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Obama-Elect, The end of 401k, IRA, and Retirement Accounts as we know them?
Well, the election of 2008 has come and gone. Barack Obama is the president-elect of our great nation. Now, the main question turns to, “How will Obama’s election affect me personally?” Well, since you asked, the main target of the Obama administration may be your 401k, 403b, IRA, and other Retirement accounts.
2009 may well bring a concerted and all-out effort by the Obama administration and a Congress with well over ½ Democrats shooting to turn the generally Republican Investor Class into an endangered species by, among other tactics, raising investment taxes and ending the tax preferences for 401(k)’s, IRAs, and other retirement accounts.
Here is the emerging battle plan for Obama’s War
against Tax-deferred Retirement
Plans
:
Investment Taxes are going to be raised.
Obama wants to raise capital gains taxes even though he has
admitted that it might be bad for the economy and might actually
decrease tax revenue to the government. For now, he’s talking
about raising the highest cap gains rate by one third to 20
percent, though earlier in the campaign, he floated pushing it as
high as 28 percent, a near doubling. Now that he has been elected,
he could revert to his early campaign promise of 28%. With the next
administration facing a trillion dollar budget deficit—maybe
more—there will certainly be pressure to raise taxes to
higher levels than now being suggested.
Annuities and Life Insurance had better watch out as
well.
The government’s mouth has been watering for a number of
years, considering the windfall of cash that would come from taking
away the tax deferred status of cash value insurance and
annuities 
401(k)’s, IRAs, and other retirement plans may be
a thing of the past.
Democrats in the House are now talking openly about the longtime
liberal dream of repealing the tax advantages of putting money into
a 401(k) plan or other tax-advantaged retirement account. Some
think that since the savings rate isn’t going up for the
investment of $80 billion [in 401(k) tax breaks], they have to
started to think about whether or not they want to continue to
invest that $80 billion for a policy that’s not generating
the revenue they say it should.
Teresa Ghilarducci, an economist at the New School for Social Research in New York, floated a radical alternative to 401(k)s at a hearing held by Miller Oct. 7.
Under her plan, workers would receive a annual $600 tax refund if they set aside 5 percent of their pay into a retirement account run by the Social Security Administration, which would then invest globally in risky assets to seek high returns.
From that pool, workers would be paid a guaranteed 3 percent a
year indexed to inflation.
The change would encourage workers not to hang on to jobs longer
than planned.
Because their returns would be guaranteed, workers would be able to
retire on schedule, she said.
“We need people to retire when the economy tanks in order to
keep up aggregate demand and to reduce pressure on the labor
market. And the only way to do that is to unhook the finance
markets from retirement income,” she told Reuters.
Not only would removing the preferential tax treatment of these vehicles raise investment taxes by $100 billion a year, as well as affecting the “Rich” making less than $100,000, it would surely prompt many Americans, already shell-shocked by the market’s recent losses, to flee stocks. There are trillions of dollars in American retirement accounts, and abandoning the higher-returning stock market at a probable bottom is probably the worst long term financial move that an investor could make.
Simply put, if you believe in the American economy’s prosperity over the foreseeable future, then you have to believe in the stock market. If you don’t, then you have to admit that the government will have to fund all of its promises one way or another. The low lying “hanging fruit” of 401k, IRA, and Retirement plans may just be too tempting for them to look the other way.
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