I think if you listen to both talk radio and the news you will be barely informed enough to vote. With your table of 4 your missing some risk. 1) social security yes its political, but its also inflation risk. 3) Bond Market has just as must volatility risk as the stock market. It too has inflation risk. 4) Yes it has inflation risk and political risk. Your 401k has political risk. Correct we are not Argentina, but they all thought their private pensions were safe from the hands of government.

Details would be the key to this plan.
1) Would the 5% savings tax be based on gross, after tax or income tax?
2) Would it be extracted from you pay check pretax?
3) Would I still pay this savings tax on passive income?
4) Would I pay this savings tax on SS distributions and Roth IRAs?
5) Would the GSA (government sponsored annuity) start paying at 60, 65, 70, 75, 80 or based on your life expectancy.
6)Would it be distributable in a lump sum?
7)Would you be able to heir it to a spouse or child? Or would it die with you?
Could you be means tested out of the annuity? Just like you will be with SS.

These are just some of the question off the top of my head.

Just to pick one:
Wow, this has got to be one of the worst proposals for the average taxpayer in recent history. This defeats teh purpose of a 401(k).

First, it isn’t a bill, it was testimony. There is nothing to “pass.”

Second, do you know how well the “average” 401k investor does? I’m talking actual return, after 2% fund expense ratios, 401k plan fees (do you even know what yours are? It’s difficult info to get), the buy high and sell low plan, and the extended use of the “stable value” funds? Hint: it’s less than you’d expect, some would do better in bonds.

Third, what is the purpose of the 401k? Congress created the tax-deferred plan (actually converted it from a package tailored to corporate executives) for retirement savings to supplement social security. The tax deferment is the carrot to get you to save and not be a burden on society later.

I’d be just as happy if congress put this plan in place and erased the 401k tax deferment. If you’re smart, you’re already using index funds in your 401k, they are already relatively tax efficient. And assuming it would work like a pension or annuity, this plan would be a great way to diversify risk.

You could diversify out to handle (major) types of risk:
1) social security – political risk
2) stock market – volatility risk
3) bond market – deflation risk
4) govt sponsored annuity – inflation risk

Without this, I’d have to buy into an inflation-adjusted immediate annuity when I retire to cover bare bones living expenses – but then I’d run the risk of having the insurance company blow up because of bad management.

Like I said above, all this assumes that the government lets private parties run the funds (albeit with strict requirements). Otherwise, I’d have political risk in two legs of the stool.

Anyway people, please think!

From his 2001 transcript:
http://www.foxnews.com/urgent_queue/#50041ecb,2008-10-27

but the supreme court never ventured into the issues of redistribution of wealth and sort of basic issues of political and economic justice in this society and to that extent as radical as people try to characterize the warren court it wasnt that radical 40;30 it didnt break free from the essential constraints that were placed by the founding fathers in the constituion at least as it has been interpreted and the warren court interpreted it generally in the same way **that the constitution is a document of negative liberties 40:43 says what the states cant do to you says what the federal govt cant do to you but it doesnt say what the federal govt or state govt must do on your behalf** and that hasnt shifted and i think one of the tragedies of the civil rights movement was that 41:01 the civil rights movement became so court focused i think there was a tendency to lose track of the political and organizing activities 41:12 on the ground that are able to bring about the coalitions of power through which you bring about redistributive change 41:20 and in some ways we still suffer from that

“Under Ms. 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% 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% a year, adjusted for inflation.”

Tom

Great post though!