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What is the great scam ever perpetrated on the American people?

  1. profile image60
    Jtdfreeposted 4 years ago via iphone

    The IRA / 401K / 403b scam of course!!
    Corporate America and politicians in the pocket of Corporate America stole the reasonable, comfortable retirement pensions that many enjoyed and replaced it with "the scam" where now us poor slobs are funding and trying to manage funds in the stock market essentially on our own.  If you actually have the same amount as you invested in the last 20 years (joke), you are lucky.  Then the lucky few of us that actually were able to save some money (and I mean very few) now have the joy of paying income tax on the withdrawing of your savings taxed at 25 to 35% while the executives with  stock options essentially stolen by "the elimination of pensions scam" only pay capital gains tax at 15%.  Insult to injury.
      Then think about (if you are not already sick to you stomach) Wall Street essentially lived off the money we have wasted in the market for the last twenty years preying on our lack of knowledge and then charging us fees to make these poor investment choices because we can't really afford the services of a quality stock broker.  I can't write any more.  I need to vomit.

    1. glockr profile image61
      glockrposted 4 years ago in reply to this

      Sorry, but I don't see how a 401k/403b is a scam. I'm in a 403b plan at work. The way ours is structured, employees contribute a mandatory 5.5% (less than I'd be contributing to SS, but enough to make sure I'll have some savings when I retire) and my employer matches with another 5.5%. The mandatory employee and employer contribution are pre-tax, so of course I'll have to pay taxes on it when I withdraw it. It will be taxed as normal income though, so I believe your assertion that it will be taxed "at 25 - 35%" is incorrect. It will actually be taxed based on how much I withdraw every year since the withdrawal is considered income.

      In addition to the mandatory 403b, we can also set up an optional, supplemental account and contribute without matching from the employer. The optional account deductions can be either pre-tax (we'll have to pay taxes upon withdrawal) or after tax (the money is already taxed, so whatever is in the account when I retire is tax free).

      I like it much better than paying into Social Security:
      1. The money is mine. I can withdraw it at whatever rate I want instead of getting a fixed amount every month. I can also pass it on to my heirs when I die. Since I have a disabled son, this is very important to me.
      2. I can borrow against it. In fact, I did. My wife wanted to buy a rental property but there was no way we could afford it. Then I found out I could borrow from my 403b, so now we own a rental property.
      3. I don't have to wait until I'm an old man to start withdrawing my money. This is also important to me since my family has a history of males dying relatively young. With SS, there is a huge cut in benefits if you start drawing it too soon. With my 403b I can start drawing at 59-1/2 with no penalty.
      4. I have more control. The money is held in a Fidelity account and I get to choose how it's invested. I can buy stock funds, bond funds, or just hold it as cash. If I quit my present job, I can convert it to a "self-directed" account and have even more control (buy individual stocks, real estate, etc - not that I WOULD buy individual stocks).

      It most definitely is not a "scam."

      1. profile image60
        Jtdfreeposted 4 years ago in reply to this

        A pleasure to get such thoughtful comment, thanks.  Just to be clear I am not against retirement savings plans.  I just think that they should not displace pensions. 
        I may be wrong but I assume you are young (<50) and have no memory of a large sector of the population of older Americans living nicely off a pension and S.S. benefits.  Remember that I am talking about the current middle class who have had little ability to save 5, 10, 15% of there income.  You sound like you are doing a little better than most along with me (I’m just lucky I guess) but I still see the statistic that most people over 50 years old have less than $50K in their retirement savings account. 
        Comments on your comments:

        “The way ours is structured, employees contribute a mandatory 5.5% (less than I'd be contributing to SS, but enough to make sure I'll have some savings when I retire) and my employer matches with another 5.5%” 

        Force investment for employment is interesting to me and isn’t much different than SS tax if you think about it.  My wife has the same type of plan.  It is not typical, just remember, you are paying fees and I think you probably are limited to equities funds, bond funds, or cash (e.g. money market funds).  Unless you were lucky like me in 2000 and 2008 you probably lost a lot of money and were told that dollar cost averaging would save you.   If you are back to where you were in 2008 with all the contributions you are probably doing better than most.

        As far as the company match goes, based on my personal experience a pension for someone who works 25 to 30 years is worth about $250-450K.  I don’t think your company is willing to cough that much up.  (About $8-10,000/yr/employee)

        “It will be taxed as normal income though, so I believe your assertion that it will be taxed "at 25 - 35%" is incorrect. It will actually be taxed based on how much I withdraw every year since the withdrawal is considered income.”

        Unless your income is pretty low in retirement I doubt that you will pay <25%.
        “In addition to the mandatory 403b, we can also set up an optional, supplemental account and contribute without matching from the employer. The optional account deductions can be either pre-tax (we'll have to pay taxes upon withdrawal) or after tax (the money is already taxed, so whatever is in the account when I retire is tax free).”

        Yes, I assume you are talking about Roth.  You are taxed as income.

        “1. The money is mine. I can withdraw it at whatever rate I want instead of getting a fixed amount every month. I can also pass it on to my heirs when I die. Since I have a disabled son, this is very important to me.”

        I don’t believe you can withdraw it without penalty until you are 59.5 although there may be exceptions for circumstances like yours.  Then after 70 I believe you are required to withdraw at least a minimum amount per year.   You are correct about passing it on but make sure that you talk to a lawyer early in retirement so that you can avoid inheritance tax.  It takes at least 5 years of planning.

        “2. I can borrow against it. In fact, I did. My wife wanted to buy a rental property but there was no way we could afford it. Then I found out I could borrow from my 403b, so now we own a rental property.”

        Well that is a choice you can make but is the investment in the vacation property equal to the appreciation of the plan?  Probably not in the last 6 years but maybe the real estate market will get better.  Oh yeah, you have less money in your retirement fund now.  Trade off.  If you had a known pension you could buy a house with the funds you put in your retirement plan knowing you still had a pension.

        “3. I don't have to wait until I'm an old man to start withdrawing my money. This is also important to me since my family has a history of males dying relatively young. With SS, there is a huge cut in benefits if you start drawing it too soon. With my 403b I can start drawing at 59-1/2 with no penalty.”

        Wow, you really sound like me.  Women live forever in our family—Men maybe 75.  I just retired at 55.   So to spill the beans I have a 401K and a pension.  So I can draw from the 401K now and the pension funds later.  So, again I say I am lucky and younger people are getting a raw deal.

        “4. I have more control. The money is held in a Fidelity account and I get to choose how it's invested. I can buy stock funds, bond funds, or just hold it as cash. If I quit my present job, I can convert it to a "self-directed" account and have even more control (buy individual stocks, real estate, etc - not that I WOULD buy individual stocks).”

        Yes, as I said if you know what you are doing.  So, I guess you anticipated the crash of 2000 and 2008.   You bought apple at $150/share.  No, I think working people with no knowledge just took “self direct” loss of savings.

        1. glockr profile image61
          glockrposted 4 years ago in reply to this

          I think it's all a trade off. I'm relying on a retirement savings plan and as you note there are risks (my mutual funds still haven't completely recovered:) ). OTOH there are risks with pensions - like what if the company goes out of business? Actually my plan is to find something I love doing so much that I can keep at it until I die - that way I'll never have to worry about retirement:) That's kind of why we decided on getting into real estate. So far our rental is returning much better than CD's and that's after accounting for maintenance costs, taxes, insurance, and vacancies.

          I have relatives who retired with guaranteed pensions from the state of California, and while the pensions are generous, they are also contributing to the fiscal problems CA is having. I suppose you could have the Federal government guarantee all pensions, but then you'd have a situation where an increasingly smaller work forced has to pay more and more to support an increasingly higher number of retirees. It's a tough problem. I wish I had the solution:)

  2. ocbill profile image74
    ocbillposted 4 years ago

    Enron
    Bernie Madoff
    Fast Food Industry (oh if you knew the chemicals they put in the food)

    The above is financial related.

  3. LindaSmith1 profile image60
    LindaSmith1posted 4 years ago

    Voting
    We are led to believe our vote counts, it will make things better.
    Well, I have voted, and it is the same ole, same ole, but with new politicians and presidents to screw American citizens,

  4. LindaSmith1 profile image60
    LindaSmith1posted 4 years ago

    Millions of Americans thought they had retirement plans etc at work, then got cheated out of them. Some may have theirs today, but tomorrow it may just vanish,

  5. paradigmsearch profile image89
    paradigmsearchposted 4 years ago

    I have no dispute with any of the previous posts.

    I just wanted to add...

    Q: "What is the great scam ever perpetrated on the American people?"

    A: The illusion that we have civil rights.

    1. Repairguy47 profile image59
      Repairguy47posted 4 years ago in reply to this

      You must be the only one without civil rights, everybody else has them.

      1. paradigmsearch profile image89
        paradigmsearchposted 4 years ago in reply to this

        Take your post...

        Print it.

        Frame it.

        Hide it for 20 years.

        Then, when you have a little more life-experience to draw on, take it out and reread it.

        Then get back to me.

        LOL
























        I'm outta here... lol

        1. Repairguy47 profile image59
          Repairguy47posted 4 years ago in reply to this

          Bye

  6. kaiyan717 profile image81
    kaiyan717posted 4 years ago

    Fiat currency- unconsititutional and the biggest scam imo

 
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