Fed report: simplify retirement savings incentives

[FinanceDude]

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Originally Posted by Htown Harry Eight ways to fix the U.S. retirement crisis Robert Powell - MarketWatch The story starts with this bit of understatement : BOSTON (MarketWatch) -- Paul Volcker and his troupe, the President's Economic Recovery Advisory Board, are unlikely to appear on the "America's Got Talent" stage any time soon..... Soon enough, though the author gets to the eight bullet points in the Volcker report related to Simplifying Savings and Retirement Incentives: Consolidate Retirement Accounts and Harmonize Statutory Requirements Integrate IRA and 401(k)-type Contribution Limits and Disallow Nondeductible Contributions Consolidate and Segregate Non-Retirement Savings Clarify and Improve Saving Incentives Make the Saver’s Credit a Match Expand Automatic Enrollment in Retirement Savings Plans Reduce Retirement Account Leakage Simplify Rules for Employers Sponsoring Plans Simplify Disbursements Simplify Taxation of Social Security Benefits I briefly read through the section of the report covering these retirement issues. While I didn't find every recommendation to my personal benefit, most of the ideas make sense. For example, #1. There's little logic to the fact that my wife and I have IRA, inherited IRA, Roth IRA, 401(a), 401(b), and 457(b) accounts, all with slightly different rules for contributions, withdrawals and tax treatment. Full report here: http://www.whitehouse.gov/sites/defa...orm_Report.pdf There are other sections on capital gains taxes, corporate taxes and other hot-button topics if you're inclined. Prediction: there's little chance any of it will be read, much less implemented.

I'm dead serious...............WHEN was the last time the govt SIMPLIFIED ANYTHING?

[FUEGO]

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Originally Posted by Texas Proud I work for a small company and we have a plan with Fidelity and pay a flat rate per person.. the current ratio for out costs is .09%. We do not have a load fund in our options and few have 12b1 fees.

I'm in the same boat. I think our annual costs are somewhere down around 0.09%, and each participant pays another $20 a year, subtracted quarterly.

We have a wide selection of funds, all sponsored by Fidelity. Virtually all actively managed with expense ratios around 1%. Except two spartan index funds with 0.1% ER's. For a small company, I would say it is great.

The one thing that confounds me is that apparently our company has to pay about $1000 to modify the plan documents if they want to change the investment options available. I have suggested they add a third Spartan fund, the international index, but the company doesn't want to pay another $1000 just to add a fund. This seems like it should somehow be easier to implement.

[Independent]

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Originally Posted by FinanceDude I'm dead serious...............WHEN was the last time the govt SIMPLIFIED ANYTHING?

How about the tax reform act of 1986, (aka the result of "The Showdown at Gucci Gulch")?

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Yesterday marked the 20th anniversary of the nation's most recent federal tax overhaul—the Tax Reform Act of 1986. Although much of what that reform accomplished has been unwound over the years by lawmakers eager to reward constituents with tax preferences, it stands as a rare example of bipartisan support for fundamentally sound tax policy. In yesterday's Washington Post, Jeffrey H. Birnbaum, co-author of Showdown at Gucci Gulch, had a nice commemoration of TRA'86: Twenty years ago today, President Ronald Reagan signed into law the broadest revision of the federal income tax in history. The Tax Reform Act of 1986 -- the biggest and most controversial legislative story of its time -- had lawmakers, lobbyists and journalists in Washington in an uproar for two years. Despite nearly dying several times, the measure eventually passed, producing a simpler code with fewer tax breaks and significantly lower rates. The changes affected every family and business in the nation. In the years since, however, rates have gradually risen and Congress has passed nearly 15,000 changes to the tax law.

The Tax Foundation - Twenty Years Later: The Tax Reform Act of 1986

I can't claim to be an expert, but I've seen multiple references that it actually did the above.

[Texas Proud]

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Originally Posted by FUEGO I'm in the same boat. I think our annual costs are somewhere down around 0.09%, and each participant pays another $20 a year, subtracted quarterly. We have a wide selection of funds, all sponsored by Fidelity. Virtually all actively managed with expense ratios around 1%. Except two spartan index funds with 0.1% ER's. For a small company, I would say it is great. The one thing that confounds me is that apparently our company has to pay about $1000 to modify the plan documents if they want to change the investment options available. I have suggested they add a third Spartan fund, the international index, but the company doesn't want to pay another $1000 just to add a fund. This seems like it should somehow be easier to implement.

We just got into the plan about a year ago.... since I picked the funds... well, all Spartan funds were picked that could be... so we have it. It was interesting to try and satisfy all investment styles... that got me to 70 funds and I could have picked more!!! We were able to pick funds outside of Fidelity, so I have a number of them also...

I have not yet had any requests to modify, but think it is the same plan so I can see it costing $1000....

[Texas Proud]

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Originally Posted by Independent How about the tax reform act of 1986, (aka the result of "The Showdown at Gucci Gulch")? The Tax Foundation - Twenty Years Later: The Tax Reform Act of 1986 I can't claim to be an expert, but I've seen multiple references that it actually did the above.

SOOOO, the answer to FD's question.... is 20 years.... and if we ask the same question 5 years from now it will be 25 years...

[FUEGO]

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Originally Posted by Texas Proud We just got into the plan about a year ago.... since I picked the funds... well, all Spartan funds were picked that could be... so we have it. It was interesting to try and satisfy all investment styles... that got me to 70 funds and I could have picked more!!! We were able to pick funds outside of Fidelity, so I have a number of them also... I have not yet had any requests to modify, but think it is the same plan so I can see it costing $1000....

I think I have finally sold our company president on the virtue of index funds (he and I and a couple others manage about a million bucks in our ESOP plan, virtually all index funds now, and he has seen they can perform very well vs. actively managed funds).

However they aren't willing to pony up $1000 just to give me access to the Spartan international fund! Everyone else doesn't care if they are paying 1% ER for the same asset class in an actively managed fund. What is interesting is that I have over 10% of the assets in the 401k, yet there are way more than 10 employees participating in it (maybe 50?). I don't get a 10% say in what fund choices are in the 401k.

[chinaco]

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Originally Posted by Emeritus It rotates the whole document, not the page. if you can read the page rotated, you can put it in the document rotated.

Those pdf documents are also printed. If those wide tables were not oriented that way.... the text would be so small no one could read it.

[chinaco]

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Originally Posted by Htown Harry ... I briefly read through the section of the report covering these retirement issues. While I didn't find every recommendation to my personal benefit, most of the ideas make sense. For example, #1. There's little logic to the fact that my wife and I have IRA, inherited IRA, Roth IRA, 401(a), 401(b), and 457(b) accounts, all with slightly different rules for contributions, withdrawals and tax treatment. ...

I agree with you, our tax advantage retirement savings account systems are a fragmented mess.

It make senses to simplify it.

[Independent]

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Originally Posted by Texas Proud SOOOO, the answer to FD's question.... is 20 years.... and if we ask the same question 5 years from now it will be 25 years...

Unfortunately, I believe you are correct.

We complained about our politicians in 1986, but they did get some stuff done. I'm thinking the current crop is worse.