The framing gives it away.
“That $17 trillion in 401(k) and IRA accounts is distributed unevenly …”
“Mr. Biden’s proposal would attempt to level the playing field …”
“…forcing them to make some contribution to the funds.”
A piece in The Wall Street Journal that slams (yet again) 401ks doesn’t so much advocate for a national retirement plan as it does a universal basic income for the elderly—apparently unaware Social Security already exists.
The argument, by Spencer Jakob, takes issue with the supposed unfairness of it all, decrying, for example, tax breaks for upper-income earners that are larger than their lower-income counterparts, once again failing to note the obvious (and simple) math that upper-income earners pay more in taxes and therefore receive a larger corresponding break.
“Not only is it a lot easier for high-earners to set cash aside, but they are also given a bigger incentive to do it, courtesy of taxpayers,” he writes, using the loaded term “subsidy” to describe earners that simply keep more of their money. The double-thrust of the “courtesy of taxpayers” is especially rich and the mental gymnastics needed to understand the logic would break a back.
Referring to Joe Biden’s recent 401k tax credit proposal, Jakob adds that it “would attempt to level the playing field by eliminating tax deductions and giving everyone a 26% federal tax credit instead, even if they earn too little to pay taxes,” which, again, raises the question of why deductions are somehow unfair to those who don’t pay taxes.
Noting that the tax credit acts as an employer match, he includes a major “but” by claiming the latter is something eligible participants too often fail to take advantage of, “even though it is essentially free money.”
“I do think it’s more equitable,” CRR’s Alicia Munnell says of Biden’s proposal. “I don’t think it’s going to change behavior much.”
Which calls into question the reason for the argument at all. Jakob concludes by pointing to “automatic 401(k) plans” contained in the proposal, apparently also unaware of the auto-revolution that already exists, although he does mention state-run plans in the offing.
401ks are working, and coverage is increasing at a healthy rate, so of course, now would be the perfect time for a heavy-handed government hammer to fix a nonexistent problem.
Retirement crisis? Nah, more like one of logic.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
