Sen. Mitt Romney suggests he’d back cutting retirement benefits for younger Americans
https://www.businessinsider.com/mitt-romney-retirement-benef…
… you got to do what you got to do to maintain the billionaire tax cuts. Single mothers are probably too flush with the food stamps, too.
intercst
If you think Millennials and Z’ers are cranky bastiches now…
You all should organize amongst your age group(s), and loudly make your displeasure known
about this even being considered. I have to believe that if any
politicians are speaking about this in the open, then you can be sure it is a hot
topic behind closed doors, so this is a legitimate threat.
And judge politicians for what they actually do, not for the catchy slogans they like
to throw out like “family values”, or “make America great again”.
( I’ve always rolled my eyes at the “family values” platform. Can never recall
a single candidate running on the “anti family values” platform. Amazed that
people bought into that as a substantial platform to run on )
Can never recall a single candidate running on the “anti family values” platform. Amazed that
people bought into that as a substantial platform to run on
That’s part of the “bread and circuses” thought process, pandering to the masses, which unfortunately seem to include a sizeable portion that refuse to wash. The sloganeering is more on the circus side of things than the bread, of course.
Pete
lol, it’s one of the biggest MACRO economic issues in America, but this is the wrong board for it
The quoted article is super light on substance, so none of the following actually comes from it.
We have two young men in their 20’s. We have taught them to make use of the retirement tools available to them to secure their retirement, all while paying into SS from which they may never get to benefit. We started funding their Roth accounts from the first earned dollar, even tracking their income when “self-employed,” aka mowing lawns. Now young professionals, they are funding their Roth 401Ks in addition to the Roth IRAs. Youngest also has a 457b and a pension, in addition to the 401K and Roth, though as a newbie, not nearly enough income to fund all of them.
Most of these tools were not available to us at their age, Roths only very late in our careers. More and more tools are coming on line for individuals to create their own retirement funds. I would rather see these tools remaining and a subsistence level of emergency funds available to those who either choose not to provide for themselves or for some reason fail to do so. Having others take care of you as you age should not be the default, it should be the exception. Start early and save consistently.
Clearly, a stronger education on how to accomplish this is critical, as well as possibly seed money for investing for kids with parents at a low level of income, or who are young adults with low income. These would go to dedicated funds that could not be redeemed without reaching a certain age or infirmity level.
Kicking the can down the road is not working. I appreciate people like Romney whose default mode of communication is not to pat me on the head and tell me only what I want to hear. We need more politicians who are willing to make hard choices, rather than sticking verbal lollipops in our mouths.
IP
I have FA’d this political post.
Wendy
inparadise analyzes,
The quoted article is super light on substance, so none of the following actually comes from it.
We have two young men in their 20’s. We have taught them to make use of the retirement tools available to them to secure their retirement, all while paying into SS from which they may never get to benefit. We started funding their Roth accounts from the first earned dollar, even tracking their income when “self-employed,” aka mowing lawns. Now young professionals, they are funding their Roth 401Ks in addition to the Roth IRAs. Youngest also has a 457b and a pension, in addition to the 401K and Roth, though as a newbie, not nearly enough income to fund all of them.
Most of these tools were not available to us at their age, Roths only very late in our careers. More and more tools are coming on line for individuals to create their own retirement funds. I would rather see these tools remaining and a subsistence level of emergency funds available to those who either choose not to provide for themselves or for some reason fail to do so. Having others take care of you as you age should not be the default, it should be the exception. Start early and save consistently.
You understand that tax dodges like IRAs, 401ks and Roths disproportionately help those with higher incomes, right? They’re great for those in the top 10% of the income pyramid, not so much for the average worker.
No wonder people are sharpening their pitch forks.
intercst
You understand that tax dodges like IRAs, 401ks and Roths disproportionately help those with higher incomes, right? They’re great for those in the top 10% of the income pyramid, not so much for the average worker.
Unsubstantiated drive by comments like this are useless without presenting the reasons behind your conclusions. I strongly doubt we were in the top 10% for most of our career, but since you fail to define that, it’s hard to know. What I do know is that we could earn nothing on our assets and be just fine, all because of throwing, rather blindly while learning on the run, as much as we could into tax deferred IRAs/401Ks.
With a little education, others will benefit too.
IP
“The Hierarchy of Tax Preferred Savings Vehicles For High Income Earners” by Kitces is a nice discussion on how high income earners can maximize their returns in tax sheltered accounts.
“The Hierarchy of Tax Preferred Savings Vehicles For High Income Earners” by Kitces is a nice discussion on how high income earners can maximize their returns in tax sheltered accounts.
Fantastic, though if you are looking to actually have a point, stating that point and substantiating that point with data from that article rather than just broadly referencing the article would be helpful. And does it conclude as Intercst does that “They’re great for those in the top 10% of the income pyramid, not so much for the average worker.”? And if it is not so great for the average worker, why is that? Could education on retirement investing change that? Seed money to start the investments? I absolutely concede that both those things would be necessary.
In order to fix problems, one must first identify the root cause of said problem.
IP
<<You understand that tax dodges like IRAs, 401ks and Roths disproportionately help those with higher incomes, right? They’re great for those in the top 10% of the income pyramid, not so much for the average worker.>>
Unsubstantiated drive by comments like this are useless without presenting the reasons behind your conclusions. I strongly doubt we were in the top 10% for most of our career, but since you fail to define that, it’s hard to know. What I do know is that we could earn nothing on our assets and be just fine, all because of throwing, rather blindly while learning on the run, as much as we could into tax deferred IRAs/401Ks.
It’s simple arithmetic. A subject where many investors/voters are lacking. Someone earning the median family income is paying very little in taxes, thus a tax deduction for an IRA contribution, or property taxes and mortgage interest on a home yields very little benefit.
Make it a “refundable tax credit”, and I’d have a different opinion.
intercst
Make it a “refundable tax credit”, and I’d have a different opinion.
You mean like this? (it’s not refundable, but it can reduce income taxes (often to zero) for many low-income people)
“Retirement Savings Contributions Credit (Saver’s Credit)”
https://www.irs.gov/retirement-plans/plan-participant-employ…
It’s simple arithmetic. A subject where many investors/voters are lacking.
And a subject that can be taught, as I proposed.
Someone earning the median family income is paying very little in taxes, thus a tax deduction for an IRA contribution,…
No tax deduction, since we would be talking Roth IRAs, and as I said if the income levels were too low, then seed money from the gov’t to fund the accounts, which unlike self funded Roths would not be accessible until a certain age or disability level. The point is to give the individual control, though not access if not self funded, to their retirement funds and wean them off of the gov’t handouts. Yes, the initial seed money would be handouts, for some, but there would be required training in how to manage the accounts and the need to do so, since SS would be disappearing as we know it and replaced with bare survival funds. Teach them how to fish and give them the hook, line and bait to use their training. Don’t feed them endlessly.
Can’t be done without training and seed money for the lower income levels, as I stated in my first post.
IP
You mean like this? (it’s not refundable, but it can reduce income taxes (often to zero) for many low-income people)
Sure, that’s a start. But it still doesn’t do anything for the 47% that don’t pay any taxes because of a low income. (The guy referenced in the subject line famously complained about that.) They’re going to retire some day, too – often to some kind of welfare program at a higher social cost.
https://www.yahoo.com/video/retirement-reforms-may-not-benef…
In a recent research paper, “The Great American Retirement Fraud,” University of Virginia Law Professor Michael Doran argues that the retirement-reform road map undertaken by Congress, starting in 1996, has failed Americans, PlanSponsor reports.
“The retirement-reform project of the past 25 years has been and continues to be a policy scam,” Doran says in the paper. “Neither the aim nor the effect of the legislative changes has been to increase retirement security for the great majority of American workers.”
Instead of improving retirement security for low- and moderate-income workers, Doran contends that the congressional changes to retirement savings only helped employer-sponsored plans and individual retirement accounts (IRAs), which largely benefited affluent individuals with both the means and the inclination to save money toward retirement regardless of federal law providing incentives to do so.
I’m a case in point. I needed “X” dollars to retire early. And I was going to save “X” whether I had access to an IRA/401k or not. I didn’t save anything extra because of the IRA/401k. It just meant that I moved as much of the total as possible to the tax-advantaged accounts. (Less than half of “X” as it happened.)
Tax policy researchers estimate that the retirement tax breaks for 2019 to 2023 will exceed $1.5 Trillion, with most of the money going to the higher tax brackets. If you took that $1.5 Trillion and made it a fixed $5,000/year refundable tax credit instead of shoveling the money to the top of the pyramid, it would do a lot more good.
https://www.taxpolicycenter.org/briefing-book/how-large-are-…
intercst
No tax deduction, since we would be talking Roth IRAs,…
Again, a lack of understanding of arithmetic.
An untaxed Roth is an even bigger tax deduction over time (untaxed compounded investment returns are magic.) That’s why most of the value in these large, multi-generational fortunes is in the lack of taxation, not whatever productive activity the first generation workers were up to.
One proposal is to limit the Roth account value to $10 million, and then tax everything above that limit. Of course, political corruption will prevent that from happening.
intercst
An untaxed Roth is an even bigger tax deduction over time
And the point is to get them started by educating them and giving them seed money, making the alternative basic safety net entirely unattractive. You would be replacing SS with this, not adding it on to the existing system.
If a young person starts to accumulate assets and invest early, they won’t need SS to back them up. Initial early funding can be much more cost effective than what we have now, but it requires training and initial seed money. Eventually they will see their assets grow in the retirement account and be motivated to add more.
This is essentially how we trained our kids. We funded their Roths and worked with them on how to invest it. Had annual reviews to see how the investments were doing. Having skin in the game, funds in their own name, is what caught their attention. If you are all talk and nothing real for them to grow, then you start sounding like Charlie Brown’s teachers and they tune you out.
Teach them how to fish rather than feed them forever.
IP
And the point is to get them started by educating them and giving them seed money, making the alternative basic safety net entirely unattractive. You would be replacing SS with this, not adding it on to the existing system.
You can educate and “seed” the young without shoveling money to the upper income tax brackets. The arithmetic stands on its own.
intercst
But it still doesn’t do anything for the 47% that don’t pay any taxes because of a low income.
The 47% who don’t pay any income taxes don’t pay BECAUSE OF these parts of tax law!
That’s why married people who earn $40-50k rarely pay any income tax. The standard deduction is the biggest and immediately wipes away about $25k of income. Then add credits, like child tax credit, this one, and it wipes away all the rest of the income tax liability.
The saddest thing is that too many eligible people don’t use this wonderful credit to its full extent.
If nothing is done, and SS is required to be self-supporting, actuarial facts say benefits would be cut to about 75% of scheduled benefits, a few years from now, when the trust fund is exhausted. All everyone has to do is sit on their hands.
Or, the (L&Ses) could take a page from the Michigan legislature, which passed legislation to make receipt of Medicade benefits by able bodied people contingent on their working.
Expanding on that notion, SS and Medicare could be made contingent on people being too feeble to work, essentially becoming exclusively a disability program, while everyone who is able bodied is required to work, regardless of age, to fill all the poo jobs the “JCs” cry they can’t fill at the wage they want to pay.
Steve