Guaranteed Retirement Accounts (GRAs)

[Arkie]

Would you be in favor of legislation that would eliminate 401(k) plans and create as an alternative a "Guaranteed Retirement Account" for every worker in the United States?

Guaranteed Retirement Accounts are like universal 401(k) plans except that the government will invest and manage the pooled savings.

Participation in the program is mandatory except for workers participating in equivalent or better employer defined-benefit plans where contributions are at least 5% of earnings and benefits take the form of life annuities.

Contributions equal to 5% of earnings are deducted along with payroll taxes and credited to individual accounts administered by the Social Security Administration. The cost of contributions is split equally between employer and employee. Mandatory contributions are deducted only on earnings up to the Social Security earnings cap, and workers and employers have the option of making additional contributions with post-tax dollars. The contributions of husbands and wives are combined and divided equally between their individual accounts.

The accounts are administered by the Social Security Administration and funds are managed by the Thrift Savings Plan or similar body. Though funds are pooled, workers are able to track the dollar value of their accumulations, as with 401(k)s and other individual accounts.

The pooled funds are conservatively invested in financial markets. However, participants earn a fixed 3% rate of return adjusted for inflation, guaranteed by the federal government. If the trustees determine that actual investment returns have been consistently higher than 3% over a number of years, the surplus will be distributed to participants, though a balancing fund will be maintained to ride out periods of low returns.

Participants begin collecting retirement benefits at the same time as Social Security, and therefore no earlier than the Social Security Early Retirement Age. Funds cannot be accessed before retirement for any reason other than death or disability.

Account balances are converted to inflation-indexed annuities upon retirement to ensure that workers do not outlive their savings. However, individuals can opt to take a partial lump sum equal to 10% of their account balance or $10,000 (whichever is higher), or to opt for survivor benefits in exchange for a lower monthly check. A full-time worker who works 40 years and retires at age 65 can expect a benefit equal to roughly 25% of pre-retirement income, adjusted for inflation, assuming a 3% real rate of return. Since Social Security provides the average such worker with an inflation-adjusted benefit equal to roughly 45% of pre-retirement income, the total replacement rate for this prototypical worker will be approximately 70%.

Participants who die before retiring can bequeath half their account balances to heirs; those who die after retiring can bequeath half their final account balance minus benefits received.

[ak1971]

Originally Posted by Arkie

Would you be in favor of legislation that would eliminate 401(k) plans and create as an alternative a "Guaranteed Retirement Account" for every worker in the United States?

Guaranteed Retirement Accounts are like universal 401(k) plans except that the government will invest and manage the pooled savings.

Participation in the program is mandatory except for workers participating in equivalent or better employer defined-benefit plans where contributions are at least 5% of earnings and benefits take the form of life annuities.

Contributions equal to 5% of earnings are deducted along with payroll taxes and credited to individual accounts administered by the Social Security Administration. The cost of contributions is split equally between employer and employee. Mandatory contributions are deducted only on earnings up to the Social Security earnings cap, and workers and employers have the option of making additional contributions with post-tax dollars. The contributions of husbands and wives are combined and divided equally between their individual accounts.

The accounts are administered by the Social Security Administration and funds are managed by the Thrift Savings Plan or similar body. Though funds are pooled, workers are able to track the dollar value of their accumulations, as with 401(k)s and other individual accounts.

The pooled funds are conservatively invested in financial markets. However, participants earn a fixed 3% rate of return adjusted for inflation, guaranteed by the federal government. If the trustees determine that actual investment returns have been consistently higher than 3% over a number of years, the surplus will be distributed to participants, though a balancing fund will be maintained to ride out periods of low returns.

Participants begin collecting retirement benefits at the same time as Social Security, and therefore no earlier than the Social Security Early Retirement Age. Funds cannot be accessed before retirement for any reason other than death or disability.

Account balances are converted to inflation-indexed annuities upon retirement to ensure that workers do not outlive their savings. However, individuals can opt to take a partial lump sum equal to 10% of their account balance or $10,000 (whichever is higher), or to opt for survivor benefits in exchange for a lower monthly check. A full-time worker who works 40 years and retires at age 65 can expect a benefit equal to roughly 25% of pre-retirement income, adjusted for inflation, assuming a 3% real rate of return. Since Social Security provides the average such worker with an inflation-adjusted benefit equal to roughly 45% of pre-retirement income, the total replacement rate for this prototypical worker will be approximately 70%.

Participants who die before retiring can bequeath half their account balances to heirs; those who die after retiring can bequeath half their final account balance minus benefits received.

personally no. I can generate better returns. and honestly the govt will just use all that $$$ for something else and f that up. At least with a 401 or a self directed IRA, you know that the money is there (even if it is losing like the last 6 mo)

[mosca]

Absolutely NOT. The part that scares me is the idea of it being mandatory. What you have described is just Social Security, Part Deux. If people want to invest their money for retirement, let them - if not, so be it. But it shouldn't be forced upon anyone.

[El Minion]

ON THE MEDIA
Right-wing media feeds its post-election anger

Bill Pugliano / Getty Images
RIGHT WING: "The game has begun," Rush Limbaugh told his radio audience of 15 million to 20 million last week.


Rush Limbaugh and Sean Hannity dive shamelessly in, talking about the 'Obama recession' and other partisan lines.
By JAMES RAINEY
November 9, 2008
You have to give Rush Limbaugh a perverse kind of credit. At least when he is demonizing Barack Obama, fabricating Obama policies, blaming Obama for single-handedly causing the recession and the stock market crash, he doesn't pretend to be fair.

Opening his first post-election rant against the president-elect, Limbaugh launched in with a certain relish. "The game," he told his radio listeners, "has

Sean Hannity, on the other hand, insisted on feigning a post-election detente, telling his Fox News television audience last week, "I want Barack Obama to succeed."

Didn't he think anyone would notice that, just a moment later, he was back parroting the failed campaign argument that Obama is a "mystery"?

"I fear [this] is the guy that has these radical associations 20 years ago," Hannity added, an odd way of demonstrating support for the new commander in chief.

A healthy skepticism is not only the media's right but its obligation. Indeed, commentators at many mainstream outlets -- including the Los Angeles Times, Washington Post and Wall Street Journal -- have already argued that Obama's best bet to succeed will be if he hews to a centrist path.

But many on the losing end of last week's election want to hold on to their anger. And there are those in the media -- led by the likes of Limbaugh and Hannity -- only too ready to feed that animus, along with their own ratings.

"The Obama recession is in full swing, ladies and gentlemen," Limbaugh told his radio audience of 15 million to 20 million on Thursday. "Stocks are dying, which is a precursor of things to come. This is an Obama recession. Might turn into a depression."

Apparently the tanking of the real estate market, record losses in the auto industry, and massive failures in the banking and investment industry have very little to do with our problems. The economic system is collapsing, Rush wants us to know, because it anticipates the tax increases Obama has pledged on capital gains and for the highest income earners.

But maybe that shouldn't be so surprising, because radio's Biggest Big Man also assures us that the Democrat welcomes "economic chaos" because it gives him "greater opportunity for expanded government." In a time when the nation calls out for cool leadership and rational discussion, Limbaugh stirs the caldron, a tendency he proved in a particularly grotesque way last week when he accused Obama's party of plotting a government takeover of 401(k) retirement plans.

"They're going to take your 401(k), put it in the Social Security trust fund, whatever the hell that is," Limbaugh woofed. "Trust fund, my rear end."

A slight problem with Limbaugh's report: Obama and the Democrats have proposed no such thing.

The proposal, in fact, emanated from a single economist, one of many experts testifying to a congressional committee.

The president-elect has thus far shown as much interest in taking over your 401(k) as he has in moving the capital to Nairobi. (If you look hard, you might find that one somewhere out there in the blogosphere, too.)

To broadcast such a report -- so drained of context as to constitute a lie -- would be a shameless act at any time. But Limbaugh needlessly stirred the fears of the millions he holds in his thrall -- making the 401(k) thievery sound like nearly a done deal. Shameless.

Hannity and Limbaugh filleted Obama's selection as chief of staff, Rahm Emanuel, in a way that exposed their partisan gamesmanship.

Mainstream newspapers have filed plenty of unflinching accounts of Emanuel's tough, occasionally ruthless tactics as a Democratic congressional leader and onetime operative in the Clinton White House. That assessment of bare-knuckle partisanship Hannity seized on. But it wouldn't do to report another aspect of Emanuel's record -- his Clintonesque bent for the political center.

So the Fox-man simply created a new persona for Emanuel as, you guessed it, "one of the hardest left-wing radicals on the left."

Ever open-minded, Hannity concluded, "I think they're going to overreach, and I think we're going to see the person that I think Barack Obama is. I think he is hard, hard left."

Then, I kid you not, Hannity ended with this pledge: "We'll see. We'll give him an opportunity."

Republican Sen. Lindsey Graham apparently didn't get the memo requiring Obama's opponents to sink immediately and mindlessly into rank partisanship.

The South Carolina senator, one of Sen. John McCain's closest allies in his bid for the presidency, praised Obama's selection of Emanuel as "a wise choice." He added that the new chief of staff could be a tough partisan, but was also "honest, direct and candid" and willing to "work to find common ground where it exists."

Perhaps Hannity, Limbaugh and the rest of those intent on poisoning the soil before bipartisanship can take root might recall words of wisdom from Brit Hume, a veteran newsman who is close to leaving the Fox anchor desk for semi-retirement.

The problem with the accusations of Obama being "dangerous" and "radical," Hume said on election night, "was that it just didn't fit with the man you saw before your eyes."

Rainey is a Times staff writer.

james.rainey@latimes.com

[cutthemdown]

Oh god no!!!!!!

[Spider]

nothing like this has been suggested ............... Not that I have heard

[cutthemdown]

Originally Posted by Spider

nothing like this has been suggested ............... Not that I have heard

A lot of Dems in Congress are talking about it.

[Spider]

Originally Posted by cutthemdown

A lot of Dems in Congress are talking about it.

Show me the proof ..........

[cutthemdown]

http://www.workforce.com/section/00/...e/25/83/58.php

Powerful House Democrats are eyeing proposals to overhaul the nation’s $3 trillion 401(k) system, including the elimination of most of the $80 billion in annual tax breaks that 401(k) investors receive. House Education and Labor Committee Chairman George Miller, D-California, and Rep. Jim McDermott, D-Washington, chairman of the House Ways and Means Committee’s Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.
A plan by Teresa Ghilarducci, professor of economic-policy analysis at the New School for Social Research in New York, contains elements that are being considered. She testified last week before Miller’s Education and Labor Committee on her proposal.
At that hearing, the director of the Congressional Budget Office, Peter Orszag, testified that some $2 trillion in retirement savings has been lost over the past 15 months.
Under Ghilarducci’s plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5 percent of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3 percent a year, adjusted for inflation.
The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.
“I want to stop the federal subsidy of 401(k)s,” Ghilarducci said in an interview. “401(k)s can continue to exist, but they won’t have the benefit of the subsidy of the tax break.”
Under the current 401(k) system, investors are charged relatively high retail fees, Ghilarducci said.
“I want to spend our nation’s dollar for retirement security better. Everybody would now be covered” if the plan were adopted, Ghilarducci said.
She has been in contact with Miller and McDermott about her plan, and they are interested in pursuing it, she said.
“This [plan] certainly is intriguing,” said Mike DeCesare, press secretary for McDermott.
“That is part of the discussion,” he said.
While Miller stopped short of calling for Ghilarducci’s plan at the hearing last week, he was clearly against continuing tax breaks as they currently exist.
Savings rate
“The savings rate isn’t going up for the investment of $80 billion,” he said. “We have to start to think about ... whether or not we want to continue to invest that $80 billion for a policy that’s not generating what we now say it should.”
“From where I sit that’s just crazy,” said John Belluardo, president of Stewardship Financial Services Inc. in Tarrytown, New York. “A lot of people contribute to their 401(k)s because of the match of the employer,” he said. Belluardo’s firm does not manage assets directly.
Higher-income employers provide matching funds to employee plans so that they can qualify for tax benefits for their own defined-contribution plans, he said.
“If the tax deferral goes away, the employers have no reason to do the matches, which primarily help people in the lower income brackets,” Belluardo said.
“This is a battle between liberalism and conservatism,” said Christopher Van Slyke, a partner in the La Jolla, California, advisory firm Trovena, which manages $400 million. “People are afraid because their accounts are seeing some volatility, so Democrats will seize on the opportunity to attack a program where investors control their own destiny,” he said.
The Profit Sharing/401(k) Council of America in Chicago, which represents employers that sponsor defined-contribution plans, is “staunchly committed to keeping the employee benefit system in America voluntary,” said Ed Ferrigno, vice president in the Washington office.
“Some of the tenor [of the hearing last week] that the entire system should be based on the activities of the markets in the last 90 days is not the way to judge the system,” he said.
No legislative proposals have been introduced and Congress is out of session until next year.
However, most political observers believe that Democrats are poised to gain seats in both the House and the Senate, so comments made by the mostly Democratic members who attended the hearing could be a harbinger of things to come.
Advice at issue
In addition to tax breaks for 401(k)s, the issue of allowing investment advisors to provide advice for 401(k) plans was also addressed at the hearing. Rep. Robert Andrews, D-New Jersey, was critical of Department of Labor proposals made in August that would allow advisors to give individual advice if the advice was generated using a computer model.
Andrews characterized the proposals as “loopholes” and said that investment advice should not be given by advisors who have a direct interest in the sale of financial products.
The Pension Protection Act of 2006 contains provisions making it easier for investment advisors to give individualized counseling to 401(k) holders.
“In retrospect that doesn’t seem like such a good idea to me,” Andrews said. “This is an issue I think we have to revisit. I frankly think that the compromise we struck in 2006 is not terribly workable or wise,” he said.
On Thursday, October 9, the Department of Labor hastily scheduled a public hearing on the issue in Washington for Tuesday, October 21.
The agency does not frequently hold public hearings on its proposals.

[cutthemdown]

Why Spider don't want to give up your 401k?

[Stormontheplains]

http://www.usnews.com/blogs/capital-...01k-plans.html

Would Obama, Dems Kill 401(k) Plans?

October 23, 2008 10:47 AM ET | James Pethokoukis | Permanent Link | Print
I hate to use the "S" word, but the American government would never do something as, well, socialist as seize private pension funds, right? This is exactly what cash-strapped Argentina just did in the name of protecting workers' retirement accounts (Efharisto, Fausta's Blog). Now, even Uncle Sam isn't that stupid, but some Democrats might try something almost as loopy: kill 401(k) plans.
House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created "guaranteed retirement accounts" for every worker. The government would deposit $600 (inflation indexed) every year into the GRAs. Each worker would also have to save 5 percent of pay into the accounts, to which the government would pay a measly 3 percent return. Rep. Jim McDermott, a Democrat from Washington and chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, said that since "the savings rate isn't going up for the investment of $80 billion [in 401(k) tax breaks], we have to start to think about whether or not we want to continue to invest that $80 billion for a policy that's not generating what we now say it should."
A few respectful observations:
1) McDermott is right when he says the savings rate isn't going up. But the savings rate doesn't include gains to money you invest in the stock market. It ignores the buildup of net worth. (If you bought a share of XYZ Corp. in January at $100, for instance, and its value doubled by December, the savings rate measure would still value that investment at $100. In short, the savings rate is a phony number.)
2) So based partly on the above faulty logic, the $4.5 trillion, as of the start of the year, invested in 401(k) plans doesn't count as savings.
3) Ghilarducci would have workers abandon the stock market right at the bottom of the market. A stupid idea, according to Warren Buffett: "I don't like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I'll follow the lead of a restaurant that opened in an empty bank building and then advertised: 'Put your mouth where your money was.' Today my money and my mouth both say equities."
4) Ghilarducci would offer a lousy 3 percent return. The long-run return of the stock market, adjusted for inflation, is more like 7 percent. Look at it this way: Ten thousand dollars growing at 3 percent a year for 40 years leaves you with roughly $22,000. But $10,000 growing at 7 percent a year for 40 years leaves you with $150,000. That is a high price to pay for what Ghilarducci describes as the removal of "a source of financial anxiety and...fruitless discussions with brokers and financial sales agents, who are also desperate for more fees and are often wrong about markets." Please, I'll take a bit of worry for an additional $128,000.
5) What effect would this plan have on an already battered stock market? Well, I would imagine it would send it even lower, sticking a shiv into the portfolios of everyone who didn't jump aboard. But I am sure the Chinese would love to jump in and buy all our cheap stocks to fund the retirement of their citizens.
My bottom line: If you believe in the long-run dynamism of the American economy, then you have to believe in the stock market. Listen to superinvestor Buffett, not the prof from the New School.

[cutthemdown]

Originally Posted by Spider

nothing like this has been suggested ............... Not that I have heard

Well if Spider hasn't heard anything it must not be true.

[Arkie]

http://abcnews.go.com/Business/Perso...ory?id=6122417
Movement to Scrap 401(k)s Gains Traction
Net Gains: Guaranteed Retirement Accounts Are Getting Attention in Washington

When it comes to how we spend and save, borrow and lend, nothing in this nation will ever be the same.

Today's stock market shocks are adding momentum to the idea that 401(k) plans should be replaced with a more stable retirement alternative. I can't tell you how the financial crisis will be solved, when the Dow will return to 13,000 or if home prices will recover anytime soon. But the events of the past two months make it clear our national money habits are in for big changes.

Given that reality, there's one proposal you might want to keep an eye on. A recommendation to shake up the nation's 401(k) system is gaining traction as workers and retirees gape in horror at their investment account balances.

"Four weeks ago this plan didn't have a chance," conceded its author, Teresa Ghilarducci.

Suddenly, things have changed. Ghilarducci's proposal to create what she calls Guaranteed Retirement Accounts is gaining attention in Washington as the nation grapples with the issue of retirement security in the wake of a 40-percent-plus drop in the U.S. stock market this year.

"These last three weeks people are learning their 401(k) plans can go down," said Ghilarducci, an economist at the New School for Social Research in New York.

Called to testify before Congress earlier this month, Ghilarducci's ideas are gaining wide exposure nearly a year after she published a policy paper on the subject. She followed up that paper with a book published in May, "When I'm Sixty-Four: The Plot Against Pensions and the Plan to Save Them."

Her proposal calls for knocking down the 401(k) plan system and replacing it with a government-run pension plan funded by employee contributions. Participants would be guaranteed an inflation-beating return and a lifetime stream of income.

"What people want from their pensions is guaranteed income for life," Ghilarducci said in an interview Monday.

The intent of the plan is not to replace Social Security. Rather, Guaranteed Savings Accounts would supplement Social Security, Ghilarducci said.

She estimated a full-time worker retiring after 40 years could expect a benefit equal to about 25 percent of pre-retirement income. That would be on top of Social Security benefits.

The portion of Ghilarducci's plan that has drawn the greatest criticism is her suggestion to eliminate the tax breaks received for contributing to a 401(k) plan or an IRA.

Last week, conservative radio talk show host Rush Limbaugh pilloried her ideas, but Ghilarducci said Limbaugh got some of the facts of her proposal wrong, including that the guaranteed rate of return would be 3 percent above the inflation rate, not a flat 3 percent return.

Ghilarducci now talks about maintaining some level of tax-free contributions, maybe up to $5,000 a year, to IRAs or 401(k)s. That's more than most workers contribute to a retirement plan, she said, and would only cost the federal government $25 billion a year compared to the $80 billion a year contribution levels cost the federal Treasury now.

Ghilarducci said she's not "anti-stock market" but, rather, against 401(k) plans in their current iteration. She called the 401(k) "a tax shelter with very bad elements, namely hidden fees and very costly products."

The retirement scheme simply does not work, she said.

"If current trends continue, poverty rates among the elderly will increase and middle-class retirees will find that their retirement income will not pay for the lifestyle they achieved while working," she wrote in her original policy paper.

Ask the retirees you know if they've begun to worry about the same trends as the Dow has fallen more than 20 percent in less than a month. I think they might want to hear more about Guaranteed Retirement Accounts.

I'm not ready to embrace every aspect of Ghilarducci's plan, but it's a plan that needs to be part of the national discussion as we deal with the fallout from easy credit, risky derivatives and a stock market decline that has devastated the retirement fortunes of millions.

[Stormontheplains]

spider has heard of it, he is now an official lefttard

[Garcia Bronco]

"Participants who die before retiring can bequeath half their account balances to heirs; those who die after retiring can bequeath half their final account balance minus benefits received."

Half. . Aweful nice of them.

[Spider]

Originally Posted by cutthemdown

Why Spider don't want to give up your 401k?

I dont have a 401 K genius

[Spider]

Originally Posted by cutthemdown

Well if Spider hasn't heard anything it must not be true.

Now you are learning **** tard

[Spider]

Originally Posted by Stormontheplains

spider has heard of it, he is now an official lefttard

you just shut the **** up .... no one will **** up as bad as the guy you have blown for the last 8 years

[cutthemdown]

Originally Posted by Spider

I dont have a 401 K genius

how would I know? It's not my fault you don't know the issues your party supports. Many people don't want the govt handling their retirement.

[Garcia Bronco]

This plan would be a disaster on so many levels

[Spider]

Originally Posted by cutthemdown

how would I know? It's not my fault you don't know the issues your party supports. Many people don't want the govt handling their retirement.

well you are the one that suggested I had one ........... as for the issues , this is still pretty new and just being talked about .......Like you assuming I had a 401 K , stop jumping to conclusions , wait and see how things pan out before hiking your skirt and going drama queen

[Spider]

Originally Posted by Garcia Bronco

This plan would be a disaster on so many levels

How so ? ......you tell me the ins and outs of it

[cutthemdown]

Originally Posted by Spider

well you are the one that suggested I had one ........... as for the issues , this is still pretty new and just being talked about .......Like you assuming I had a 401 K , stop jumping to conclusions , wait and see how things pan out before hiking your skirt and going drama queen

All I did was mention some Democrats are talking about it. You went ape **** and asked for proof. How is that me going drama queen. All I did was post the proof you asked for.

They way you reacted I assumed you didn't like the idea sorry I was wrong. Actually you don't care because you don't have a 401k. I don't either so I don't really care either.

[Spider]

Originally Posted by cutthemdown

All I did was mention some Democrats are talking about it. You went ape **** and asked for proof. How is that me going drama queen. All I did was post the proof you asked for.

They way you reacted I assumed you didn't like the idea sorry I was wrong. Actually you don't care because you don't have a 401k. I don't either so I don't really care either.

i didnt go ape **** you twit ......... show me where i went ape **** .........
i dont know if I like the idea or not , I dont know much about it , but I know by the time it gets wrote out into a bill and voted on it will be a different program then what we see now

[cutthemdown]

Originally Posted by Spider

i didnt go ape **** you twit ......... show me where i went ape **** .........
i dont know if I like the idea or not , I dont know much about it , but I know by the time it gets wrote out into a bill and voted on it will be a different program then what we see now

Show me where I hiked up my skirt and went drama queen. If you can use colorful statements then so can I.

Wait until you hear about the carbon tax Obama wants to put on truckers. That one will make you hike up your skirt and go ape **** running down the road like a drama queen.