New government control system proposed to restrict your access to your 401(k)s

[Joseon]

Proposal aims to curb raids on 401(k)s

Use your imagination. What would happen if everybody withdrew their 401k at the exact same time? Oh that's right, economic disaster! The banks are all dead and they don't want the idiots to withdraw their own hard earned money. Why? because the banks would be exposed as frauds, with no liquidity to provide the cash for millions of 401k retirees.

ala the middle ages, this scheme or fraud was similar to when banks lent or leveraged paper money to clients. Banking(Pun intended) on the fact that all clients would not cash their bank issued paper for gold at the same time.

By Sarah O’Connor in Washington


Published: October 28 2009 20:02 | Last updated: October 28 2009 20:02

US lawmakers were set to propose a new law on Wednesday that would discourage people from raiding their retirement savings early to see them through tough financial times or to splash out on expensive items.

The robustness of the US retirement system has come under close scrutiny since the financial crisis crushed the value of many so-called “defined contribution” pension plans such as 401(k)s, which invested in the markets. Legislators have already proposed bills trying to improve transparency, particularly over fees and conflicts of interest.

Herb Kohl, chairman of the Senate special committee on ageing, was on Wednesday set to go one step further and propose a law that would discourage people from dipping into their 401(k)s before they retire, which can seriously reduce the pot of money they have to live off in old age.

Some 15 per cent of Americans between the ages of 15 and 60 raid their 401(k) retirement savings plans, either by taking a “hardship withdrawal”, borrowing money from it or simply cashing it out when they leave their employer. Some fear that more people will be driven to do this as unemployment mounts and people struggle to pay bills and other expenses, though the Government Accountability Office has found no evidence of this.

“Americans’ retirement savings have taken a huge hit due to the recession,” said Mr. Kohl last month after the GAO released a report into so-called “leakage” from plans. “Despite the financial hardships many are facing, people need to resist raiding their 401(k) because it can be a really bad deal for them over the long-run.”

Taking money from 401(k)s can incur a 10 per cent tax penalty as well as fees and the loss of compound interest the account would otherwise have accrued. The GAO study found that a low-earning 35-year-old who took a $5,000 hardship withdrawal would forgo 12 per cent in retirement savings.

Mr. Kohl’s bill, which has yet to be introduced, was expected to ban products such as “401(k) debit cards” – a niche item that allows people to dip frequently into their savings.

It would also increase the interest rate that people have to pay on so-called 401(k) loans – when they effectively borrow money from themselves and are required to pay it back with interest. The bill would cut the number of loans people can take at one time, and eliminate a provision that stops people contributing to their 401(k) for six months after taking a hardship withdrawal, which the GAO found was ultimately damaging rather than helpful.

The Senate ageing committee is also investigating “target date funds” which have become the most popular default option for people automatically enrolled into 401(k)s. These plans are intended to shift from riskier investments such as stocks into safer ones such as bonds as the saver ages.

But the financial crisis exposed a big disparity in such funds: 2010 target funds had anything from 21 to 79 per cent of their investments in stocks, for example, meaning some were badly hit when Wall Street tanked last year.

[larsonstdoc]

   They (the illegitimate government) expect most of us  to be poor soon.  They don't want us to raid our retirement funds so they can raid them "FOR THE GOOD OF THE COUNTRY".

[planning4acrash]

Since when is withdrawing YOUR OWN money considered a raid? When the government consider that your money is theirs. They print it afterall, so they consider that all money you have was given you at their bequest. This is their criminology.

[Monkeypox]

Amazing, you aren't allowed to withdraw your own money during difficult economic times.

If the cared about the people, they would be proposing laws to make it EASIER to withdraw during the economic downturn.

[scoffer]

THIS HAS ME HOPPING MAD

It would also increase the interest rate that people have to pay on so-called 401(k) loans – when they effectively borrow money from themselves and are required to pay it back with interest. The bill would cut the number of loans people can take at one time, and eliminate a provision that stops people contributing to their 401(k) for six months after taking a hardship withdrawal, which the GAO found was ultimately damaging rather than helpful.

F**K our piece of S**T government.  They are so good to us, they want to save us from ourselves, so they are going to charge higher interest to those who choose to withdraw from their 401(k)'s early. I call bulls**t. Where the hell was concerned Big Brother when our tax dollars for years to come were being handed out to the greedy bastard failed f**king banks and insurance companies.

I don't even have a 401(k), but this suggestion has pushed me over the edge. There is no hope in changing our bloated, corrupt, greedy and self serving government. We are living "government of the people by corporate America".

Find a thousand ways to starve the beast, start today.

[Sane]

Amazing, you aren't allowed to withdraw your own money during difficult economic times.

If the cared about the people, they would be proposing laws to make it EASIER to withdraw during the economic downturn.

Almost like it is all going according to a plan.

I wonder if they are proposing restrictions on the Federal Reserve from giving $10 Trillion to Rothschild so that he can buy a continent with our 401(k) money backing up those soon to be worthless notes.

[Sane]

I bet Ptech is lined up to handle this task.

They did such a "Bang Up" job on 9/11 with the FAA.

[vcif]

Since when is withdrawing YOUR OWN money considered a raid? When the government consider that your money is theirs. They print it afterall, so they consider that all money you have was given you at their bequest. This is their criminology.

Indeed.

These criminals really do believe that this is their money since you have not yet paid taxes on it. As if your labor and the fruits of your labor are not your own to begin with.

America, homeof the slave.

[TahoeBlue]

No talk of IRA's (yet) but they already hit you with 10% Federal penalty, plus 2.5% California penalty
for early distribution.  (And What does California have to do with my IRA money? Why do they deserve 2.5 percent penalty? (Cause they're broke bastards? maybe? )

Yes there is 72(t) equal distribution payments, but many bonus penalties if you need to "modify"
(you can get equal payments of ~5 percent of total per year )
http://www.72t.net/

[chris jones]

I received mail from an old friend telling me her 401 was already hit big time by the Gov. this was 4 or 5 months past.

What am I missing here?

Our masters want us enslaved and broke. SHIITE they want it all.

[Joseon]

THIS HAS ME HOPPING MAD

It would also increase the interest rate that people have to pay on so-called 401(k) loans – when they effectively borrow money from themselves and are required to pay it back with interest. The bill would cut the number of loans people can take at one time, and eliminate a provision that stops people contributing to their 401(k) for six months after taking a hardship withdrawal, which the GAO found was ultimately damaging rather than helpful.

F**K our piece of S**T government.  They are so good to us, they want to save us from ourselves, so they are going to charge higher interest to those who choose to withdraw from their 401(k)'s early. I call bulls**t. Where the hell was concerned Big Brother when our tax dollars for years to come were being handed out to the greedy bastard failed f**king banks and insurance companies.

I don't even have a 401(k), but this suggestion has pushed me over the edge. There is no hope in changing our bloated, corrupt, greedy and self serving government. We are living "government of the people by corporate America".

Find a thousand ways to starve the beast, start todaya .

They are charging higher interest rates because 

1. Banks to earn some extra money from those smart enough to withdraw their savings and into real assets.

2. to prevent people from withdrawing at once. Since, there is no real pool of money for people to withdraw from. All of the money in the nest has been. It is all a grab fest, everybody for themselves , no holds bar.   That is reality.