Barack Obama’s supposed secret and diabolical plan to steal your 401(k) monies to plug holes in the federal budget, one of the many low points of the 2008 presidential campaign, is back.
It appears to have started on this go-round with World Net Daily’s Jerome Corsi, best known for his opinions about the validity of Barack Obama‘s birth certificate, who penned a piece late last month headlined “Now Obama Wants Your 401(k).” The next day, The American Society of Pension Professionals and Actuaries began a media campaign, designed to head off the any changes to 401(k) tax subsidies. Within days, Investors Business Daily was writing about “the war on retirement,” which they described as “quiet now” but something that “could erupt at any time into a hot war.”
On the other side, almost simultaneously, a paper co-authored by academics at Harvard University and Denmark was released. This paper, which explored how people in Denmark changed their savings habits in response to retirement tax incentives, more or less demonstrated that the popular 401(k)tax break does nothing to increase anyone’s savings rates, but, instead, allows people who would put the money aside anyway — mostly those at the top of the economic heap — to direct their funds toward a tax-advantaged retirement plan rather than, say, a plain old regular brokerage account where they would pay taxes on their original earnings, dividends and investment gains.
This brought Rush Limbaugh into the fray. He united all these different strands in segments he ran on his popular radio program for several days running. He claimed the Democrats were ”demanding more of our private property to solve their budget problems.” As for that study out of Harvard and Denmark? Maybe those researchers or the reporters at such websites at The Atlantic and Time who wrote about the study were in on it too, or perhaps they were being manipulated by the evil geniuses behind the plot to steal our retirement savings accounts. ”The magazines didn’t just out of thin air say, ‘You know what? Let’s do a 401(k) story.’ Somebody at the regime calls ‘em and leaks it.”
“There is an all-out assault,” Limbaugh proclaimed.
Since then, rumors have run rampant on the Internet about this plot to steal all our retirement monies to fund the federal deficit.
What’s really going on?
One of the proposals that has received attention in Washington talking head discussions about how a compromise might be reached between Democrats and Republicans on the fiscal cliff and federal budget is one that argues for cutting back or eliminating the tax break the 401(k) deduction. This, I should say, is not a new suggestion. It’s come up numerous times over the years, but was given renewed life when the Simpson-Bowles commission stumped for it. It’s a commonsense if controversial idea, especially given the evidence we have that the tax break does not cause very many people to save more money. It’s this proposal, not any plot, that led the American Society of Pension Professionals and Actuaries to speak out in defense of the 401(k).
Similarly, the details of the supposed plan to confiscate our 401(k)s originate, not in secret covens, but in the papers a number of academics have published over the years, seeking ways to better or reform our nation’s individual retirement savings efforts. The authors of these efforts include J. Mark Iwry, who is now a senior adviser to Secretary of the Treasury Tim Geithner and and a deputy assistant secretary for retirement and health policy. (The plot thickens! Just kidding!), He’s argued for such things as Automatic IRA’s, which would cover workers who are not offered access to a 401(k), and for the inclusion of annuities as a choice in 401(k) plans.
Another name that frequently surfaces in the 401(k) plot discussions is longtime retirement activist Teresa Ghilarducci, a professor of economics at The New School, who believes the 401(k) should lose all its tax advantages, and instead be replaced by something she calls Guaranteed Retirement Accounts, a system of mandatory retirement contributions by both employees and their employers, that would allow for a minimum, promised investment return.
However, the supposed conspiracy never mentions a group that truly does want your 401(k) and other retirement accounts: the financial services and related retirement communities. According to a report issued by the progressive think tank Demos (where Ghilarducci is also affiliated) earlier this year, the average household will lose $155,000 of their retirement savings to plan sponsor and administrator fees.
Call me cynical, but I think the 4o1(k) and the tax-advantaged subsidy granted those who utilize it is quite safe indeed.