Economists from the left and right call for 401(K) tax benefits to be AXED to help fund Social Security benefits | Daily Mail Online

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Tax benefits on 401(K)s should be axed in favor of higher Social Security payments, says a report co-written by a former aide to President Clinton.

Alicia Munnell, who served as an assistant Treasury secretary from 1993 to 1995, claims retirement pots with tax breaks disproportionately benefit the wealthy.

She made the claim in the report co-authored by right-leaning economist Andrew Biggs - where they say such benefits have done little to incentivize workers to save more anyway.

Cutting the perks on 401(K)s and Individual Retirement Accounts (IRA) could save the Government almost $200 billion, they argue - and that windfall would be better used plugging shortfalls in Social Security payments.

The paper - 'The case for using subsidies for retirement plans to fix social security' - has attracted a widespread backlash with one retirement expert labelling it a 'preposterous idea' since being published last month.

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Traditional defined contribution (DC) retirement plans such as 401(K)s are not taxed on their own or their employer's contributions. Instead, the levy is deferred until when they draw on the funds in retirement at which point it is taxed as ordinary income.

By comparison, workers saving into an IRA take a tax-hit upfront but can withdraw the savings tax-free in their twilight years.

Both plans significantly reduce the amount a worker pays in tax over their lifetime compared to what they would on ordinary investments.

In theory the perks are intended to boost the nation's retirement savings by incentivizing workers to contribute more.

But they come at a cost. According to estimates by the US Treasury, the tax benefits on such plans cost the government between $185 billion and $189 billion in 2020.

And Munnell and Biggs, from the right-leaning American Enterprise Institute. argue that the generous tax breaks have had minimal impact on participation rates in retirement plans.

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I'm sure politicians won't raid the lockbox again and it would go to pay people on social security.

This is nothing but wealth redistribution and a small step along the path towards what they really want, and that's to outright confiscate our 401Ks/IRAs.

F the Feds

They probably don't know how market forces work. You know, a ready supply of capital to loan to business, to create jobs and income and wealth, rinse, repeat.

That's usually the case for people who want to steal from successful people. Burglars, robbers, thieves.

Redistribution of wealth.....we were told this would happen.

While I think this is a bad idea, I've never been completely on board with the idea of tying everyone's retirement to the stock market. There are too many overlapping interests. Yes, I understand diversifying investments, and, yes, people should be able to invest however they want. But I would bet the majority of people who have money in 401Ks and similar accounts aren't particularly savvy.

Did I miss where they forgot to mention Government Pensions? How odd.

BBRex said:

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While I think this is a bad idea, I've never been completely on board with the idea of tying everyone's retirement to the stock market. There are too many overlapping interests. Yes, I understand diversifying investments, and, yes, people should be able to invest however they want. But I would bet the majority of people who have money in 401Ks and similar accounts aren't particularly savvy.

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How is it tied to the stock market?

Won't be long before they decide it is time to seize all 401Ks and IRAs outright, and give us peasants IOUs which will never be repaid.

ProgN said:

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Economists from the left and right call for 401(K) tax benefits to be AXED to help fund Social Security benefits | Daily Mail Online

Quote:

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Tax benefits on 401(K)s should be axed in favor of higher Social Security payments, says a report co-written by a former aide to President Clinton.

Alicia Munnell, who served as an assistant Treasury secretary from 1993 to 1995, claims retirement pots with tax breaks disproportionately benefit the wealthy.

She made the claim in the report co-authored by right-leaning economist Andrew Biggs - where they say such benefits have done little to incentivize workers to save more anyway.

Cutting the perks on 401(K)s and Individual Retirement Accounts (IRA) could save the Government almost $200 billion, they argue - and that windfall would be better used plugging shortfalls in Social Security payments.

The paper - 'The case for using subsidies for retirement plans to fix social security' - has attracted a widespread backlash with one retirement expert labelling it a 'preposterous idea' since being published last month.

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Quote:

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Traditional defined contribution (DC) retirement plans such as 401(K)s are not taxed on their own or their employer's contributions. Instead, the levy is deferred until when they draw on the funds in retirement at which point it is taxed as ordinary income.

By comparison, workers saving into an IRA take a tax-hit upfront but can withdraw the savings tax-free in their twilight years.

Both plans significantly reduce the amount a worker pays in tax over their lifetime compared to what they would on ordinary investments.

In theory the perks are intended to boost the nation's retirement savings by incentivizing workers to contribute more.

But they come at a cost. According to estimates by the US Treasury, the tax benefits on such plans cost the government between $185 billion and $189 billion in 2020.

And Munnell and Biggs, from the right-leaning American Enterprise Institute. argue that the generous tax breaks have had minimal impact on participation rates in retirement plans.

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I'm sure politicians won't raid the lockbox again and it would go to pay people on social security.

This is nothing but wealth redistribution and a small step along the path towards what they really want, and that's to outright confiscate our 401Ks/IRAs.

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Sounds like a group of economists that need to be loaded into helicopters for a one way sightseeing trip over the ocean. Just one more way for them to make people more dependent on government instead of taking responsibility for their own future.

Logos Stick said:

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BBRex said:

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While I think this is a bad idea, I've never been completely on board with the idea of tying everyone's retirement to the stock market. There are too many overlapping interests. Yes, I understand diversifying investments, and, yes, people should be able to invest however they want. But I would bet the majority of people who have money in 401Ks and similar accounts aren't particularly savvy.

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How is it tied to the stock market?

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Tell me you don't understand where 99% of 401Ks are invested without telling me...

I hate when money that isn't handed over to the government in taxes is called "cost."

"Save the government $200 billion" - that mindset is so ****ed

They will be after 529s next. Just to insure "equity".

txags92 said:

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Logos Stick said:

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BBRex said:

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While I think this is a bad idea, I've never been completely on board with the idea of tying everyone's retirement to the stock market. There are too many overlapping interests. Yes, I understand diversifying investments, and, yes, people should be able to invest however they want. But I would bet the majority of people who have money in 401Ks and similar accounts aren't particularly savvy.

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How is it tied to the stock market?

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Tell me you don't understand where 99% of 401Ks are invested without telling me...

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It's not tied to anything. People choose to put their money in equities.

I marvel at what people consider "the wealthy", because in my mind, "the wealthy" couldn't care less about tax advantaged accounts due to their low contribution limits.

But the middle class sure does!

I think this is bad idea of course but it should be fun watching all the libertarian's on this board cry about it.

Allowing a tax deduction for retirement contributions but not other things is the ultimate in the government nanny state. Why are they telling you how to spend your money and giving tax preferences for one certain activity?

Giving tax preferences for one activity and not something else is just another "tax loophole" that flat-taxers should be complaining about,

Money from IRA's and 401K's are taxed upon withdrawal. The clowns that wrote this report are neglecting how much that money has grown over the decades it is sheltered in these plans. My IRA's and 401K's are much much much larger than the total amount I put in there and I will pay significantly more in taxes as I withdraw from them than I would have ever paid on the initial deposits.

The Fed Govt is much better off with allowing people to save for retirement, allowing those savings to grow then taxing the savings upon withdrawal.

These people are just greedy children that can not look to tomorrow.

The average American is stupid. Few save for retirement...Much more important to charge vacations, select baseball, Iphones, and restaurants on credit card. The sheep will be bailed out by the few workers through confiscation until collapse. This system of government required moral hard working citizens...We're F'ed. Hopefully, we get atleast 40 more years so I don't have to deal with it

I suspect the vast majority of people only contribute to a 401k past employer match due to the tax advantage

fast forward a few years and they are just going to take/ nationalize all 401ks and IRA. i know i know crazy conspiracy. i am sure they would never do that, but they are going to just watch.

The theft of the value of our retirement plans will continue regardless of whether they ever get around to confiscating them. Print, print, print.

Transfer wealth from those who saved to those who didn't


What a shock

Dear government, stop spending money you don't have, problem solved. Stealing more money from your citizens to pay for your jackass mistakes is bullcrap.

Detmersdislocatedshoulder said:

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fast forward a few years and they are just going to take/ nationalize all 401ks and IRA. i know i know crazy conspiracy. i am sure they would never do that, but they are going to just watch.

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They will. Once they stack the court and ex post facto laws are deemed constitutional.

I can think of nothing better than trusting the government with all retirement planning. Let's take water from a pool that's growing and pour it into a sieve. Brilliant!

Just commies doing commie things

Plenty of those around

ThEy'Re NoT cOmInG fOr YoUr 401k.

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But they come at a cost. According to estimates by the US Treasury, the tax benefits on such plans cost the government between $185 billion and $189 billion in 2020.

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This ****, right here, is the perfect example of the Communist infestation of these people.

This statement assumes that first, and foremost, it is the gov't's money, not ours.

**** these evil *******s.

Guessing we could not ship billions overseas and save money that way too, but I guess that's not in the table.

F 'em all

No kidding. We spend billions to proxy wars we have no business in, but this is okay. Eyeroll....However, this is all part of the plan.

There is no funding mechanism that can "fix" social security.

The only realistic option is to reduce outflows.