When the going gets rough the Democrats get bold. So bold that they are now considering doing away with 401k accounts. In their place we would have ‘guaranteed retirement accounts’ run by none other than the Federal Government. Nothing like hard economic times to bring socialists out of the woodwork.
According to James Pethokoukis at Capital Commerce the government would deposit $600 per year into your GRA and you would be required to save 5% of your pay in these accounts, with the government paying a 3% return. Pethokoukis points out that workers would abandon the stock market right at the bottom. This would take away any chance of making back your losses in the future.
Ghilarducci would offer a lousy 3 percent return. The long-run return of the stock market, adjusted for inflation, is more like 7 percent. Look at it this way: Ten thousand dollars growing at 3 percent a year for 40 years leaves you with roughly $22,000. But $10,000 growing at 7 percent a year for 40 years leaves you with $150,000. That is a high price to pay for what Ghilarducci describes as the removal of “a source of financial anxiety and…fruitless discussions with brokers and financial sales agents, who are also desperate for more fees and are often wrong about markets.” Please, I’ll take a bit of worry for an additional $128,000.
What effect would this plan have on an already battered stock market? Well, I would imagine it would send it even lower, sticking a shiv into the portfolios of everyone who didn’t jump aboard. But I am sure the Chinese would love to jump in and buy all our cheap stocks to fund the retirement of their citizens. Read full article.
With 401k plans, early withdrawal is strongly discouraged due to heavy penalties. Who would penalize Congress for raiding these accounts to pay for their pet projects? Is there any doubt in your minds that would happen? Do you want to give Congress your life savings, so they can raid it at a whim?
How can anyone argue that the Democrats, lead by a President Obama, wouldn’t swiftly put the nail in the coffin of capitalism and turn us into a socialist country? Barack Obama said he’s certainly not sorry for his “spread the wealth” comment. He’s not sorry because he means it, whole heartedly.
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