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Since the 401(k) laws are federal laws within the IRS, couldn't that law be changed at any time by the federal government? Based on history, it seems naive to t

Since the 401(k) laws are federal laws within the IRS, couldn't that law be changed at any time by the federal government? Based on history, it seems naive to think that trillions of dollars sitting in retirement accounts would not be eventually re-purposed.

ceejayoz 10y ago
They have the theoretical power, but how do you think "we're taking your retirement accounts" is going to play politically? It was possible with pensions because they often weren't privately held accounts, and people didn't have individual balances they could consult.
- logicalmind 10y ago
  How is that any different from social security though? Social security taxes are being taken out of every american's paycheck as we speak. Yet, anyone under the age of 40 or so has no illusions that social security will be solvent by their retirement age.
  - ceejayoz 10y ago
    It's possible because you don't have a Social Security balance. There's no statement that says "you personally have $250k in your account" like a 401(k) or IRA does. So, no one notices when Congress goes fishing in it. Frankly, I (34) do think it'll be solvent by my retirement. It'll still have funds to pay about 3/4 of current benefits without changes to the system. As it gets closer, political change will likely get easier as Congress doesn't want lose their cushy jobs en masse.
    - snuxoll 10y ago
      I actually get a letter from the government every year showing how much money I have put into the social security trust, and how much I can expect when I retire if I keep putting in the same amount as I did last year. You can view it online anytime here, actually: https://www.ssa.gov/myaccount/ https://www.ssa.gov/myaccount/ Ultimately since it's a huge trust fund of course there's no "You have X money in the bank", but it does say I should expect "X money per month" when I retire. It'd be nice if it showed details of the trust fund overall.
      - ceejayoz 10y ago
        I get those too. Note that nowhere does it claim the amount you paid in is your balance. Your benefits won't go up if you retire at 100 years old. Your benefits won't run out if you live to 500. It's not like a 401(k) or IRA, where you have $x dollars in it that's your money and have to budget your withdrawals. They won't update the "amount you will get" to reflect Congress dipping into the fund. The statements operate on the "if everything continues to go well" basis, and so what Congress does isn't reflected on them. No one gets their next statement and asks "hey, where'd my money go?" That's why it's politically safe to raid, at least in the short term.
        loeg 10y ago
        > They won't update the "amount you will get" to reflect Congress dipping into the fund. The statements operate on the "if everything continues to go well" basis, and so what Congress does isn't reflected on them. Right. They do say, "Your estimated benefits are based on current law. The law governing benefit amounts may change. Congress has made changes to the law in the past and can do so at any time." At least.
  - loeg 10y ago
    I think it'll be solvent one way (reduced benefit or increased benefit age) or another (increased tax rate on workers) by the time I'm 62.
    - harryh 10y ago
      Another possible way is means testing. If you've saved enough for retirement on your own, you don't get social security. Personally I think this scenario is one of the more likely ones.
      - loeg 10y ago
        I hope not. One would have to exclude benefits to a lot of people who have been paying the top tax rate for SS to save any significant amount of money. In effect, this would be a retroactive tax. SS has never been a means tested program. See also: > Social Security benefits are relatively evenly distributed among retirees. The vast majority of benefits go to people who are low- or middle-income by any standard. This means that a means test that is focused on taking back benefits from upper income retirees is likely to raise very little money... > This suggests that means testing is not an effective route for reducing the cost of Social Security. Source: http://cepr.net/documents/publications/ss-2011-03.pdf http://cepr.net/documents/publications/ss-2011-03.pdf
        harryh 10y ago
        You raise a very good point that means testing wouldn't save very much money unless the cutoff was very low and cut into middle-income retirees. So perhaps my guess about this is wrong. It just seems so politically easy though. "Why should millionaires get SS benefits while the middle-class suffers?" is a good sound bite.
  - Spellman 10y ago
    It will likely be a net drain on the budget, but it's highly politically unviable to stop payments altogether.
  - guelo 10y ago
    One way to think of the Social Security fund is that it is invested in one of the safest instruments in the world: loans to the US government backed by their "full faith and credit". What's going on is that the tax-cut crowd is hoping to default on those loans so their taxes don't have to be raised to pay it back. Part of their political strategy is convincing young people that the fund will disappear for unexplained reasons, or that it's not really a fund. It's part of a long-term, multi-generational plan to transfer tax burden from the wealthy to the <$100k crowd that started with Mr. "lower taxes" Ronald Reagan increasing the SS tax.
- rsync 10y ago
  "They have the theoretical power, but how do you think "we're taking your retirement accounts" is going to play politically?" How did "we're showing up to physically seize all of your gold" play out ? https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102
  - ceejayoz 10y ago
    "We're exchanging something worth money for money" plays a little differently than "we're taking some of your money".
bdavisx 10y ago
Changing the law would mainly affect older people. And older people vote in very high percentages. Politicians are very, very careful about doing things that will make older voters angry.

ceejayoz 10y ago

They have the theoretical power, but how do you think "we're taking your retirement accounts" is going to play politically? It was possible with pensions because they often weren't privately held accounts, and people didn't have individual balances they could consult.

logicalmind 10y ago
How is that any different from social security though? Social security taxes are being taken out of every american's paycheck as we speak. Yet, anyone under the age of 40 or so has no illusions that social security will be solvent by their retirement age.
- ceejayoz 10y ago
  It's possible because you don't have a Social Security balance. There's no statement that says "you personally have $250k in your account" like a 401(k) or IRA does. So, no one notices when Congress goes fishing in it. Frankly, I (34) do think it'll be solvent by my retirement. It'll still have funds to pay about 3/4 of current benefits without changes to the system. As it gets closer, political change will likely get easier as Congress doesn't want lose their cushy jobs en masse.
  - snuxoll 10y ago
    I actually get a letter from the government every year showing how much money I have put into the social security trust, and how much I can expect when I retire if I keep putting in the same amount as I did last year. You can view it online anytime here, actually: https://www.ssa.gov/myaccount/ https://www.ssa.gov/myaccount/ Ultimately since it's a huge trust fund of course there's no "You have X money in the bank", but it does say I should expect "X money per month" when I retire. It'd be nice if it showed details of the trust fund overall.
    - ceejayoz 10y ago
      I get those too. Note that nowhere does it claim the amount you paid in is your balance. Your benefits won't go up if you retire at 100 years old. Your benefits won't run out if you live to 500. It's not like a 401(k) or IRA, where you have $x dollars in it that's your money and have to budget your withdrawals. They won't update the "amount you will get" to reflect Congress dipping into the fund. The statements operate on the "if everything continues to go well" basis, and so what Congress does isn't reflected on them. No one gets their next statement and asks "hey, where'd my money go?" That's why it's politically safe to raid, at least in the short term.
      - loeg 10y ago
        > They won't update the "amount you will get" to reflect Congress dipping into the fund. The statements operate on the "if everything continues to go well" basis, and so what Congress does isn't reflected on them. Right. They do say, "Your estimated benefits are based on current law. The law governing benefit amounts may change. Congress has made changes to the law in the past and can do so at any time." At least.
- loeg 10y ago
  I think it'll be solvent one way (reduced benefit or increased benefit age) or another (increased tax rate on workers) by the time I'm 62.
  - harryh 10y ago
    Another possible way is means testing. If you've saved enough for retirement on your own, you don't get social security. Personally I think this scenario is one of the more likely ones.
    - loeg 10y ago
      I hope not. One would have to exclude benefits to a lot of people who have been paying the top tax rate for SS to save any significant amount of money. In effect, this would be a retroactive tax. SS has never been a means tested program. See also: > Social Security benefits are relatively evenly distributed among retirees. The vast majority of benefits go to people who are low- or middle-income by any standard. This means that a means test that is focused on taking back benefits from upper income retirees is likely to raise very little money... > This suggests that means testing is not an effective route for reducing the cost of Social Security. Source: http://cepr.net/documents/publications/ss-2011-03.pdf http://cepr.net/documents/publications/ss-2011-03.pdf
      - harryh 10y ago
        You raise a very good point that means testing wouldn't save very much money unless the cutoff was very low and cut into middle-income retirees. So perhaps my guess about this is wrong. It just seems so politically easy though. "Why should millionaires get SS benefits while the middle-class suffers?" is a good sound bite.
- Spellman 10y ago
  It will likely be a net drain on the budget, but it's highly politically unviable to stop payments altogether.
- guelo 10y ago
  One way to think of the Social Security fund is that it is invested in one of the safest instruments in the world: loans to the US government backed by their "full faith and credit". What's going on is that the tax-cut crowd is hoping to default on those loans so their taxes don't have to be raised to pay it back. Part of their political strategy is convincing young people that the fund will disappear for unexplained reasons, or that it's not really a fund. It's part of a long-term, multi-generational plan to transfer tax burden from the wealthy to the <$100k crowd that started with Mr. "lower taxes" Ronald Reagan increasing the SS tax.
rsync 10y ago
"They have the theoretical power, but how do you think "we're taking your retirement accounts" is going to play politically?" How did "we're showing up to physically seize all of your gold" play out ? https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102
- ceejayoz 10y ago
  "We're exchanging something worth money for money" plays a little differently than "we're taking some of your money".

bdavisx 10y ago

Changing the law would mainly affect older people. And older people vote in very high percentages. Politicians are very, very careful about doing things that will make older voters angry.