'Leaky' 401(k)s Worry Congress - some want to make it harder to get your money out:

[The Straight Story]

Broken Piggy Bank: 'Leaky' 401(k)s Worry Congress

Americans in record numbers are raiding their 401(k)s, depleting their retirement savings to compensate for paychecks and mortgage equity lost to the recession. As employers and savings plan providers struggle to stem the outflow of money, two senators have introduced legislation that would make it both harder for employees to dip into company-sponsored retirement savings and easier to repay their borrowings.

The SEAL Act (Savings Enhancement by Alleviating leakage in 401(k) Savings) introduced by Sens. Herb Kohl, D-Wis., and Mike Enzi, R-Wyo., would reduce to three the number of loans an employee could take against a 401(k). Savers currently can take as many loans as they think they can handle -- or as many as their employer may permit.

The bill would ban products that promote savings depletion, such as debit cards linked to 401(k)s, and it would make it easier for consumers to repay monies borrowed. According to a new study by consultants Aon Hewitt, some 28 percent of active participants in 401(k) plans had an outstanding loan in 2010, up from 22 percent in 2005.

"Loans are at an all-time high," says Pam Hess, director of Retirement Research for Aon. Withdrawal of money for reasons of hardship has been "up significantly, since the downturn," she reports. She thinks savers "are permanently impairing their retirement."

http://abcnews.go.com/Business/401k-retirement-savings-eroded-loans-withdrawls-cashouts-worry/story?id=13641490

[yourout]

1. Better Idea....bring home the manufacturing jobs and have people start putting money in....

instead of having to pull money out.

[RC]

4. Naa, can't do that. Too simple.

Besides the economy might recover and the working stiffs might have some discretionary money to spend. Gotta leave that money in the 401K for the big boys to use.

[Mr. Jefferson]

2. Harder for us to get our money out...

That way, there will still be something there when politicians decide to raid 401k plans like they did the SS trust fund.

[Skink]

3. Where else can you get a low cost loan.

then as you pay it back you are paying youself back.

[truebrit71]

5. "permanently impairing their retirement"...ummm..that would be what the rethugs want to do...

...to SS....

Bottom line, the 401(k) is MY money...i'll tap into whenever the fuck I feel like it thank you very much...especially in these economic hardtimes it can be a life-saver...

[dixiegrrrrl]

6. Whose money is it, again???? This story tells us exactly what is going on.

"She thinks savers "are permanently impairing their retirement."

No...savers are permanently impairing the free money ride that hedge funds and banksters have been using for years.


I would never ever ever fund a 401 k if I had to do it all over again.
Millions lost their investments in 2008 when Lehman and AIG crashed.
I got my retirement funds out by a cat's whisker that year, weeks before they folded.
Pension funds are GIANT source of revenue for hedge funds.

Wanna crash the banksters? Stop putting money into those funds.

[CoffeeCat]

7. This is frightening big time...

These bastards have NO RIGHT to tell us what we can do with OUR OWN money. It's one thing to mandate taxes or
that we put money into Social Security. But for the government to regulate what we can do with 401k funds--which are funds that
we voluntarily put away for retirement--is beyond the pale.

Is anyone else just a bit put off by this????

And how self righteous is this. Many people are raiding their 401ks because the economy is in the shitter. Why is
the economy in the shitter: Because our politicians voted for tax incentives for corporations that ship jobs overseas.
Because our politicians were paid off by the banksters who got deregulation and a repeal of Glass Steagal--which ushered
in the banking-crime crisis and the housing implosion. Because our politicians continue the trillion-dollar war machine that is bankrupting
our country. Because our government is cutting the safety net and support for people the poor, for senior citizens and
for hungry children--during a time when unemployment is at nearly 10 percent.

These bastards crater our economy and paint us into a economic corner of desperation--and they want to regulate money that we have
saved and may have to use--because of the mess that these same politicians have created?

OMFG.

I don't know how they'd pull it off, but they might just try to steal our 401k funds. This is probably a step toward them eventually saying, "Ooops...I'm sorry, but your 401k is gone. We messed up again. Our bad."

[Ed Suspicious]

8. Amen!

I had to take a 401k loan out late last year when I was between jobs. It saved me from eviction. To limit my access to my money - that I pay back to myself - is beyond the pale. Cannot happen. Keep your government hands off my private savings!

[Ed Suspicious]

9. And I find it disgusting that this is the shit that gets bipartisan support! n/t

[TBF]

16. They've stolen them before -

during the "crash" of 2008 many folks had the values of their 401k's drop when the market tanked. I wouldn't be surprised if they did it again. After all, we've only been through the residential real estate crash. We haven't even gotten to commercial for the most part and there's more money there.

[tammywammy]

10. Fuck that, it's MY money! n/t

[hobbit709]

11. In other words: They don't want you to get your money before they steal it.

[TBF]

14. Bingo - best reply in the thread. nt

[Gormy Cuss]

12. What's really going on here? Who benefits?

Investment houses? Pols who want to gut Social Security?
On the surface there is no reason for the government to cut off 401K loans solely on the basis of percentage of participants taking out loans. Is it that too many participants are failing to pay back those loans? Is it lenders crying foul over the competition?

I'd love to know what's really driving this. It's not concern about savers "permanently impairing their retirement."

[hobbit709]

13. Exactly. cui bono?

[CoffeeCat]

18. Great post...

...and I like how you think.

Anyone who believes that our politicians have our best interests at heart--is delirious. Most of
what they've done to us in the recent past has decimated our democracy and hurt the most vulnerable.

"We just want to help you" should sound the alarms for all US citizens.

And your questions are thought provoking. As you said, something else is going on. The loans
that people are taking, may be interfering with the interest of the banksters.

I'm just guessing, but usually when they rob us blind or take away freedoms--it's done in
an iterative process. First, they get us warmed up with small infractions that we're told
to tolerate because it's for our own goods. Then, after we grow accustomed to losing rights
or control of our lives--they make a few more small changes and they've got us in a sleeper
hold.

I'm guessing that this is one way to get their paws on it and put additional controls on it.

Possibly, they're disincentivising people into putting money into their 401ks and saving
money in general. They won't be happy until they have every last damn dime from everyone
in the lower 95 percent.

[IDemo]

15. I'm not worried a bit

Opted out of the 401k.

[Yo_Mama]

17. As so many have speculated, they think it's their money

The proposal to raid the 401k's to finance the federal government was set up in 2008 by the Democrats!
http://www.workforce.com/section/news/article/house-democrats-contemplate-abolishing-401k-tax-breaks.php

http://www.fool.com/personal-finance/retirement/2008/10/16/the-new-threat-to-your-life-savings.aspx

http://money.usnews.com/money/blogs/capital-commerce/2008/10/23/would-obama-dems-kill-401k-plans

It caused a lot of ire at the time. Stripping out all the rhetoric, Ghilarducci proposed that 401k's be tapped to fund the payments from the Social Security fund. Investments would be made into a special class of Treasuries, and workers would have to contribute 5%. These securities would guarantee a real rate of return of 3%. So as Social Security had to be funded by the general fund (when it starts redeeming all those IOU's), private workers retirement funds would be used to pay the Social Security draws on the general budget.

This solution kicks the can about 20 years down the road, but in the end it will leave everyone who participates with a double Social Security problem - when enough workers start drawing on their government TIPS-type 401k's, Social Security will no longer have a source of funding and workers won't be able to get their 401k money back from the government as fast as they wanted.

Ireland just did this. The proposal was made in 2008 right after Argentina did this.

The problem is that you would have to be really stupid to participate.

On edit: This proposal alone convinced several people I know to vote against Dem candidates in 2010. They were really pissed.

On second edit: Because they realized most people would never do this, they were going to make participation mandatory. So you would have to contribute another 5% of your paycheck to the government, the government would stick it in bonds that would replace the Social Security special-class bonds, and that way the federal budget would be balanced for years more. But when it crashes, it would crash utterly.

This is really just a regressive tax on the earners and a way to avoid raising taxes on higher earners.

[CoffeeCat]

20. Plus, it would leave so many people destitute!

If Soc Sec is gone, and Medicare/Medicaid is gone--as they plan; the only hope
many have remaining is the 401k savings they've amassed. If they have that as well, the
only hope for the middle and upper-middle classes is that they've squirreled away money
in their mattresses.

And seriously, that is an option. However it's very hard to be disciplined with money
that is in your house. It's just too easy to dip into it and spend it.

What a crock. How in the hell could we possibly allow this to happen?

A big problem with all of this---If you want to pull your money out of your 401k now--because
you see what's coming--you are taxed/penalized at 30 percent interest. So, they pretty much
have us over a barrel.

The only option for many is to just stop putting money into the 401k.

[Yo_Mama]

23. I never did put money into a 401k

I looked at the finances in the early 80s, and the SS "solution", ran the numbers when I was 25 and decided it was too big a risk to take.

Realistically, if persons with moderate incomes can't pull money out of the 401ks for emergencies, they can't afford to save in the first place. This bill would prevent a lot of moderate income people from taking advantage of the tax break.

It is really closet regressive tax on lower income people.

The truth is the people with the incomes over 200K that Obama wants to tax don't have nearly enough income to cover our deficit; all of these proposals are really ways to tax lower income people more while leaving the bennies intact for higher income people.

[RebelOne]

19. Fortunately, I got all of my money out of my 401K.

I was laid off my job in 2010. That was at the time of the Wall Street fiasco. I closed out my 401K and put the money in my savings account. At least, the money is safe there for the time being unless the government can figure a way to confiscate my savings.

[closeupready]

21. 'unless the government can figure a way to confiscate my savings.' - um, inflation.

Ignore the rising cost of housing, food and energy, and voila, they have found a way to confiscate your savings over time.

[closeupready]

22. Keep your hands off my 401(k).

:mad:

[Hannah Bell]

24. of course they're impairing their retirements you nimrods.

that's what happens when people lose their jobs, benefits, & housing wealth.