RUSH: Your 401(k) plan, there's more information now about what's about to happen to it if Obama gets his way. Obama's new budget proposal aims to limit your nest egg by setting a cap on the amount of contributions you can make over the term of your life, and that number is $2.7 million. At $2.7 million you can no longer -- if he gets his way, that would be the maximum size of your 401(k).
Now, Obama says the reason he's doing this is to simplify the tax code. The proposal, if it becomes law, would be the first time there has been a limit on the balances one could build up in a defined contribution plan such as a 401(k) or an IRA. Peter Brady, a senior economist at something called the ICI, said, "The proposal to place a dollar cap on individual retirement saving accounts would add complexity and confusion to our nation’s system for retirement savings."
Now, why would anybody do this? Let's trace the history of the 401(k). I remember where I was when I first heard about it. Well, I don't remember exactly. I don't know if I was in Kansas City or I moved to Sacramento when this thing was first proposed. But, boy, it sounded like a good deal to me. What you could do was designate a certain percentage of your gross income to your 401(k) or IRA. And it was tax-free. That amount that you put in your retirement plan would be deducted from your gross earnings, and you would then pay your income tax on what was left. If you make 50 grand, you could put $5,000 away per year and your taxable income would be $45,000.
This was done because at the time it was said Americans weren't saving enough. So this was an incentive. And it was a good deal. It was a really good deal for a lot of people. But then about three years ago, four years ago the government decided that all of this tax-free money was costing them, and they needed to get it back. And so there was a professor at the New School, a woman, who came up with a proposal, and it was endorsed by George Miller, Democrat from California. Because all of those $5,000 that I just mentioned, all of that money the government wasn't taxing, why, it amounted to billions and billions. And since all money is government's, they figured they had to stop this.
I always thought the purpose of the plan was for people to be able to provide their own retirement, put less pressure on Social Security, a defined contribution benefit plan inspired savings, it built for retirement. You could go get the money before retirement age, but there were penalties if you withdrew it for an emergency or what have you, so the incentive was to clearly save it for your retirement. A good thing. Now the government feels cheated, because it's all their money, see.
So the proposal from the babe at the New School was, the government will purchase everybody's 401(k) or IRA at the value it was a couple of weeks before the crash of 2008. They'll just give you that amount of money, and it goes into an account, and then you can no longer make any contributions to it. It only will grow by virtue of a government promise of one to 3% growth every year. That's it. Even if the market index grew 10%, doesn't matter, they would say between one and three is the guarantee. Because they've gotta stop this contribution aspect. That's just costing 'em too much money. Never mind that it was great for the citizens. Never mind that it made all kinds of sense. It was costing the government money.
Now Obama's come along and he wants to add to that plan by now saying that the maximum size any plan can be, any total account can be is $2.7 million. Do you know why? 'Cause that's all you need. Obama believed that that's all you need for a comfortable retirement, $2.7 million, theoretically, in his budget will generate an annual income of $200,000, and that's plenty. You don't need any more. So the government's changing the rules in the middle of the game, after telling you at the outset how great it could be. Imagine if somebody were able to amass, I don't know, $5 million, wouldn't that be good? Wouldn't it be better if more people were taking care of themselves? Wouldn't that benefit everybody?
We don't want that to happen. We don't want people to be independent. And besides, you don't need any more than $2.7 million in your overall retirement account. Who the hell are you? That's more than you need. We're being generous with you with that. What the hell business is it, in the case of your IRA or 401(k), all of that is your money, bud, all of it. The fact that the government hasn't taxed it is their problem. They set up the rule. You didn't even demand it. This is one of these things that just came along. But you might end up having too much, more than you need. See, we've got a national debt to deal with. We got deficits to deal with, and those deficits, they're your fault, because your IRA isn't being taxed enough. That's why there's a deficit, you're not paying enough taxes.
It's not Obama's fault for spending too much. It's not Congress' fault for spending too much. It's not the government's fault because their irresponsible. Nope, it's your fault, bud, and we're gonna limit you to 2.5 max because that's all you need. This is the last thing Obama ought to be looking at, especially as a means of wiping out deficits and so forth. All this means, once again, is that your independence, your self-reliance is a threat to them. Your being able to take care of your retirement is a threat. Don't doubt me. It's exactly what it is. It's exactly how they see it. Self-reliant individuals are the biggest threat liberals face. Well, maybe not the biggest, but it ranks right up there.