retirement varied dramatically depending on when they retired. Those retiring in 1948 could replace just 19%; those retiring in 1999, 51%; and 2008 retirees, 28%."

and

"Julien Pierre has been a model 401(k) saver. The 32-year-old Santa Clara, Calif., software engineer started contributing to a 401(k) when he was 19, and he has made the maximum contribution for the past eight years or so. He has a well-diversified investment mix, including large-cap, midcap, small-cap and international stock funds.
He started last year with about $220,000 in his 401(k), but about $90,000 of that has been wiped out in the market meltdown. Though Pierre is still maxing out his 401(k) contributions, he sees his plans to retire early crumbling and thinks it may take years to determine whether his faith in the plan has been justified."

The quoted Boston College study is interesting. Save 6% all your life in your 401k and you have enough to replace between 19 to 51% of your pre-retirement income. Presumably that includes no employer match. So I assume if you double the contribution to 12%, you can replace 38-102% of your pre-retirement income.

The responsible super saver, Julien Pierre, has done really well by accumulating $220,000 at one point. Not sure how he started saving in a 401k at age 19, since I was under the impression 21 was the minimum age for a 401k. But the main point is that he is well-diversified, saving a lot, and saving continuously. Even now.

I'm like Julien Pierre (except I started saving in my 401k after age 21), in that I would be hurt by changes in the 401k tax advantaged status. The plan seems to work overall. Why not add a little better education to it, and open up the Thrift Savings Plan that all federal employees have access to as investment options for all plans (even at slightly higher expense ratios to cover administrative expenses).

I like the flexibility of 401ks. I like the society wide impact of having an ownership society. People care about the future of businesses and the economy. They depend on it for their current and future livelihood. We are all working together (in our own self-serving rational ways) towards economic prosperity that benefits us.
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Old 01-13-2009, 04:57 PM   #11
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If you read between the lines, this is straight socialism. Give the government the money and they will take care of everyone. You can bet that any implementation of this would make sure the lowest earners benefit proportionately better than those who make more. In short, just another income redistribution plan for the masses. The Romans called it bread and circuses.
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