Your 401(k)

Some of my readers may have a 401(k) to which they contribute. If you are employed, your employer may contribute also, and the contributions are tax-free until you withdraw them.

The democrats, however, are adding up the costs of all those hopeful new programs, and want to change all this.

Under 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 percent 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 percent a year, adjusted for inflation.

The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.

So, instead of getting around 15% on my 401k investments, I'll get a government bond at 3%. Why don't they just kick me straight in the groin while they are at it? Seriously, this is what passes for a reform to Democrats?

But look, instead of one of those unreliable and soon-to-be-nationalized financial outfits managing your 401(k), you get the inimitable services of Social Security department, which your ill-gotten (tax deferred) money is in competition with.

All this makes a powerful argument for complete privatization of the retirement system, phasing Social Security out as quickly as is practical, and letting people manage their own retirement.

Now, yes, if you were 20-something and just getting started with your retirement account, and had it all invested in a market index fund that tracked the Dow Jones 30, you’d have lost about half your investment in the last 6 months. I’m guessing that would be about $500. If you were 65.5 and getting ready to retire, you’d probably have your account managed by someone who knew what they were doing, and only be down abut 10%, which is where I’m at. Just not that old.

Peru adopted this system in the early 1990s and it produces retirement incomes about 6 times what US social security gives.