Scooter432

I'm surprised more of us aren't pushing for an annuity of some sort in addition to a 401k for our retirement. With all the drunken sailor spending our gov't is doing, it is a short matter of time before our 401ks start becoming taxed. We need to start thinking of other retirement options besides an MBCP.

nene

If the socialists ever get fully in charge, there will be a "nationalization" of retirement accounts whereby you submit all 401K's, IRA's 403Bs to the feds and they will "provide" you with a national annuity to count on.....

At a minimum, I will be shocked if Roth IRA gains are not taxed by the end of my lifetime. I can already read the headlines.....over 2/3 country has little/nothing saved for retirement. Too much wealth in the top 10%, Feds need to spread the retirement funds around for fairness..... women and minorities the most effected.

Bottlen0se

I doubt this would ever get passed. At worst, I see a cap on how much can exist in a Roth account coming, as well as a cap on how much in 401ks. In fact I think this was proposed in the last few years but that’s not an easy one to make reality with fluctuating asset values. The retirement age for social security will likely be increased as well.

Scooter432

I doubted Biden would ever get elected, but here we are. It's coming.

SonicFlyer

They already do this, it's called "Social InSecurity" and it was implemented by the biggest socialist ever to gain power in this country, FDR.

OOfff

and it has kept millions of elderly from complete destitution.

NuGuy

With inflation comes high interest rates. High interest rates bring moderate, but very low risk investments not subject to market gyrations. Or exactly the kind of environment that produce low cost annuities.

Everything is cyclical. 401k & DCs cost companies real money every two weeks. Given a return to "normal" interest rates, on a historical basis, it would not surprise me one bit to see some companies go back to annuities/DB plans, at least in part. If they are set up correctly, in the proper environment, they are self funding and even if not, only require "notional" accounting.

A lot of DB plans suffered during the last 12 years because of the historically low interest rates. Simply google "historical interest rates" and you'll see the long period from 2008 to just recently as basically a flat line right above zero. While the actual funds use a blend of investments to generate their returns, ERISA requires them to calculate their funding ONLY by long term interest rates (those plans subject to the PPA2006 are exceptions). So while the "in the bank" part of the funds do OK, the ridiculously low interest rates (basically zero), compounded over the actuarial life of an average participant, drives insane funding requirements. With rates going back towards "normal", many of those funds that had been funding for low interest rates are going to suddenly find themselves seriously overfunded. Not because of some increase in the actual value of the fund, but because of how the math works looking forward for the funding requirement, and it's completely dependent on that long term interest rate number.

We're not there yet. We probably have another 150 basis points to go before we get back to "normal-ish" interest rates on the low end. What's more interesting is what happens to the investing strategies...we have a whole generation of investors that "grew up" with essentially free money. That's probably going to change significantly.

threeighteen

No it hasn't. It encouraged millions of [now] elderly people that saving for retirement wasn't necessary because the biggest ponzi scheme ever invented will take care of them.

https://en.wikipedia.org/wiki/Ida_May_Fuller

Bottlen0se

False equivalency. Nationalizing 401ks is something that IMO would never be discussed unless we saw true economic collapse. Many of these politicians themselves have Roth IRAs. They proposed to remove the backdoor Roth loophole. That never made it through either. I wonder why (sarcasm). Point is, there’s a lot of fear porn out there, and then there’s reality. Things would have to get extremely ugly before some of these things happened. It’s just my take, I enjoy hearing optimistic and pessimistic views and then I make my own conclusion which is still always open for revision.

Gunfighter

You are so close to the answer, you need to take one step back to see it. Imagine sitting in the JS rather than a control seat for a view of the entire picture. As one of Carnegie's 90% example, I can assure you political connections are not necessy. Just align your financial interest with the federal government and central banks by owning income producing real estate with fixed rate debt. A loan is your political connection to the Cantillon effect.

3% increase on a million dollar asset is $30,000. That represents a 12% gain on $250,000 of equity, while the loan balance gets paid down with inflated dollars. Cash flow from operations increases with inflation, while interest expense remains the same or decreases with amortization of principle. After 5-7 years in the above example you can refinance to a new loan, take equity out with no tax and buy a second property. Lather, rinse repeat indefinitely.

The price you pay is capital gains tax. It is how the government collects "their fair share" of inflation. Your million dollar asset has grown by $30,000 on paper, but $ in adjusted value. You will pay $6000 in CG tax on the inflation..

I can tell you from personal experience with over 50 examples that this is exactly how the majority of millionaires create wealth.