Feeds:
Posts
Comments

Archive for June, 2010

It began during the reign of Ronald Reagan, although he certainly was not the architect of the idea.  Even so, he must have wholeheartedly approved. Why? Because it was good for business.  If there was ever a gigantic hoax put upon the unsuspecting American public, it is embodied in section 401k of the U.S. tax code.  It is this provision that provides for employers to set up tax deferred 401k retirement accounts for their employees. You know, so that when that day comes, in the dim and distant future, you will have a great big nest egg awaiting you, so you can have a long and comfortable retirement.  – Oh, and by the way, since all you workers now have these great 401k plans there isn’t a need any longer for your employer to provide a pension plan, is there?  So – goodbye pension plans. American workers, you are on your own.  How very Republican.

Oh, but wait.  There is one other little detail. You know all that money you can put in your 401k account? Well, you can’t put it in a bank and earn interest like other money you save. Of course you could of course put it in a money market account  with your broker.  There you could earn 0.003 percent interest and then watch the actual purchasing power of your savings drop by 50% or more in the next 30 years before you retire. (because of inflation. Or… you could invest it!  Yes, that’s the ticket!  You can put all of your money in the stock market – you could even buy stock in the company you work for!  And don’t worry. This isn’t gambling with your retirement money – it’s investing for the future!

Well, the future is here. As far too many boomers have found out and far to0 many children of the boomers have learned, there is no gold at the end of this rainbow, just a pile of horse manure – all of it a  gift from your government and big business and the IRS. Wasn’t it wonderful for them? Think of it. For so many years before the invention of the 401k scheme the Dow Jones average was essentially flat. The stock market was a no growth system.  Stocks had hardly moved since the Great Depression. Then, as if by magic, as soon as the 401k ripoff began the stock market started going up.  And the more our 401k dollars went into the market the more it went up!  Isn’t that incredible – just like the housing market! Of course the housing market went the way of all good Ponzi schemes…. and so did the stock market, because that was just an artificial bubble too – a scheme contrived by the arch Capitalists of America to use their employees wages to fuel the growth of their businesses, and all the while calling their scheme a retirement plan.

I’m afraid the chickens have come home to roost. Too many 401k plans are nothing but a smoldering ruin now. Too many retirees will be getting most of their retirement income from Social Security, not their 401k plan.  Thank God for Franklin Roosevelt, perhaps the last honest President this country has had.  But wait. It’s not over yet.  The 401k system still hangs over the heads of our youth. Cunning businessmen and government “servants” tell us to invest our 401k money wisely. Better still, young man, take the money and run.  Don’t listen to the advice of the big businessmen and certainly don’t listen to the government people who are owned by the businessmen.  They have worked out a system where your employer no longer has to give you a pension.  Even worse, a lot of people in power would like to kill Social Security as well.  Avoid the advice of businessmen and government hacks, they mean you no good.  We are truly floundering in a Republican world now – you are on your own and you will sink or swim by your own wits and not with any help from your employer or the government.

Meanwhile, a new crop of people are reaching retirement age every day. They are being pushed out from their jobs by mandatory retirement rules.  They can’t survive on what is left of their puny 401k and their Social Security benefits don’t come close to paying the bills. And WalMart doesn’t need anymore help. They’ll need to sell their homes now, but to whom? There is no market for houses anymore. It is like the retirees are stepping off the deck of the sinking Titanic only to find that there are no lifeboats in the water.  It is a slow moving catastrophe.  It is happening one day at a time, but it never makes the headlines.

How can a government tell its citizens to gamble in the stock market with their pension funds?  How can an employer look an employee in the face and shut down their pension plan while at the same time telling them to invest their savings in the company’s stock?  Today as people retire in their 60’s they can look forward to living a long life, perhaps into their 90’s or more.  But how will they pay for their housing and how will they buy food? The 401k catastrophe is only beginning. Wait a few years.  Wait until the retirees have spent what little is left of their 401k money.  Wait until they try to survive on their paltry Social Security payments. And just to rub salt into the wounds of these unsuspecting workers, wait until they try to take their money out of their 401k plan and they find they have to pay tax on each withdrawal – It was tax deferred, remember? Ah, but the IRS is sneakier than either you or I could ever imagine, for you not only have to pay tax on the money withdraw from your 401k, for if you also take additional money from your 401k to pay the 401k tax, you have to pay tax on that money too! So then, if you take out more money to pay that tax, well…you have to pay tax on that too! So you are paying tax on the tax on the tax. Isn’t that wonderful?  It’s a tax collectors dream.  And it all comes out of your 401k.  How perfect!

Happy retirement, America.

Read Full Post »

%d bloggers like this: