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Is Obama Going To Nationalize 401k Plans?
By Mike Rowan on March 20, 2009 | More Posts By Mike Rowan | Author's Website
This proposal is in the 2010 Budget and may be a start of a Government take over of the American 401k and Retirement Account system. Obama is giving retirement, IRA, and 401k savers something to monitor closely….
President Barack Obama is calling for establishing automatic workplace pensions and expanding unemployment insurance as part of his spending plan for the U.S. Labor Department next fiscal year. We liken this to an “Obama 401k Plan”
The budget “lays the groundwork for future establishment of a system of automatic workplace pensions, to operate alongside Social Security, that is expected to dramatically increase” retirement and personal savings, Obama’s Office of Management and Budget said in its outline, without giving details on the costs.
Obama 401k Plan: What it entails
The plan would force employers that don’t offer retirement plans to enroll employees in a “direct-deposit IRA account,” with the option for workers themselves to opt out. Currently, 75 million working Americans, or about half the workforce, lacks employer-based retirement plans, according to the administration.
The troubling thing to me is that the government would pay a 3% fixed interest rate on the accounts as opposed to the diverse mutual fund offerings in a traditional 401k plan. In effect, this would create a “Social Security” type structure to your retirement, IRA, or 401k.
The lack of equity options in your 401k plan would dramatically affect the possible returns, especially over an extended period of time. Just think, the average equity return over the stock market’s history is somewhere between 9-11%. Do you think that you would be happy with 3%?
A traditional 401k Savings Plan vs. an Obama 401k Plan
$10,000 invested over a 30 year period at a 3% interest Rate
Final Savings Balance:$ 24568.42
$10,000 invested over a 30 year period at a 8% rate of return
Final Savings Balance:$ 109357.30
That is a $84,789 Difference!
$10,000 invested over 30 years with an annual contribution of $2,000 at 3%
Final Savings Balance:$ 121302.74
$10,000 invested over 30 years with an annual contribution of $2,000 at 8%
Final Savings Balance:$ 356756.97
That is a $235,454 Difference!
As you can see. Your 401k plan offers you a drastically higher return than Obama would give you at 3%. The nationalization of the nations retirement system could cost you a pretty penny.
Is an Obama 401k Plan what you want?
The proposal “raises more questions than it answers,” said Representative Howard “Buck” McKeon of California, the top Republican on the House Education and Labor Committee.
“We need to take a step back and question this ever- expanding role for the federal government,” he said in a statement.
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I really don’t understand your comment in the article. The proposal would require employers which don’t offer retirement plans to now start offering retirement plans. Hence it would offer 75 million people access to a pre-tax savings account…which people can opt out of if they want. It says nothing about sunsetting 401Ks or having them replaced or “nationalized” as you suggest. How about covering the view in a more balanced way?…how much retirement a person currently without access to such a plan could benefit? Your article is a “Rush Limbaugh” like propaganda where conclusions have no basis in facts…but created fiction. We are in the deepest r(d)ecession in our lifetime, and all you can offer is status quo? Please….
why do you hold such a strong opinion about something you dont know what to call. does decession make sence? i dont want to embarrass you over the internet, wow, so i’ll cease.
1) Those 75 million peoples already have access to a pre-tax account. It is called an IRA.
2) The difference is that having the account would be the default action. We all know how ‘lazy’ people are in such decisions, so this might not be totally bad in theory but it is still an intrusion.
3) The biggest problem with such a plan is that “the gov’t” will be paying the 3% return. Where will the gov’t get this? What will the gov’t do with “our” funds for 30 years? Will the gov’t even “have” to leave our money alone or will they simply “loan” it to themselves and leave us IOU’s ala social security? What happens to the overall economy if these automaticly deducted funds are not injected into the private economy but only the gov’t economy?
If I can have my 401K invested individually at 7% or 8% or more, why would I want 3% regardless it’s a monkey or a snake’s plan.
Thanks Mike Rowan, you have pointed out very clearly with numbers, unless one is number blind, it’s not hard to see the vast difference.
Hi I dont’t invest in 401k and don’t want be forced in to investing in goverment 401k plan. I like my money in in gold and silver. If you do the history over the stock market to gold or the dollar to gold you will see what I mean. And my co-worker say well it goes up and down to. But when the market goes down they cry when gold goes down I get it cheaper and I never can lose what I have already got and no one can take it from me. the whole key is gold doesn’t go up or down it is the economy and price of are dollar. thanks Hamilton