Previously posted January 27, 2015
As you may have heard, the president feels the federal government needs to be even more involved in your retirement savings and he is proposing changes to the tax code to make this happen. “Fairness” for middle class savers is his stated motivation, but forgive me if I don’t take him at his word. There are plenty of studies and statistics relating to savings rates and preparedness for retirement, and none of them are very promising. I mention this because the idea that people need to save more and better plan for their passive income years is absolutely true. The issue with this new tax/spend scheme is that it, along with every federal program designed to fix something, will simply create more bureaucratic control, increase costs, increase the national debt, and have zero or negative impact on the problem. I make this statement not out of some personal dislike for Obama, but based on the very real fact that no federal government program can be cited that actually solves a problem.
The paraphrased nugget of wisdom I prefer in these situations is that we cannot use the same level of thinking to get us out of a mess that got us into the mess in the first place. The federal government created this problem long ago starting with the income tax followed by the Social Security program, and finally the qualified retirement plan designed to avoid the income tax that was created in the first place. Yes, savings rates are way too low. Yes, people need a lot more education and guidance relating to money management. But creating a new debt-expanding mess of regulations will not address either one. In fact, I would argue they make people feel even less empowered and more beholden to the whims of the politicians in D.C.