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Fri Nov 30, 2012, 11:10 PM

 

Time Magazine taps into right-wing crazy theory about eliminating 401(k) plans

One of the earliest fears about tax-favored savings accounts like IRAs and 401(k) plans was that when this pool of savings grew large enough Congress would not be able to resist tapping it to help solve the nation’s debt problems. We’re about to find out if those fears—persistent for decades—have been justified.

Everything including the sacred mortgage deduction is on the table as lawmakers wrestle with the fiscal cliff, a year-end avalanche of scheduled spending cuts and tax increases. With a combined $10 trillion sitting in IRAs and 401(k) plans, retirement accounts make a juicy target. Some of this money has never been taxed, and under current law never will be.

To maintain this savings incentive the government “spends” $100 billion a year in the form of tax breaks to those who stash money in these kinds of accounts. Now, a new study suggests this tax incentive does little to change saving behavior. Some lawmakers, no doubt, are wondering: Why keep an expensive tax incentive that does not incent?


Read more: http://business.time.com/2012/11/28/fiscal-cliff-why-congress-might-have-to-mess-with-the-401k/#ixzz2Dlmw04PT

I saw a thread about this here today (more accurately about taking retirement money from them).

This is how crazy rumors get started.

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Reply Time Magazine taps into right-wing crazy theory about eliminating 401(k) plans (Original post)
banned from Kos Nov 2012 OP
Still Sensible Nov 2012 #1
creeksneakers2 Nov 2012 #2
Canuckistanian Nov 2012 #3
life long demo Dec 2012 #4
dlcgopdinosamesame Dec 2012 #5
Ms. Toad Dec 2012 #6
Earth_First Dec 2012 #7

Response to banned from Kos (Original post)

Fri Nov 30, 2012, 11:28 PM

1. While not as universal as the middle class tax cuts

such a move on 401k or home mortgage deductions (at least on primary residences) would be a bigger blow to many in the middle class.

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Response to banned from Kos (Original post)

Fri Nov 30, 2012, 11:42 PM

2. During the last debt ceiling negotiations

The Senate gang of six put retirement savings on the block. I don't think they were looking at the basics though. They were after the savers tax credit, which allows low and moderate income earners to take up to 50% of their IRA / 401K investments off of taxes owed. The credit is worth up to $1,000 for an individual and $2,000 for a couple.

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Response to banned from Kos (Original post)

Fri Nov 30, 2012, 11:54 PM

3. The way I see it, it's very simple

If there's a benefit for the 99%, it's on the chopping block as unnecessary and a drain on the economy.

If it's a benefit for the upper 1%, it's sacrosanct and necessary for a full economic recovery.

Republicans are so easy to figure out.

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Response to banned from Kos (Original post)

Sat Dec 1, 2012, 04:59 AM

4. Maybe I don't fully understand the article, but I'm about to

start taking money out of my IRA, I'll be 70 in January, and apparently there is a law that you have to start taking required minimum distribution from your IRA, which will be taxed. I've been living frugally on my SS and a VERY small pension. So I do not understand what they mean by "some of this money never will be taxed". Can someone explain it to me?

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Response to life long demo (Reply #4)

Sat Dec 1, 2012, 06:48 AM

5. See the GOP wants YOU to suffer so the 1% won't have too

 

You worked hard saved a little in your 401k and now that you are retired and withdrawing from your 401k they want you to PAY for the lifstyle of the 1%.

Notice how your 401k is taxed at regular income rates while the 1% who live off interest and investments pay the at capital gains rate.

If it were up to me once you retire the first $100k of income regardless of source should be tax free.

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Response to life long demo (Reply #4)

Sat Dec 1, 2012, 07:13 AM

6. It depends on which form of IRA you have.

And how you put the money in. I have two - regular and Roth.

In my regular IRA I have a mixture of "taxed" and untaxed contributions. I say "taxed" because the reality is that those were contributions I put in when my income was low enough that I owed zero taxes (in other words, I never deducted my IRA contribution on the front page of the 1040). So I will never pay any actual taxes on those contributions. I have been tracking those contributions (by basis), and when I take money out of my IRA I will only have to pay taxes on the growth and on the portion of my contribution that was treated as untaxed (even though I never actually paid any taxes on any of it).

In my Roth IRA, I paid taxes on everything I put into it, but it gets to grow untaxed. So nothing I take out of my Roth IRA will be taxable income, even though I will be taking out considerably more than I put in. There is also a Roth 401(k) that works the same way.

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Response to banned from Kos (Original post)

Sat Dec 1, 2012, 07:19 AM

7. "stash money in these kinds of accounts"

Stash? Like we're stealing it and harboring it out of sight?

Nice language there...

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