Powerful House Democrats are eyeing proposals to overhaul the nationâ€™s $3 trillion 401(k) system, including the elimination of most of the $80 billion in annual tax breaks that 401(k) investors receive.
Under Ghilarducciâ€™s plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5 percent of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3 percent a year, adjusted for inflation.
The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.
â€œI want to spend our nationâ€™s dollar for retirement security better. Everybody would now be coveredâ€ if the plan were adopted, Ghilarducci said.
It sounds so good. “Everybody will be covered,” which almost seems to protect us from the clueless who won’t manage to save anything before retirement.
And it’s a neat idea, making us use the cash from everybody to earn money for the rest.
But it eliminates the option of the frugal to save, and save well, for their retirement, and replaces it with more government bureaucracy — but at least everyone is covered, even if badly.
It’s like hobos sharing a blanket. “We can’t all have full cover, so let’s cut it into tiny scraps, and then we’ll each have some.”