Thursday, May 7, 2009

Governments hands in our 401(k)s?

After reading this article in the Wall Street Journal about major changes that are going to probably be coming down the road on 401k's has got me completely freaked out.  I also remember reading a article about this in Money mag on how our 401k's need to be revisited and revamped. I feel the government has its hand in to much of our personal lives as is, stay out of my retirement. I already have fears about some of the decisions being made in Washington that are going to come back hurt my pocket one day, but let's just stick to the subject. 

Some of the highlights from the article are:
"In another proposed change, President Obama's 2010 budget calls for the future establishment of a program in which all workers would be automatically enrolled in employers' retirement plans. Now, in most cases, they must opt in to participate. Also under the administration's plan, employers that don't offer a retirement plan would be required to enroll their employees in a direct-deposit individual retirement account. Employees would be able to opt out of either approach."
I could be wrong but don't we already have a plan like this, that is currently bankrupt, called social security? The only difference I see is the option to opt out? I think a easier solution would be to allow us to opt out of SS now. I would be up for opting out of SS, because I am 100% sure that I could take the 6.20% that I give every pay check and invest in something I would actually see one day. 

Goes on to say:
"The 401(k) has become the primary savings vehicle for 60% of workers but has been under scrutiny as workers lost $2 trillion in the market downturns, including traditional pension plans."
Look I agree that there should be some scrutiny behind a 401k. The individual needs to look at the plan and I don't think the government needs to have a hand in any part of my retirement or investments. They were not saying that when people were making money at 8-12% year? Everyone should have learned with Enron that you should be diversified and not have everything all in one company. I am willing to take a strong look at my 401k plan and determine personally, what I need, to make sure I have a nice egg for retirement. If someone decides not to participate in a 401k, they can just save or invest in other areas they seem fit. My grandfather never had a 401k, what he had was a saving account, and he saved enough money that he could retire and play golf everyday. 

I believe that this is what will happen if the government has their way
"Ed Ferrigno, of the Profit Sharing/401(k) Council of America, an industry group, said one fear is that more regulatory requirements will increase costs, and thus reduce services, for workers."
This is what happens when the government has there hands in the people's business. We don't need anyone to tell us what we should be doing with my hard earned money. What we need is for everyone to learn and understand that they need to save money for retirement. Whether they want to take the risk in the stock market or in other means of saving/investing is each individuals right as an American.

The one part of the article I like, talks about more tax incentives for workers and employers who participate in plans, but that should be the case now. Right now 401k's are deferring current income taxes, but the more incentives individuals and employers have, the more people would be willing to learn about the best options. If the government doesn't stop spending, the tax rate for my generation will be through the roof because of the deficit. They need to have more incentives like the Roth 401k which allows you to contribute with after-tax dollars and once you hit retirement age (59-1/2) you can begin to withdraw the money tax-free.

My whole fear in the government having a role in this matter, is that they don't have a very good track record with money, they seem to waste a lot. The government also seem to make decisions based on what crisis is going on, take this conversation for an example. For the most part they make changes that are the most popular one at the time or at these turning points. Our 401ks are individuals savings/retirement accounts and if the government has their hand in it, who is to say that they will not, if there is a national emergency, take that money from us and use it as they seem fit? That might be an extreme, but its to make a the end of the day we don't need a nanny state. This seem again like the government is swooping in to bail us out? Please leave me out of this one as I am not counting on anything from the government when I retire, I can take care of myself.

I know this is probably a touchy subject but I really am very interested in hearing your thoughts on this. Is it a good thing, or are we playing with fire(retirement)?

1 comment:

  1. MMS, while I share your apprehension regarding government meddling with retirement vehicles, I feel there are a few pieces of legislation in the works like H.R. 1984: 401(k) Fair Disclosure for Retirement Security Act of 2009 and H.R. 2021: Savings Recovery Act of 2009. I've got status links for them over at

    I agree that the government has a bad track record with money management, but I think there is always room for more transparency and H.R. 1984 might help with that. As well, we have a lot of people ready to retire that lost out big time in the last year or so. Unemployment could be further increased if millions of baby boomer retirees try to keep working for another five years.