Matthew C Cox Blog

Yesterday, a friend from my college days sent me an email.

I hadn’t heard from Kent for a while so I opened his email first.

It contained news that I had not heard in the mainstream media.

This morning, Kent sent me another email with more information.

He is concerned about current plans in the United States Congress to do away with 401(k) retirement plans because they are too costly to manage and their value can go down.

He believes that if 401(k) plans disappear, 403(b) plans and IRAs will go next.

(Each email had numerous links about this plan. I’ve included them at the end of this post if you want to research it.)

The alternative idea is a government controlled pension plan with mandated contributions (That means another employee tax.) and a guaranteed fixed rate that exceeds inflation by three percent. For example, if inflation is 2%, the annual rate for the pension is 5%.

Like current plans, there are tax breaks for contributing.

To repeat, there are discussions in congress to do away with current retirement plans and change them so that the United States Federal Government has more control.

I’m not surprised.

I sold retirement plans about ten years ago. I discovered then that the glorified savings plans don’t work very well.

At that time, no plan grew fast enough to meet my clients’ financial goals without subjecting them to substantial risk.

More importantly to me, no plan grew fast enough to meet my financial goals without subjecting me to substantial risk.

I realized then that I am responsible for my income. I realized that putting my money into somebody else’s hands to manage might not be the smartest thing to do.

I decided I could do better myself with real estate investing and business ownership. I pulled all my money out of my retirement accounts, paid the tax penalty, and never, for a second, regretted the move.

Today, many people are discovering the same thing.

With the value of retirement plans dropping, one solution is to pull money from the accounts and self-manage it.

The US Government, who is now an owner of many banks and insurance companies, wants to make sure retirement plan money stays there.

The plan under discussion in congress could keep the money there and guarantee that more money goes into the governement’s new businesess on a regular basis.

I don’t know if this plan will pass congress. I don’t know how this idea will work if it passes congress.

Nobody does.

So why am I writing a post about it?

I’m writing because some people are worried. (Maybe you are one of them?)

They think the US government is already too big.

They think this is another step towards socialism.

They think this might work but they don’t think the government can handle it.

They think any other thought about this that causes them to worry.

I see their point.

My opinion is that the government needs to leave these things alone and let them fix themselves. However, that is not going to happen.

Our nation is far too committed to government assistance plans to change now.

What is a person to do?

I have an answer for you. It brings Peace of Mind. It allows you to focus on what is important to you and move forward.

I will write about that in my next post.

Here are the links if you want to research the plan under discussion in Congress.

http://texasdarlin.wordpress.com/2008/10/23/house-democrats-want-to-kill-401ks/

http://www.tboforums.com/index.php/forums/viewthread/6731/

http://www.usnews.com/blogs/capital-commerce/2008/10/23/would-obama-dems-kill-401k-plans.html

http://20smoney.com/2008/10/28/should-government-take-over-your-401k/

http://www.freerepublic.com/focus/news/2116843/posts?page=1

http://abcnews.go.com/Business/PersonalFinance/story?id=6122417&page=1

http://www.thebulletin.us/site/index.cfm?newsid=20179546&BRD=2737&PAG=461&dept_id=576361&rfi=8

http://www.gopusa.com/theloft/?p=814

http://news.aol.com/political-machine/2008/10/24/obama-dems-seek-to-end-401-k-plans/

http://www.monthlyreview.org/0506ghilarducci.htm

http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20081012/REG/310139971/0/TOC&ht=

Tags: 401(k), IRAs, Levi's Books and Taxes, Retirement Plans

This entry was posted on Thursday, October 30th, 2008 at 6:14 am and is filed under Levi's Books and Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.