401k and the Democratic Party
In short, the 401k and the Democratic Party don’t mesh well. Here’s what I mean:
The purpose of 401ks from the beginning, was to give investors a break. They were fraught with all types of tax breaks and advantages, creating an almost-irresistible lure to savvy investors.
The reason that the 401k and the Democratic Party don’t mesh well is because a lot of Democrats wish to eliminate the tax advantage from the 401k.
Why the Dems want your 401k cash
A lot of people contribute to 401ks obviously. You probably are right now, which is why you’re interested in the future of the 401k.
The fact is, that so many people participate in it that it is a $3 trillion system affording more than $80 billion to Americans in tax-breaks yearly.
No wonder Democrats are eye-balling that!
So what’s the democratic party going to do?
There are several different proposals being considered right now with regard to 401k reform. A lot of the criticism comes from the fact that 401ks are usually self-managed, and usually individuals suck at investing their own accounts.
It seems though, the Obama’s administration is probably going to be changing the rules surrounding 401k and perhaps IRAs and other retirement accounts. The way that they see it, it’s a gigantic amount of money going untaxed when it doesn’t have to be..
One of the most likely scenarios is an elimination of the tax-break; a portion of it anyway. The problem with that is that it leaves little incentive for individuals to continue socking cash into their 401k. This could back-fire and end-up producing bad blood, and not making as much money for the party.
So with 401k and the Democratic Party at odds, is it still smart to be pumping money into it?
I’m not so sure..
I know that when this news started surfacing, I definitely decreased my 401k contribution. There were other factors that really pushed me to that decision but the way that Obama’s administration is drooling over them definitely had an influence.
It’s not quite clear why the Democratic administration is so eager to propose changes to the 401k system when there are other systems that are malfunctioning to a much greater degree.
(Cough…Social Security…Cough)
What do you think?
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