This is horrible news but you have to appreciate the irony.
Three days ago Newsweek reported that Obama wants to cap the amount you are permitted to save for retirement.
“The Obama Administration’s new budget will cap retirement savings for the nation’s super-rich, but it’s possible that it could affect even smaller-scale savers… According to advance reports, the administration’s budget due out on Wednesday will propose a cap limiting the amount of annual return a retirement account can create to $205,000. If that proposal were enacted today, that would mean retirement accounts would be limited to $3 million in assets. The White House estimates that caps on the tax-preferred accounts would generate $9 billion over 10 years.”
It is completely wrong that I should have to argue against this plan. Letting people keep their money ought to be the default position of all people. But just remember, this amount doesn’t change according to how many children and grandchildren you have, or any other good you might do with the money. Obama’s planners have simply decided no one needs more than $205,000, and should not be permitted to save more.
But it gets better (by which I mean: much worse).
The next day Bloomberg reported on how the number of people borrowing money from their retirement accounts has shot up.
“The number of people taking loans from their 401(k) retirement accounts increased 28 percent in the fourth quarter from a year earlier as older workers tapped their savings, according to Wells Fargo (WFC) & Co…. U.S. workers may borrow from their 401(k) and pay the loan back to the account if their employer’s plan allows it, according to the Internal Revenue Service. Individuals who demonstrate financial need for reasons including medical expenses or the purchase of a primary residence also may take a so-called hardship withdrawal. Savers in their 50s were the most likely to borrow against their 401(k)s, Wells Fargo said.”
So even if Obama’s proposal goes down in flames, as I trust it will, it is still likely that many Americans will not be able to afford to retire. In fact, the news is worse than the Bloomberg report indicates. As Mish blogged:
“401(k) borrowing provides more evidence the economy is not as good as presented and that people are struggling in their jobs, much closer to the edge of oblivion than the Fed or Obama wants to admit. The borrowing surge happened in the 4th quarter, before the increase in payroll taxes this year, so expect matters to get worse. And if for any reason those 401(k) borrowers lose their jobs, they are going to be in deep trouble tax-wise.”
So one more dip in employment (which is one-hundred-percent likely, in my opinion), and we will face even more of a solvency crisis throughout the United States.