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.
