Retirement accounts such as 401k plans are meant to help people save money for retirement. So why do democrats want to do away with them?

Teresa Ghilarducci.

Does this name sound familiar to you?

She is a Professor of Economics at the New School for Social Research in New York City.

She is also out of her damn mind.

Why do I make such a claim? Because Teresa Ghilarducci has been speaking at committee hearings held by House Democrats regarding her views to de-privatize 401k retirement plans, and make them government programs. Let that just sink in for a second: she wants to do away with 401k plans geared towards Americans saving their income away for retirement and make them Government sponsored entities.

Sounds logical enough, right? Barney Frank did such a great job with Fannie and Freddie, he's exactly the type of person I want in charge with my retirement. Let me say this right off the bat - the federal government is the last group of people I want touching my retirement accounts.

To get into it, let's cover the basics: a 401k is a retirement account, typically sponsored by an employer. It is what is called a defined contributions account, meaning that the participant in the plan makes contributions to the plan from his/her paycheck before taxes. It is up to the participant how much money they want to contribute, and in most cases, the employer will match a certain amount. Employers may differ in what they match or when an employee is vested - in other words, they are eligible to receive a certain amount of that money from the employer upon withdrawal. For example, if an employer matches 100% of the first 6% an employee contributes on what is called a tiered vesting schedule of 5 years, that means that while the employee is contributing, they are eligible for a percentage of that money from the employer each year until they are fully vested at the end of 5 years. This means that withdrawal after 1 year would leave the participant eligible for their contributions, their earnings, and 20% of the employer's contributions. After 2 years it would be the same, only 40% of employer contributions, and so on...until after five years, when the employee would be fully vested.

It is up to an individual how aggressive they want their 401k portfolio to be - they can invest in high risk mutual funds such as those centered around stocks, or low risk funds, such as those that invest in a money market or bonds. The idea is that the account grows over time, and rises and falls with the reflective changes in the market. A typical mutual fund in a money market will have a rate of return on 6-9% on someone's investments. This is the value of the market. The account grows over time, and when the participant is ready to take their money out, they can pay any taxes up front on their earnings (since the money is deducted out of the pay check pre-tax) and then have the money for retirement. It should be noted that some plans do allow money to be taken out after taxes on a paycheck, but the traditional 401k plan has money taken out pre-tax.

There, now you have your history. Remember the original point of this blog? That's right, it was to call out Teresa Ghilarducci.

Once again, let's look at what this woman wants to do. I cannot stress this enough, because it needs to be beaten into people's heads until they understand. Teresa Ghilarducci wants to eliminate 401k plans under the private investment sector (all of you who work for mutual fund companies can kiss your jobs goodbye if this happens), and make them a government entity. She wants to take the money set aside by hard working Americans and trust it to the Federal Government - The same federal government that was in charge of Fannie Mae and Freddie Mac - which just had to undergo a 700 billion dollar bailout.

According to an interview with Ms. Ghilarducci, the rich are contributing 20 thousand dollars to their 401k plans a year, and this is unfair, because not everyone can contribute such an amount. The first problem with this statement is that it is quite simply wrong. There is a thing called the 402g limit. The 402g limit is a maximum amount that someone can contribute to his or her 401k plan. The 402g limit in 2008 is the same as it was in 2007 - $15,500 dollars. Therefore, Dr. Ghilarducci - no one can contribute 20k to a plan - it's illegal. No investment firm will allow you contribute over the 402g limit. They get fined, and the plans are set up to contribute over time, or to just simply stop once the limit is reached.

Second fallacy - according to Theresa Ghilarducci, the "middle class" is getting screwed since they can't contribute as much. Wrong. There are plenty of people who make let's say 70,000 a year (yes, this is part of the middle class) who give the maximum contribution pre-tax. I can honestly say this because I have worked in the industry and the average person contributing to a plan does not make loads of money. Many people just believe in the power of a free market or desire better retirement and contribute all they can.

Ironically, those making large 6 figure salaries are typically deemed ineligible for investing in 401k plans. They must open up an IRA or a brokerage account. You heard me right, they cannot even have a 401k. That means the vast majority of these people who are investing in 401k accounts are not millionaires, they are not the uber-rich, they are not the top 1% of the country, they are middle class Americans.

Why are these idiots so quick to try and place blame on people who have succeeded and made money for themselves?

Theresa Ghilarducci, your idiocricy continues to just baffle me.

The logic just gets more twisted. Under her proposal, the maximum contribution per participant would be 5,000 dollars. This is 10,500 dollars less than the maximum contribution per year under the current 402g limit. However, it's okay according to Dr. Ghilarducci, because those contributing that much "don't need it" anyway.

Really? Who is Theresa Ghilarducci to decide what Americans should do with their money? Who the hell is she to decide how much money someone does or doesn't need? Isn't this money that people are putting away for their retirement?

So let me get this straight - if you are making too much money, you don't need to contribute because you make too much or have saved too much anyway. Let's make it a government sponsored entity, and restrict the amount of money you can put in your 401k plan.

What's the term Barry Obama liked to use? "Spreading the weath?" This sure sounds like a clear cut example of it to me.

If you won't say it, then I will: SOCIALIST, SOCIALIST, SOCIALIST.

Now, stay with me here...when you look at the average of the stock market over the long term, the typical rate of return is (as noted before) 6-9%. To be safe, let's just go with 7%. Under her plan, she would offer an across the board rate of return of 3 percent. Without even having to do the math, let's just think about this...if you have seven thousand dollars growing at a rate of 3 percent a year for 30 years, or seven thousand dollars growing at a rate of 7 percent a year for 30 years, which earns more? Once again, this wouldn't even be possible under her plan, as the max contribution per participant would be 5 thousand dollars.

I fail to see the logic in this plan.

I understand that the market is at a down turn. However, the market has ups and downs. Any investor will tell you this. The point of playing the market is to stay with it, through large highs and lows...because in the end, the average rate of return will still be good enough to put you in the positive.

These huge evil tax breaks for 401k plans that Dr. G speaks of are not huge evil tax breaks at all. There are fees associated with plans, and yes - they do go to the people at the investment firm. But they aren't all rich because of it. Since it is a defined contributions employer sponsored plan and not a brokerage account, there is no commission, no huge benefit for those people.

Not to mention if we make it a government entity, someone still has to manage it, and someone still has to watch the plan. This idea that government knows best over the private sector is absolutely absurd.

There's no such thing as a free lunch, people. Your socialist meal tastes stale and moldy, and I want no part of it.

So let's review: under this idea the investor cannot invest as much, the government has more control over the normal citizen's life (yes, the average middle class American), and people who work for investment firms will be left looking for new jobs (over thousands suffering job loss). Yet, we are one more step to government control and a socialist country. In addition, millions upon millions of dollars that could have been earned by the normal honest investor will never see the light of day, because they have never had a chance to grow in a free market economy. They will be swept up in a whirlwind of government control.

No thank you. My hope is that ordinary Americans will wake up, and realize these theories proposed by people are destroying ordinary Americans, not helping them.

My advice to Teresa Ghilarducci? Leave my country the hell alone. You are a socialist, and I am not surprised you are supporting Barry Obama. You are doing more harm than good. Stop trying to hurt this country, just leave it the hell alone.

Wow - turns out the rocker knows a thing or two. Go figure.

-The Rocker-