Americans are drawing down their 401(k)s for nonretirement needs in record numbers, just as Social Security goes bust. This portends poverty for millions as the White House fiddles. Cat food, anyone? One out of four U.S. workers with 401(k) retirement savings accounts has been forced to cash them out or borrow from them at high costs just to stay solvent. The Washington Post, citing a report from financial advisory firm HelloWallet, said the withdrawals have drained $70 billion, or an astonishing near-quarter of the total $293 billion, in America's retirement accounts "undermining already shaky retirement security for millions of Americans." It comes at a bad time, because as Monday's Page 1 IBD story by Jed Graham warned, as of this year, new retirees will outlive Social Security's official trust fund, a bankruptcy that will force a 25% cut in benefits. Some 69% of retired workers already are dependent in "major" part on Social Security as their main retirement income, according to a 2012 study by the Employee Benefit Research Institute, with worker savings off sharply for those in the below-$35,000 income bracket. Why is this happening? It's tempting to blame workers financial incompetence for these early cashouts, as some of the Post's quoted experts do. But harder evidence points to Obama's economic policies. For one thing, jobs remain scarce. A tax penalty for withdrawals as high as 45% suggests workers are most likely to be cashing out from necessity, not irresponsibility. The withdrawals coincide with a sharp rise in workers taking early retirement or going on disability simply because they can't find jobs and their unemployment benefits have run out. Another problem is Social Security itself and its low returns on contributions. U.S. workers contribute 12.4% of their income to Social Security, but get retirement checks so low they must direct another 5% to 10% to 401(k)s, eating into their take-home pay. And that's before the looming 25% cut in benefits. In privatized systems, such as Chile's, workers put just 10% of their incomes toward personal retirement accounts. They don't need extra 401(k)s, as their private pensions yield close to 80% of their working salaries. The Cato Institute notes that the Obama administration's high-tax, high-regulation, anti-business climate has depressed many stocks, which in turn has depressed the values of 401(k)s in addition to its tax hikes on capital gains. Worker pensions have been hit just as hard as "the rich," providing an incentive to withdraw from 401(k)s as investments decline. Incredibly, the Democratic intelligentsia's response has been to declare that the withdrawals prove a need for a government takeover of private accounts. Congressional Democrats constantly threaten to expropriate 401(k)s and replace them with Argentine-style "guaranteed retirement accounts." Alarmed savers on Internet financial bulletin boards have started talking of emptying their 401(k)s as a defense. But the problem isn't financially foolish workers. It's bad policies that make the problems worse. And none of this is being discussed rationally in Washington. Even so, as sure as the sun will rise, it's a coming disaster for millions of people in America who will spend their retirements in shocking poverty. http://news.investors.com/ibd-editorials/011613-640905-early-401k-withdrawals-american-seniors.htm
That's what Odumbo's MONSTROUS DEFICIT SPENDING IS REALLY ALL ABOUT! Of course, the sheeple are too stupid/naive to see it... and the MSM, The Bachelor, Dancing With The Stars, and American Idle aren't about to clue them in
IBD's op/ed is the equivalent to the Sunday comics if you have a basic understanding of how the world works. "just as Social Security goes bust." A one minute search on the Social Security Board of Trustees annual report: "After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033, three years earlier than projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086." ---------- The govt still has plenty of time to make adjustments. ---------- "The Cato Institute notes that the Obama administration's high-tax, high-regulation, anti-business climate has depressed many stocks, which in turn has depressed the values of 401(k)s in addition to its tax hikes on capital gains." <IMG SRC=http://research.stlouisfed.org/fred2/graph/fredgraph.png?&id=SP500&scale=Left&range=Custom&cosd=2009-01-15&coed=2013-01-16&line_color=%230000ff&link_values=false&line_style=Solid&mark_type=NONE&mw=4&lw=1&ost=-99999&oet=99999&mma=0&fml=a&fq=Daily&fam=avg&fgst=lin&transformation=lin&vintage_date=2013-01-17&revision_date=2013-01-17> The depressed values of 401(k)s are attributed to the Obama administration's so called "anti-business climate" and not from people selling at the lows in 2008 or 2009 and becoming so scared out of the market that they never get back in during the runup? Really?!?! ------ The problem with the Chilean private social security system:Chile rethinks its privatized pension system What a joke that system is. IBD, always a good comical read. Stephen Hawking is still alive.
Social Security Cliff in Sight; Retirees Will Outlive Trust Fund; Ramifications of Nonmarketable IOUs and Privatization Mike Shedlock In response to my post Making Social Security Actuarially Sound in a Business-Friendly Manner I have been exchanging emails and phone conversations with Jed Graham at Investor's Business Daily. Jed thinks benefit cuts will happen, and I agree. However, Social Security cuts are considered the "third rail" in politics. If you are not familiar with the term, it means anyone espousing cuts cannot be elected. Retirees Will Outlive Trust Fund Graham's current position on the viability of Social Security can be found in his January 14 article New Social Security Retirees Will Outlive Trust Fund Cliff Now in Sight Nonmarketable IOUs Jed and I are 100% in agreement that the alleged "trust fund" is nothing more than "nonmarketable Treasuries â really IOUs from one branch of government to another" that have no real value. As Jed states, those IOUs provide the Social Security administration the "legal authority to run cash deficits until they're spent." The key points are as follows: There is no lock box, there is no fund, there is a deficit, and IOUs in a pretend piggy bank are not the same as marketable bonds. Amusingly, I got into an exchange with a reader just a few days ago over the IOU concept. Reader Elliot wrote "You don't seem to understand bonds. They're just an IOU. The Chinese give us $$, we give them an IOU, and then we spend the dollars." Clearly, one major difference is the trust fund has nonmarketable IOUs, not marketable bonds. I responded to Elliot that "You cannot owe yourself money and it's even more ridiculous to put an IOU in a piggy bank and pretend to collect interest on it." Elliott was not convinced. The discussion with Elliott proves that some people will continue to believe whatever nonsense they want, no matter how carefully facts are presented otherwise. One thing I did not realize before exchanging emails with Jed Graham was that the payroll tax cut did not actually contribute to the current Social Security deficit (SS was not charged for the reductions in payroll taxes). Rather, the cuts simply added to the general deficit, funded as temporary stimulus. Thus, the current deficit is real, not imagined, no matter how one looks at it. The payroll tax cut did not temporarily overstate the problem. Simply put, Social Security is already insolvent if one ignores imaginary interest deposited into an imaginary piggy bank. Only on a pretend basis, by counting interest owed to oneself in a piggy bank that does not even exist, is Social Security solvent. Elliott's of the world aside, Jed points out the IOU pretense is universally understood by the CBO, by the administration, etc. Unfortunately, Congress ignores the problem for political reasons. Clearly, something needs to be done to shore up the system. And since something has to give, by definition it will. I outlined six possibilities, none of which has universal appeal. Six Possible Ways to Make Social Security Actuarially Sound Raise retirement age Raise or eliminate the cap on payroll taxes Cut benefits Collect Social Security on personal income Implement a Tiered Cap structure Means Testing More after the jump: http://globaleconomicanalysis.blogspot.com/2013/01/social-security-cliff-in-sight-retirees.html If anyone is a good, comical read, it is Convertibility.
Reading comprehension is still something that troubles the republican mind. Go back in my post and you'll see the part of exhaustion and the reduction in future payouts. The next president still has time to make adjustments, ie raising of taxes, to avoid the reduction in payouts.
Ah, so since the next President supposedly has time, Obama shouldn't bother showing any leadership whatsoever on the subject, right? Put it all off until D-day. That's a wise strategy.
Obamacare Social Security Medicare Medicade ---------- Wellfare Food Stamps The democraps won't touch the first four and are greatly expanding the last two. So long as the public keeps voting for the money nothing will happen until the collapse. It's going to be a weak effort advocating responsibility vs all those who want to be re-elected by a selfish electorate. In short, the collapse is inevitable. The only question is, 'when.'
Chronic inflation, ZIRP, forced withdrawals of retirement savings...i.e. sounds like the perfect recipe to horde millions of formerly self sufficient plebe's into the nouveau wards of the state. I don't give a shit what side of the aisle people reside on, there is no question that this is a deliberate policy. (btw, has anyone else taken notice of the hypocrisy that abounds when the bureaucrats talk of "increased savings", but then follow policies of "cash is trash" and herd people back into "forced speculation" and or "leveraged consumption".)