Michelle Singletary: The 401(k) millionaire next door

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  • rustopher West Valley City, UT
    Nov. 3, 2017 2:08 p.m.

    I'm sure someone will correct my ignorance, but aren't the funds that go into a traditional 401k/IRA taxed at a different rate than what comes out? You get the break going in tax deferred at ordinary income, but when you take it out during retirement it's taxed at investment rate. Kind of that whole thing that Buffet's secretary pays a higher tax rate than Buffet does. Kind of makes sense that the government would want a higher percentage now then a lower percentage later.

    Either way, smells like elements of both liberal and conservative thought to get more revenue.

  • Vermonter Plymouth, MI
    Nov. 3, 2017 8:52 a.m.

    @Tekakaromatagi.
    Interesting idea to make Social Security payments means tested. But, you would also need to reduce Social Security payments to be bare subsistence, basic and simple food, clothing and shelter. I will admit SS payments are now not extremely generous. But, keeping them at current levels encourages more people to spend their entire paycheck now rather than save for a more comfortable retirement. To one degree or another, it punishes the thrifty and rewards those who live beyond their means.

    But, any significant change to SS is politically unrealistic. The majority of baby boomers have not saved adequately for their retirement. Changing the current social security scheme in any way will get any president or member of Congress kicked out fast. And, yes, baby boomers will demand that the government spend their grandchildren's money to take care of them in their retirement years. As long as fertility rates in the US keep falling, the young will not have the political power to change this for at least 30 or 40 years. That's just the world we live in.

  • Tekakaromatagi Dammam, Saudi Arabia
    Nov. 3, 2017 6:14 a.m.

    @NoNamesAccepted:
    "Ditto for anyone who suggests that those who do make good use of their 401(k) should be rewarded with losing even 1 penny of the social security they have earned with lifetime "contributions" to that program."

    I will say it. If you are well to-do and retired, you should not collect social security. Save social security for those who need it.

    Please note, social security is funded by taxing people working now. There is not a social security account with your name on it with a bunch of numbers and dollar signs. (If you disagree with me, call the social security administration and ask them how much money is in your account.)

    Why should people who are struggling financially have to pay for me when I retire if I can retire comfortably with my 401K and savings? That is not fair.

    I scrimped and saved so that I would not have to rely on taxing people living hand to mouth , with too much month and not enough paycheck to pay for my retirement. I am a socialist that way.

  • Copybook Headings Draper, UT
    Nov. 3, 2017 4:47 a.m.

    It makes perfect sense. Baby boomers discovered this tax loophole in 1978 and took full advantage of it during their prime earning years. Now that they're retiring they want to close it off. Money that would have gone tax free into a 401k is going to stay out in the economy now; where it will be taxed over and over. I'm guessing the extra tax revenue will probably help shore up social security and medicare. What a coincidence.

  • Fred44 Salt Lake City, Utah
    Nov. 2, 2017 2:26 p.m.

    2 bits,

    Again I agree with you and the only specific comments you respond to are ones that are made by people that appear to be left leaning and speak out against those on the right. What I am saying is don't accuse one side and label them when your side does the same thing.

    Most of the negative comments right now will be toward republicans because they control both houses and the White House and have opted to try and govern from the far right without any effort at bipartisanship. So when people say republicans want XYZ they are referring to the current republican leadership who have crafted a tax plan that focuses on tax cuts that not in terms of dollars because everyone knows the wealthy pay more but they are also given tax cuts in this proposal that only benefit them. Taking away the 401 was potentially very hurtful to the upper middle class. Who wanted to do it? The republicans in congress. This tax plan is not upper middle class or poor or elderly friendly but it is very friendly to the wealthy and the creators of the tax cut, the republicans will need to own it.

  • Tyler D Prescott, AZ
    Nov. 2, 2017 1:44 p.m.

    @Vermonter – “Finally, we may have found an issue (401k tax breaks) that unites liberal and conservative at least at the grass roots level.”

    I think there’s a lot we actually agree but our media (and who owns them) seems to want us to only talk (i.e., fight) about the stuff that divides us.

    And where are you all getting the “deficit neutral” stuff?

    From what I’ve read the House tax plan will add at least $1.5 Trillion to the deficit, and that’s even with fairly optimistic growth projections.

  • Vermonter Plymouth, MI
    Nov. 2, 2017 12:58 p.m.

    @Tyler D.
    You may be right. A lot of the Party faithful serving in Congress may be bought and paid for. Oddly, this was a lot of the reasoning used by most of the Trump diehards (especially in Michigan where I live) that want to "drain the swamp."

    I, too, was surprised that the Republican leadership initially had termination of 401k tax breaks in their tax bill. It does go against everything they have been preaching for years.

    Finally, we may have found an issue (401k tax breaks) that unites liberal and conservative at least at the grass roots level.

  • Frozen Fractals Salt Lake City, UT
    Nov. 2, 2017 12:41 p.m.

    @Tyler D
    "Please… someone explain this! Otherwise I’m forced to reach the most cynical conclusion (which many on the Left already believe) which is that Republicans are so bought and paid for by the 1% that they really don’t care about the rest of us."

    Their deficit neutral tax plan disproportionately benefits the rich (partly because of what cuts they picked, and partly because the rich pay most of the taxes so pretty much any tax cut would help them more) paid for (it's deficit neutral) by the poor and elderly (cuts to Medicaid, Medicare, SNAP and other programs).

    They don't have to go after 401K's to show they're bought and paid for by the 1%.

  • 2 bits Cottonwood Heights, UT
    Nov. 2, 2017 12:19 p.m.

    @Fred44 11:00,
    I said I'm tired of people making assumptions about others based on their stereotypes for them. "People". That would include both Democrats and Republicans. They are both "People".

    Everybody does it. I know I sometimes do it. Didn't say only Democrats do it.

    In my comment I did say I think THIS assumption (The specific one in the comment I was responding to) was based on Democrat and media blather. And it is. But don't expand and then assume I think ALL comments are based on Democrat blather. I was addressing a specific comment. The assumption that "Republicans would LOVE to destroy our IRAs".

    Republicans want people to save for retirement.

    Reducing the max you can protect is not "destroying" your 401k.

    It's reducing the amount of your income you can hide from taxes (something I assume Democrats would like, but I'm not sure).

    But I am sure I don't want to destroy your IRA. And Rs in general would not Love to destroy your IRA.

    ===

    RE: "In my experience republicans are just as guilty as democrats of making these generalizations"...
    ---
    Me too. Never said it was just Democrats. But that specific comment I was talking about was.

  • Tyler D Prescott, AZ
    Nov. 2, 2017 12:02 p.m.

    So as of this morning, changing the 401k deduction is now off the table. No doubt our representatives were flooded with angry calls (another why big legislation should never be rushed).

    But again, I cannot wrap my head around the fact that Republicans posed this in the first. It seems antithetical to everything they’ve preached for decades.

    Please… someone explain this! Otherwise I’m forced to reach the most cynical conclusion (which many on the Left already believe) which is that Republicans are so bought and paid for by the 1% that they really don’t care about the rest of us.

    Trying to keep an open mind here but the cognitive dissonance is deafening.

  • silo Sandy, UT
    Nov. 2, 2017 11:57 a.m.

    @2 bits
    "Have you actually met and talked with any R who said they want nothing more than to destroy IRAs and 401Ks? Or is that an assumption?"

    Fair question. Have you ever actually met and talked with any D who said they wanted nothing more than taxpayer-funded abortion on demand? Or is that an assumption?

  • Vermonter Plymouth, MI
    Nov. 2, 2017 11:21 a.m.

    @2 bits.
    Actually I am a little surprised that the typically more liberal commenters here are for the most part against taking away the 401k tax break.

    401k tax breaks are about letting pretty much anybody that has a job keep more of their own money, and encourage them to save for retirement.

    One of my liberal friends in my community (who is doing well financially) frequently tells me that he should pay more taxes to help the government take care of the less fortunate. To him, removing the 401k tax break is one way to do this, and better "share the wealth" of America with everyone.

  • Fred44 Salt Lake City, Utah
    Nov. 2, 2017 11:00 a.m.

    2 bits,

    I couldn't agree with you more when you talk about people making generalizations about other people and assuming they know what they think and what they believe. You said "I think that's mostly Democrat and media blather about Republicans." So based on that it appears you are saying that only the Democrats and Media make these generalizations. I make that assumption based on this comment and many other similar comments.

    In my experience republicans are just as guilty as democrats of making these generalizations. I would think you would point that out with equal time for both. You do at times point out republican mistakes but typically you point out one republican mistake and follow it up with ten democratic mistakes. I would say that we are in a hyper-political world right now where both sides play politics and neither side is innocent. I think a fair minded person would point that out in a balanced way.

  • 2 bits Cottonwood Heights, UT
    Nov. 2, 2017 10:04 a.m.

    @stevo123 - Driggs, ID
    RE: "Republicans would love to see it destroyed"...
    ---
    A rash assumption on your part.

    But I'm used to these false assumptions about me and others. Assuming they know what we want. Based on what? Their political stereotypes for certain people.

    If you are an R... you must think XYZ (based on assumptions and stereotypes).

    I'm kinda tired of the grouping people and judging them, and pretending you can read their mind and know they think/want... based on your stereotypes and the letter you put by their name.

    Have you actually met and talked with any R who said they want nothing more than to destroy IRAs and 401Ks?

    Or is that an assumption?

    I think that's mostly Democrat and media blather about Republicans.

    I know what I think, you don't know what I think. The DesNews doesn't know what I think. And I don't want to destroy IRAs. So don't assume I want to do something I know for a fact I don't want to do.

    I like my 401K.

    I don't trust SS, but I do my 401K. Because I control what I put into it, and what I take out of it (not some politician who may decide somebody else deserves what I put in there more than I do).

    401Ks are a great thing IMO.

  • Vermonter Plymouth, MI
    Nov. 2, 2017 10:00 a.m.

    Agree with other commenters that this article is spot on.

    If the comments on here are any gauge, both conservatives and liberals should be contacting their representatives in Washington to tell them to leave 401ks alone.

    I think the trouble is that some people who have made their careers and lives in Washington (Republican and Democrat alike) think that 401k tax deductions cost the government too much money. On top of that, I think there is a smaller (but not necessarily impotent) group in Washington that think 401k tax breaks are simply tax breaks for the wealthy. This smaller group believes that if a person has any significant amount in a 401k, they are by definition "rich" or "wealthy."

  • conservative scientist Lindon, UT
    Nov. 2, 2017 9:47 a.m.

    Excellet editorial. The pre-tax (or more correctly, tax-deffered) limit should be raised, not lowered.

  • stevo123 Driggs, ID
    Nov. 2, 2017 9:32 a.m.

    The 401k program is a chance to let the middle class retire. Republicans would love to see it destroyed.

  • liberal larry Salt Lake City, UT
    Nov. 2, 2017 9:27 a.m.

    Lets not forget that when David Koch ran for vice president in 1980 his platform called for the elimination of SS, medicare, medicaid, etc. etc.

    And this is the person who funds a multitude of libertarian, and conservative think tanks including Americans for Prosperity, Libertas, the Tea Party, and the Libertarian party. Many of whose ideas we see referenced daily in this newspaper.

    These ultra far right groups and ideas now permeate the republican party, and this budget is helping realize David Koch's wish list from this 1980 run.

  • pragmatistferlife salt lake city, utah
    Nov. 2, 2017 8:28 a.m.

    This is a huge deal, to borrow a phrase. The article and posters are correct. This is the single difference between the middle class having a safe retirement and insecurity.

    Anyone who opposes or reduces the effectiveness of the 401K exposes their true lack of support for the middle class.

    The GOP will expose it's true intentions if it supports these reductions, and continues to try to diminish Social Security, plus eliminate the ACA.

  • KDave Moab, UT
    Nov. 2, 2017 8:27 a.m.

    Too bad, all this hand wringing and fretting is for naught. It isn,t going to happen. Just a nice tax break for the middle class.

  • Tyler D Prescott, AZ
    Nov. 2, 2017 8:26 a.m.

    Will a Republican/conservative here please explain to us the logic of lowering the limit for 401k contributions?

    I thought the end game for the Right was to do away with Social Security and to promote personal responsibility by incentivizing us to save more of our own money for retirement.

    This proposal seems to fly in the face of that “conservative” objective.

  • TeachyMcTeacherPants Sandy, UT
    Nov. 2, 2017 5:00 a.m.

    Since Citizens United was passed our legislators don't care about regular people, they care about those who donate to campaigns.

    That is why all of the laws benefit donors and wealthy people, while giving crumbs to the rest. We need to separate money from elections or this will continue.

  • Millenial Snow Sandy, UT
    Nov. 2, 2017 1:12 a.m.

    Without social security reforms, having a good 401K is my only shot of not being homeless when I'm 80.

    Especially if these cuts are to underwrite the tax cuts on the superrich.

  • NoNamesAccepted St. George, UT
    Nov. 1, 2017 8:38 p.m.

    This op-ed is spot on. And anyone, in either party, who even suggests reducing our ability to contribute to and earn retirement in a 401(k) should be promptly retired at the very next election.

    Ditto for anyone who suggests that those who do make good use of their 401(k) should be rewarded with losing even 1 penny of the social security they have earned with lifetime "contributions" to that program.

    Some of the best tax cuts to give are those that reward and encourage saving for major life expenses such as retirement, medical expenses, and college expenses. The fewer strings attached to such programs, the more likely people are to make use of them and save. That is good for individuals and families, and so it is good for society.

    Let's see what can be done in the tax code to encourage employers to offer larger 401(k) matches. That also encourages more saving on the part of employees.

    A great editorial.

    Thank you.