banksters coming after your 401(k)

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Submitted by BigGovernmentIsGood on September 22, 2010 - 8:59pm

Keep your hand on your wallet and a close eye on your 401(k). Banksters are gearing up to go after the $4 trillion in 401(k) accounts:

This week, a bevy of retirement-income experts said annuities should be offered as a 401(k) investment option as well as a default distribution option for when workers leave a company. The experts were speaking at a two-day hearing on lifetime-income options for retirement plans hosted by the U.S. Labor Department’s Employee Benefits Security Administration (EBSA) and the Treasury Department.

http://www.marketwatch.com/story/annuiti...

I imagine that there will be some mighty pissed off retirees if their 401(k) money is transferred into an annuity by default. I know it would tick me off.

Submitted by Coronita on September 22, 2010 - 9:33pm.

I know people who are more pissed off that the government is forcing them to make mandatory distributions after a certain again, and doubly pissed off that they are facing a huge taxation "penalty" for needing to take out a distribution beyond a certain level...

Actually, one my my family friends planned it very well. Instead of max out on a 401k, what they did was just contributed enough to get the company match. They took the rest of the money post-tax AND saved it in post tax accounts...Then took out a huge cash out loan on their primary home, and used the proceeds to buy rental property..Kept refinancing and refinancing and refinancing.Rationale? The huge mortgage payment was a nice itemized deduction, such that they were already hitting the upper limits on deductions that additional incentives from 401k was not needed....

Now in their golden years, they don't have the "401k oversaving hangover", and their rental property has all been paid off, and during their wage years, they had a reasonable tax rate due to the mortgage deduction. Folks were a genius..

Submitted by NicMM on September 23, 2010 - 3:44pm.

Don't they need to pay tax for their rental income?

Submitted by Coronita on September 23, 2010 - 4:46pm.

NicMM wrote:
Don't they need to pay tax for their rental income?

Yes, but that's after taking deductions from depreciation, cost of repair etc. Plus the tax on income (small) was during their earning years..Then post retirement they went from rental property to primary property, and sold, taking the tax free cap gains limit....nice, huh?

Submitted by edna_mode on September 23, 2010 - 8:20pm.

That strategy only works well in an environment with rising real estate prices and falling interest rates over the highest earning years of your career. Plus predictable taxation burden (i.e. government giving a generous mortgage subsidy).

Now, if they were in an environment with sideways real estate prices with highly volatile interest rates, would they do the same strategy?

BTW, not necessarily advocating for maxing out the 401(k)...depends on your offerings by your employer. At some, company match is in company stock...

Submitted by Coronita on September 23, 2010 - 8:31pm.

edna_mode wrote:
That strategy only works well in an environment with rising real estate prices and falling interest rates over the highest earning years of your career. Plus predictable taxation burden (i.e. government giving a generous mortgage subsidy).

Now, if they were in an environment with sideways real estate prices with highly volatile interest rates, would they do the same strategy?

BTW, not necessarily advocating for maxing out the 401(k)...depends on your offerings by your employer. At some, company match is in company stock...

I forgot to add:
Disclaimer: past performance is no guarantee of future returns.... :)

Submitted by Veritas on February 25, 2013 - 12:57pm.

delete

Submitted by Veritas on February 25, 2013 - 12:58pm.

"The federal government seems to have noticed that a whole bunch of money, much of the almost $20 trillion currently held in retirement accounts in the US, is about to get moving as the baby boomers retire. They want a piece of the action and Dodd-Frank may offer the Feds a way to weasel into your 401k."

http://cronychronicles.org/2013/02/15/th...

Submitted by UCGal on February 25, 2013 - 1:51pm.

Veritas wrote:
"The federal government seems to have noticed that a whole bunch of money, much of the almost $20 trillion currently held in retirement accounts in the US, is about to get moving as the baby boomers retire. They want a piece of the action and Dodd-Frank may offer the Feds a way to weasel into your 401k."

http://cronychronicles.org/2013/02/15/the-government-wants-to-help-you-manage-your-401k/

Here's the link to the original article.
Note the lack of details or substance. I don't think we have to worry yet. It's talking about consumer protection... not a "piece of the action" or "weaseling" into your 401k.

Having had friends sold crappy retirement products like variable annuities (still underwater on them 5 years later), etc... perhaps this is needed.

Dodd Frank already added much needed transparency... now the full expense ratio's are listed on your 401k funds. That's a GOOD thing for consumers.

Submitted by Aecetia on February 25, 2013 - 3:15pm.

We're from the government. We're here to help you.

Submitted by UCGal on February 25, 2013 - 4:04pm.

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