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Readers blast taxes on 401(k)s

By Jennie L. Phipps · Bankrate.com
Wednesday, July 6, 2011
Posted: 2 pm ET

More than 300 readers posted a comment on the retirement planning blog I wrote about the government's flirtation with the idea of taxing, or at least removing, the tax-advantaged status of retirement accounts, including 401(k)s.

As you can probably guess, almost everybody was against it. However, many of the posts were thoughtful -- and Congress should take a look. Here are a few of the comments that struck me as the meatiest:

Mike: That's right. Take away the one incentive that average Americans even have a prayer of saving for retirement. That makes a lot of sense. No, no. Don't cut wasteful government spending. Don't reform the tax code to make it fairer. No, take aim at the 401K. Bunch of idiots. Please. E-mail your Congressmen and just say no. The only way I could see changing the 401K is if the tax code was reformed to blow out all deductions, loopholes, credits and exemptions for everybody and lowering the rate to 10 percent with a three-quarter super-majority needed in Congress to raise the rates. I'd even consider a moderate inflation adjuster (capped) to account for inflation. Where is Murray the Accountant (from the movie, "Dave", when you need him?)

Regina Boyer: Why don't any of our congressional members or presidents start leading by example? Let them start paying for their medical care, and pass a law banning pay raises for the next 10 years for themselves. And when they do get a raise, it can only be .25 cents an hour.

Jim M. Gau: The economy tanked a couple years ago, and I lost a huge chunk of the value of both my 401(k), and my primary home, as well as a couple additional pieces of property I had. How can I find anyplace safe for my money? Retirement plans like 401(k)s, IRAs, etc. should have be iron-clad protected and insured by the government against losing value. I am 53. I guess I had better live to a ripe old age to keep the family afloat! One  more major tanking like this last one, and we will all be saying, "God bless the bankruptcy courts!"

Sam: What a bunch of taxophobe whiners. You already live in the advanced country with the lowest taxes in the world, and all you do is cry. Taxes are the price of civilization -- police and fire protection, education, prisons, the armed forces, and yes, Social Security and Medicare. You think government is the problem. Try living in a country which has none (Somalia); anarchy isn't the fun you think it will be.

There are lots of comments like this -- definitely worth a read.

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4 Comments
Michael
August 30, 2011 at 10:35 pm

Two points - one the existing 401k account amounts cannot be taxed prior to withdrawal - that was a promise made when thney were put in place - period. If anyone wants to see a real revolution take place, try doing this. No one in DC will like the result from the President to the Congress.

Second point - fine, no more tax advantage for 401K from a specific date forward - not anything in the past, let us know and contributions will dry up immediately... Oh and if the companies think of harsh fees for people who no longer contribute, see the point above regarding the president and congress - it can apply to other as well. By the way - to avoid that revolution, they may want to allow a grace period for those that want to do a full conversion at no cost or penalty to a Roth. We will all be investing in Roths and turning over everything in our 401K accounts to these.

For the clowns who say - stop whining, sorry clowns - that is our hard earned money and we have lost more over the last decade to inept managers and corporate/government policies that favored everyone but the employees. We owe our fair share, but we do not owe for rule changes when we have already devoted our primary earning years to these "safe" 401K accounts and their promises.

Anyone even contemplating this will become a main target for the next election to replace.

DataBoy
August 17, 2011 at 1:12 pm

Hey LT, you're wrong. People pay all sorts of overt and hidden taxes, no matter what their income. If you don't like paying taxes then start your own business so you can avoid them like all the big boys.

LT
July 07, 2011 at 12:13 am

Hey Sam, you're a idiot! You and the rest of the liberals can all live in California or better yet, Canada. Almost 50% of americans don't pay any taxes so when everyone starts paying a flat tax then we can have some common ground. If you want to work to give 40% + of your hard earned dollars then go ahead, I got an education to advance my way of life, not the governments ability to dole out money to life losers and illegals that want something for nothing.