As you might expect, writing for this site, not to mention my other site on Financial Planning at About.com, I receive a lot of email from readers. Most of it is good — people thanking me for something I helped with, general finance questions, and of course, a lot of spam. But every so often, I’ll get an email that is so strange it just makes me scratch my head.
I received an email through my other site at About.com, and it basically says I’m a “lost socialist” because I recommend that people should save in their various retirement accounts such as a 401(k) or IRA. It was just something I kind of got a chuckle out of and had to pass along:
I read an article of yours and agreed with everything except putting money in a 401k. Anything that is run by our Government should not be used to store/accumulate/create(attempt) wealth. If you hold a life insurance license you should be teaching people the IBC concept which covers the need of financing ones personal needs, as well as breaking bad tendencies in personal development. No Government program will succeed, never has and never will. You should get your head out of the clouds and teach others to do the same, by getting your money out of 401k, IRA, Roth IRA or whatever other federal program you supply/endorse. I hope you can educate yourself in a manner that is more productive and become a newfound capitalist rather than remain a lost socialist.
Haha, I don’t even know where to begin. First, it isn’t like these types of plans are government run entities, but are just a few lines of tax code that outline how money should be taxed. A 401k is just deferred compensation, and in most cases, you are free to invest in a number of things, virtually all of which have nothing to do with the government. The plan just says if you aren’t going to be taxed on the money now, you’ll be taxed later.
The same goes for IRAs. These are private accounts you set up and are free to invest in virtually anything you want. The only say the government has is whether you’ll be taxed now, or taxed later. If this person has such an issue with the government’s hand in taxation of these types of accounts, then I guess they would be against investing in anything at all. I mean, let’s think about it — we have capital gains tax, which is just special treatment of some investment gains. And let’s not forget investing in government securities that may be exempt from state and local taxes, or municipal bonds that might be exempt from federal and state taxes.
Sure, can the government decide to change the rules as to how assets are taxed in the future, and I’m not all that confident that the plans and tax benefits we see right now will stand the test of time, but I hardly see that as a reason to not participate in these types of plans at all.
Anyway, I’m all for breaking bad tendencies and educating people to find ways to improve themselves, but I don’t think I’m quite ready to put on my tinfoil hat and proclaim 401(k)s and IRAs as failed government projects and I’m a socialist for recommending them. What do you think?
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.
I agree that the 401K and IRAs are the way to go for retirement savings, although it does not come without risk. I'm not talking about less than average returns, but the fact that the government has the ability to change tax structure on these vehicles with little resistance could have an impact on your planned retirement income. Would the government grandfather-in people who have already invested in 401Ks and IRAs when making changes? Who knows.
Most people are wealthy these days because they invested in their 401(k) and IRAs, not because they were given money.
That is a very interesting post. How is telling people to invest in 401k or IRA wrong. We need people to save for retirement and these are great ways to do which deferred your taxes. I would hate to see where he is investing his money.
I don't like people who do a lot of "what if" thinking. Plan for what you know and react to when you learn about things you didn't expect... what else can you be expected to do? Calling you a socialist and claiming ever government program has failed and will always fail puts this person in the category of "lunatic."
Before proclaiming something like 401ks and IRAs are bad, the emailer should have done more research. If anything, they tend to be non-socialistic as you are not giving the government your money that you normally would have or giving less, especially when it comes to the Roth IRA
Who put peyote in this guy's coffee? I would argue 401k's and IRA's are more capitalist in their basic design since they were created to allow the worker to break off from traditional pension plans. Am I totally off-base here?
It seems to me that he was reading something where you proposed putting public money into 401Ks and IRAs - at least from his e-mail. I didn't get the impression that he believes the current 401Ks and IRAs work that way.
Hank, the IBC stands for Infinite Banking Concept. It was developed in the 90s by some guy to use whole life insurance to fund most of the expenses in your life.
Basic premise is to get people to pump as much money as they can into a whole life policy for a number of years being careful not to go over the limit that would convert it into a modified endowment. Then, you treat the cash value of this policy as your own bank, borrowing from it when you need money, and then repay yourself.
The idea is that you maintain life insurance while creating a large cash cushion that you can tap into and avoid borrowing money from a bank and paying them interest, instead paying it back to yourself.
While it has some merits, especially for higher income individuals, it's more or less a great sales pitch used by insurance salesmen to get people to buy a whole life policy.
Anyway, glad you asked, since this is probably something not very many people are familiar with. It also gives me a great idea for an upcoming post.
Honestly, that comment didn't even warrant a post, other than perhaps "This just in: some people online are dumb!"
Never thought of myself as a socialist. But I guess according to your reader, I fall under that category, too. Love to hear that person's recommendations where to put your money. It can't be a bank, because I'm sure utitlizing FDIC insurance is a socialist act as well.
Oh, no! Scary, scary socialism. Like our mail system, our garbage collection, our education (well, sometimes that IS scary), and, in my town, the electricity. Oh. And our capitalism. Even our capitalism is socialized (subsidies, bailouts, tax breaks, etc.). At any rate, we're all socialists to a certain extent because there are things that we expect the government/society to provide/pay for.
It just goes to show you the extreme types of people that are out there. It's one of the scary things of having your thoughts out there and read by hundreds of people (I'm not there yet, unfortunately). But there are some crazies out there....
Wow. I can't believe what people are saying these days - "socialist" this, "socialist" that...and how about social security? Everyone wants it, even the "non-socialists".
I wonder where this person puts his/her money - don't tell me it is a stack of cash under the bed!
I must have had my head in the sand for some time, since I never knew that IRA's and 401(k)s were run by the government (unless of course you work for the government). It's pretty difficult to confuse regulating contributions qualification limits and taxing properties with actually running and/or controlling these "programs". Maybe I'm a "lost socialist" as well!