http://news.investors.com/ibd-editor...#ixzz2EowdVv9i
i assume IRAs would be equally threatened?Except maybe ROTH IRAs (that have already been taxed)



http://news.investors.com/ibd-editor...#ixzz2EowdVv9i
i assume IRAs would be equally threatened?Except maybe ROTH IRAs (that have already been taxed)





Actually, this isn't the first time that the topic of the gov't exerting 'after the fact' changes on gov't sanctioned retirement accounts has come up. I have posted in many other dollar den threads that IRA's, 401k, and to some extent even ROTH IRA's represent a future risk factor in this regard. Some of the 'after the fact' change proposals that have come up at various Washington hearings etc. cover such possibilities as ...
- forcing the holdings within gov't sanctioned retirement accounts to be restricted to US gov't bonds ( which represent 100% currency risk and near zero ROI )
- forcing the holdings within gov't sanctioned retirement accounts to be forcibly exchanged for a new type of US gov't retirement annuity ... which would guarantee the 'owner' X dollars per month in retirement income for as long as they live, but upon their death any remaining positive balance would return to the US gov't rather than becoming part of the estate ( i.e. no inheritance )
- retroactive taxation of so far 'tax free' dividend, interest and capital gains earnings of assets under a gov't sanctioned retirement fund umbrella. Note that this would include so far untaxed earnings under a Roth as well as IRA and 401k.
- means testing of future Social Security benefit payouts, potentially meaning that the prudent retirement saver would be forced to 'sacrifice' Social Security benefits entirely, or 50 cents on the dollar in future Social Security checks, until the money they had saved in a gov't sanctioned retirement account has all been spent. Note that this could also include Roth IRA 'earnings', but not the originally contributed amounts.
I'll refrain from political comment, other than to point out that every type of gov't sanctioned retirement account comes with 'strings attached' in exchange for the tax favored status. Right now the potential future financial risk factors resulting from those 'strings' is pretty much being totally ignored. And of course the 'truism' that supposedly makes IRA's and 401k attractive ... deferring income taxes due this year on contributed money, in exchange for counting as income and paying income taxes on withdrawn money after retirement ... is only attractive if the tax rate that applies today is lower than the tax rate that will apply after retirement.





On the other hand, the probability of this actually happening is very low. The government for its own very selfish reasons wants to encourage you to save for your retirement. To get people to do that, the government has to be relatively reliable. Changing the rules on 401(k)s will cause people to lose confidence in the government's reliability and thus people will be less likely to save for the things government wants them to save for and more likely to demand government support when they are too old to work.
The more likely tax changes:
1. End employer deduction of health insurance expenses. ($130 billion per year.)
2. End the home mortgage interest deduction for higher priced home purchases. (Roughly $80 billion per year depending on how high the limit is.)
3. End the deduction for state and local taxes. ($80 billion per year.)
That is $290 billion in additional revenues. Cut the defense budget by $150 billion per year, make some changes to entitlements of roughly $150 billion a year and cut discretionary spending by $10 billion and the annual deficit is significantly narrowed with little damage to the economy. Certainly little damage to poor people who really can't sustain the hit.
We are still stuck with a jobless recovery. But, that's politics, not economics at the moment. (Although politics drive policy and it's the policies of the Obama administration that created the jobless recovery. And that is ultimately economics. Still, beyond the realm of the Dollar Den.)
Z





^^^ agreed on Zofia's alternate possibilities being realistic as well. From a purely investor-centric viewpoint, however, putting money into a gov't sanctioned tax favored retirement program involves 20-30-40 years worth of 'trust' being placed in the US gov't not 'changing the rules' after the 'game' has started. Some may be comfortable taking that risk in exchange for some measure of additional return on investment ( net of taxes ). Personally speaking, for a 20-30-40 year term investment, the additional returns don't justify the additional risks.
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