There seems to be a considerable amount of concern about a rumor that Democratic Leaders in the U.S. House are considering confiscating 401(k)s, and IRA. I received an email from a client that was rightfully concerned about what he read in the Carolina Journal Online.
From what I can gather, this all starts from the October 7th Testimony of Teresa Ghilarducci to the Committee on Education and Labor on “The Impact of the Financial Crisis on Workers’ Retirement Security. The full testimony is only 5 pages double spaced, and maybe took 10 minutes to read twice. You can find it here.
A couple of points about the hearing:
- In his opening statement Chairman Miller paints a dire view of the retirement saving landscapes, pledges increased transparency in the 401(k) industry, BUT DOES NOT even come close to suggesting confiscating 401(k) accounts.
- Ghilarducci was one of 5 witnesses that testified before the committee, and as I point out below it does not include any mention of “confiscating” 401(k) accounts.
- Jerry Bramlett, CEO of BenefitStreet a company that provides 401k plan services was another witness. His testimony does not include any mention of “confiscating” 401(k) plans
In the short term Ghilarducci advocates that congress allow workers to voluntarily exchange their 401(k) for a “Guaranteed Retirement Account composed of Government Bonds (earning 3% adjusted for inflation)”. This must be the source of the rumor.
Whether you agree or not with the suggestion, the point is that a “voluntary exchange” is not even in the same ballpark as “confiscating”!
In the longer term she recommends that the government scale back the tax breaks assocaiated with a 401(k) type plans.
Again this post is not about the merits of her testimony, it is about the contents.
We could argue all day about the merits, but after reading it a few times it would be difficult, and I think irresponsible to suggest that Ghilarducci recommends the forcible confiscation of retirement accounts.
I found a few major talk show hosts (Rush Limbaugh and Sean Hannity) that spun this another way. My only assumption is that they did not take the time to read her testimony.
Other news:
Behavior Gap was included in the “The Carnival of Personal Finance” which is a weekly showcase of the best articles written about personal finance and investing. This week it is hosted here.
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