Hillary Unveils Retirement Plan

By Jeralyn, Section Hillary Clinton
Posted on Tue Oct 09, 2007 at 03:28:00 PM EST
Tags: 2008 (all tags)

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Hillary Clinton unveiled her retirement plan, American Retirement Accounts, today.

As with her biggest policy plan for universal health insurance, Mrs. Clinton cast her savings proposal in terms of choice: If Americans like their 401(k) plans and other retirement accounts, they can keep those, while those who lack any savings plan will have a chance to start one with government help and save $5,000 a year on a tax-deferred basis.

“Saving in the accounts will be easy — it should not require a Ph.D. to save for retirement,” Mrs. Clinton said.

The Wall St. Journal has more specifics.

As to why it's needed:

More than 75 million workers have no pension, and more than half of Americans nearing retirement have $15,000 or less in a retirement-savings account.

How it works:

Under her proposal, people in households with incomes up to $60,000 a year could get a tax credit to match their own savings of up to $1,000 a year. Those with incomes between $60,000 and $100,000 could get a 50% credit on amounts up to $500. For those above $100,000, credits would be smaller until they phased out.

Income taxes would be deferred until withdrawal for savings up to $5,000 a year. As with IRAs, early withdrawals would incur taxes and a penalty, except for what the campaign called "major life investments," such as college, a first home and retirement. But unlike IRAs, Ms. Clinton's plan would allow savers to withdraw up to 15% if unemployed for a long time, or to borrow from their savings under limited circumstances.

This sounds good to me:

For low-income Americans who benefit from means-tested government programs -- such as Medicaid and food stamps -- their savings wouldn't be counted as assets for purposes of determining their eligibility. Studies have shown that the asset-limits for government programs have been a major disincentive for poor workers to save money.

Hillary's press release is here.

Anyone with a financial background or an opinion want to weigh in?

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Hillary Unveils Retirement Plan | 28 comments (28 topical)

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No one (5.00 / 1) (#13)
by Deconstructionist on Wed Oct 10, 2007 at 08:56:24 AM EST

wants to address the simplest method of ensuring everyone the ability to meet basic needs in old age without overburdenig the poor and middle class during their working lives.

If we eliminated the income limit (currently less than $100K) on income subject to FICA contributions by individual earners, we could reduce the perecentage of income designated to FICA for the middle class and poor and ensure that the trust fund had sufficient funds with which to meet not only future obligations at existing benefit levels but to increase benefits to relect higher costs of living.

FICA tax rates and income limits for 2006:

FICA Category Tax rate Income limit
OASDI 6.20% $94,200
Medicare (HI) 1.45% No limit
OASDI + HI 7.65% $94,200 (OASDI)
Employer contribution 7.65% $94,200 (OASDI)
Combined contribution 15.3% $94,200 (OASDI)

Essentially, what we could do is leave employer contributions exactly where they are but simpply remove the income limit on the 6.2% individuals contribute to the "basic" SS fund (oasdi above.

People earning less than $94 would see no increase. A family with 2 working member who each earned $94 K or less would see no increase.

Only people earning above that would see an increase of 6.2 % on all income. But, we could actually reduce the 6.2% rate because of the levying on higher incomes and still collect far more than we do today and provide better benefits to retirees.

Why is that not discussed? Because candidates and office holders get most of their money from people who make more than that and don't want to pay FICA on all their income.

Would the employer contribution (none / 0) (#19)
by Pancho on Wed Oct 10, 2007 at 12:05:28 PM EST

also be unlimited under your plan?


No, (none / 0) (#21)
by Deconstructionist on Wed Oct 10, 2007 at 12:15:25 PM EST

as I said we could leave employer contributions under FICA at current levels and solve the problem merely by eliminating the income limit on individuals' obligation to contribute to FICA.


I missed that, (none / 0) (#22)
by Pancho on Wed Oct 10, 2007 at 01:05:13 PM EST

I think that change is inevitable.


Why leave the employer untouched?? (none / 0) (#23)
by jimakaPPJ on Wed Oct 10, 2007 at 01:23:36 PM EST

In reality the employer pays nothing. It is paid for by the customer (higher price), the employee (lower wages) or he owner/stockholders (lower profits). Or some combination there of.


THAT is misleading (none / 0) (#24)
by Deconstructionist on Wed Oct 10, 2007 at 01:59:05 PM EST

not all costs can be passed on to the consumer. Demand for many things is highly elastic and increased costs will cost the employer because he cannot sell his goods or services at a price which allows him to make a profit.

Similarly, market forces do limit an employer's ability to attract and retain qualified employees which allow him to operate a successful venture.

: e.g., GM, Chrysler, etc., etc. (none / 0) (#25)
by sarcastic unnamed one on Wed Oct 10, 2007 at 02:02:03 PM EST

: Yes and no (none / 0) (#28)
by jimakaPPJ on Wed Oct 10, 2007 at 09:07:56 PM EST

If increased costs can not be passed on, at some point the enterprise collapses... unless the government steps in...

News Flash! Grsashoopers 10 -Ants 0 (1.00 / 0) (#4)
by jimakaPPJ on Tue Oct 09, 2007 at 06:27:11 PM EST

To offset the revenue lost, Ms. Clinton would not let the estate tax end in 2010 as scheduled under the Bush tax cuts.

So what she proposes is to take the money from those who saved and give it to those who have not saved.

If she really wants to help, just make interest and
investment gains tax deferred until spent, with no penalty for early withdrawal.

More nanny state crap (1.00 / 1) (#18)
by Pancho on Wed Oct 10, 2007 at 12:03:40 PM EST

What you're saying is essentially that the government should put money into savings accounts for poor people. If poor people cannot pay for their own food, why should they have savings accounts? That money should go towards food.

: The theory seems to be.... (1.00 / 0) (#29)
by jimakaPPJ on Wed Oct 10, 2007 at 09:14:15 PM EST

that the "poor" be shoehorned into a member of society that has an investment in that "society."
I don't buy it.
If you want to help the "poor," make "education" free.
Remember that 30 years ago, a high school degree would get you an entry level job in most corporations... from that point an individual could get more "education" and/or demonstrate superior abilities...
To do do that now requires at least a BA/BS to work in the mail room.

bad policy.. (none / 0) (#2)
by selise on Tue Oct 09, 2007 at 04:03:28 PM EST

privatization by another name.

it's nuts. if her buget has an extra $25 billion a year floating around for retiree support - it should go into supporting social security or medicare. this is a pay off to her wall street donors who will make lots of fees when people invest.

bad policy.

(i am not a financial person - but this is a no brainer)

: Amen.... (5.00 / 1) (#3)
by kdog on Tue Oct 09, 2007 at 04:47:22 PM EST

Just like her new health plan is welfare for insurance companies, this is welfare for Wall St.
I prefer to gamble on cards and ponies...can I get a tax exemption for that? If not...thanks but no thanks.

don't you get kind of confused by all (none / 0) (#5)
by cpinva on Tue Oct 09, 2007 at 06:52:22 PM EST

the apples and oranges you constantly mix jim? savings are not taxed, per se, except when originally earned. what's taxed on the estate is, for the most part, previously untaxed gains.

of course, the fact that just shy of 1% of all estates in the US actually come close to being taxed shouldn't bother your pretty little head one iota. the estate tax is hardly a burden to the average person.

as to sen. clinton's proposal, it just adds another unnecessary administrative layer to the mix. a slight tweak in the IRA rules would accomplish the same thing, without additional costs.

Huh?? (1.00 / 0) (#6)
by jimakaPPJ on Tue Oct 09, 2007 at 07:27:24 PM EST

savings are not taxed, per se, except when originally earned

Go save $100 and put it in the bank.

At the end of 1 year let's say you have $104.50, principal plus interest.

That $4.50 interest is taxed as ordinary income. At least it is in my world.

The amount of tax will be determined when the year in question is filed. But I never commented on that,

I wrote:

I stand on my comment.

If your 1% figure is correct, that's 2.5 million people.

My point remains. These are people who worked and saved while others did not. They paid the lawful amount of taxes. Why should they have to pay again? If Hillary wants to give someone $1000, she doesn't have to soak someone else.


in your world, (5.00 / 0) (#9)
by cpinva on Wed Oct 10, 2007 at 12:06:03 AM EST

you're a tax illiterate. i, on the other hand, am a tax expert. it's what i do, and have done, for 25 years. both the state and federal govt's have decreed me so.

the interest is ordinary income, taxed as such. however, if it is reinvested, it isn't taxed again, only the interest that it earns is.

currently, under the rules of IRC 401(k), all investment income earned is not taxed until it's withdrawn. as well, the funds invested aren't presently taxed, except for FICA, until withdrawn. as far as eliminating the penalty for early withdrawal, that would pretty much negate the whole point of the program: to save for retirement.

1% of estates, not people. most people don't have an estate worth mentioning, so they aren't. interestingly, you neglected to mention (probably because you don't have the slightest clue what you're talking about), inheritances aren't taxable to the inheritor. income earned by the inherited property is taxed, depending on its character. they also get a stepped-up basis in the property, ultimately reducing any taxable gain on disposal.

since the "max tax" on long-term capital gains is currently 15%, what the hell more do you want?

so, i have little sympathy for paris hilton, when the estate she eventually inherits gets taxed on the previously untaxed gains it includes.


You may be an expert (1.00 / 0) (#11)
by jimakaPPJ on Wed Oct 10, 2007 at 08:23:02 AM EST

But I certainly wouldn't retain your for the obvious reason that you seem incapable of reading and understanding what I am saying. I do hope you do better for those who pay you.

At the end of 1 year let's say you have $104.50, principal plus interest.
That $4.50 interest is taxed as ordinary income. At least it is in my world.
The amount of tax will be determined when the year in question is filed. But I never commented on that,

I think you are just being willfully difficult.

It is obvious that I am writing about a one year period.

As for your numerical defense re estates, so what?

Wrong is wrong if it is 10 or 10,000,000.

I never commented about long term gains, so why do you ask a snarky question?

The current early withdrawal per cent is not enough to really defer withdrawal, and is only there to produce revenue for Uncle.

As for Paris, I'll bet she's a trust fund baby, just like Ted and all the other Kennedy's.

And quit acting like everyone is SUPER rich. I'm talking about the folks who worked all their lives in some small business and finally made it fairly large. Link


Actually, jim's statement about a family of 4 (1.00 / 0) (#16)
by Deconstructionist on Wed Oct 10, 2007 at 10:08:58 AM EST

while a generalization is an extremely accurate one which a tax professional would understand applies to nearly every "family of 4" in the country.

Assuming our family of 4 ia a family of either a married couple filing jointly with 2 children living at home or a single head of household with 3 children living at home -- if the household had a gross income of $39 K or less it would owe no federal income taxes except possibly in some extremely unusual hypothetical that would be almost non-existent in the real world.

Jim says plenty of things that provide amm, but denying the accuracy of his statement about that just provides him with ammo.

heh (1.00 / 0) (#17)
by jimakaPPJ on Wed Oct 10, 2007 at 11:51:24 AM EST

If you either and/or cpinva didn't understand what I wrote, then you have a problem interfacing with your clients.

People don't hire lawyers, cpa, or for that matter, doctors, to be insulted and then overwhelmed with buzz words.

I clearly noted that I was speaking of 1 year, the interest was for 1 year and the tax would be on the 1 year interest and that the amount would be determined by the filing for that year.

Now, go try and be nasty to someone else.

And yes, a family of 4 using the standard deductions doesn't pay FIT on income of approximately $38K in wages...


DA (1.00 / 0) (#27)
by jimakaPPJ on Wed Oct 10, 2007 at 09:05:51 PM EST

And thanks for showing us what a biased person with some specialized knowledge can be like.

At that you do extremely well. I call you an "ankle biter" because you always wait until near the end of a comment and then come dashing to try and change the subject and make some marginal point...

I repeat. A family of 4 pays no FIT at around $38K.

If you want to pick the fly sh*t out of the pepper, be my guest.

It is a task that you are wonderfully qualified for.


What you are (1.00 / 0) (#31)
by jimakaPPJ on Thu Oct 11, 2007 at 09:37:41 AM EST

is wrong.

You know it.

So live with it.


: DA (1.00 / 0) (#32)
by jimakaPPJ on Thu Oct 11, 2007 at 10:10:07 AM EST

I think ankle biting defines you. I never see an original comment by you on an open thread, and I never see a comment directly to the subject of the post, it is always an attack on me. That defines you.
Let me demonstrate. I wrote:

At the end of 1 year let's say you have $104.50, principal plus interest.
That $4.50 interest is taxed as ordinary income. At least it is in my world.
The amount of tax will be determined when the year in question is filed. But I never commented on that,
Now here is your reply.

I should point out that income is taxed, and the interest on savings is income, which the savings itself isn't.
That you don't understand taxes is clear from your past rantings on the subject.
Plainer:
Me at 8:23: "That $4.50 interest is taxed as ordinary income."
What could be plainer? What about that did you fail to understand? Why did you feel it necessary to "point out" that income is taxed as if you were correcting me when I had just written the same thing?
My comment re the FIT and family of 4 was correct, just as Deconstructionist noted.
My comments to cpinva were correct.
Have a wonderful day, and don't forget to keep on proving my point.

Current years interest (none / 0) (#10)
by Abdul Abulbul Amir on Wed Oct 10, 2007 at 08:09:34 AM EST

So is your point that the cash in a bank account other than the current year's interest is already after tax?


If it's mainly about taxing untaxed gains... (none / 0) (#15)
by roy on Wed Oct 10, 2007 at 10:06:01 AM EST

...why is the tax a portion of the value of the estate, and not a portion of the previously untaxed gain in value of the estate? And is the tax offset by losses in value of the estate? My hunch is no.


: roy (none / 0) (#20)
by jimakaPPJ on Wed Oct 10, 2007 at 12:10:37 PM EST

My link in my 8:23AM comment will take you to the estate tax table which has some info.

the pander bear (none / 0) (#7)
by diogenes on Tue Oct 09, 2007 at 08:02:02 PM EST

A $5,000 bond at birth? $5,000 a year to everyone? Obviously Hillary has learned some lessons from her years married to the pander bear himself.

Our effcient private sector (none / 0) (#8)
by koshembos on Tue Oct 09, 2007 at 09:27:36 PM EST

Wanted to comment on some of the comment since my financial knowledge is nonexistence.

It turns out that despite the huge cost of private health insurance companies, people still believe that they are more efficient than the government. Sure. And Blackwater cheaper than the Marines and may be at least as capable. Sure. Haliburton feeds the soldiers in Iraq excellent food. Sure.

Wake up folks. GM, Aethna, HMOs and other private rackets are inefficient, clumsy and arrogant. They make money because the gouge the public. Hillary's plan will work if its figures are right and will be as efficient as it gets.

: Then why does Hillary.... (none / 0) (#12)
by kdog on Wed Oct 10, 2007 at 08:37:54 AM EST

want to force us all, by law, to patronize the crooked HMO's?