It's Out of Our Hands

Do the disappearing 401Ks discredit personal retirement accounts?

Mark Steyn reports that the two big accomplishments of the G20 Summit were to close global tax loopholes and to impose impose European-style regulation on the global economy. This will spread sclerotic, European-style (non) growth across the globe, guaranteeing inadequate returns on private retirement fund in perpetuity.

He then wrote about why so many people have become investors:

Let it be said that in recent years in America, the United Kingdom, and certain other countries the “financial sector” grew too big. In The Atlantic, Simon Johnson points out that, between 1973 and 1985, it was responsible for about 16 percent of U.S. corporate profits. By this decade, it was up to 41 percent.

That’s higher than healthy, but it wouldn’t have gotten anywhere near that high if government didn’t annex so much of your wealth — through everything from income tax to small-business regulation — that it’s become increasingly difficult to improve your lot by working hard, making stuff, and selling it. Instead, in order to fund a more comfortable retirement and much else, large numbers of people became “investors” — albeit not as the term is traditionally understood:

Instead, you work for some company and they put some money on your behalf in some sort of account that somebody on the 12th floor pools together with all the others and gives to somebody else in New York to disperse among various corporations hither and yon. You’ve no idea what you’re “investing” in, but it keeps going up, so why do you care?

Yes! I thought. I heard some guy on the radio talking about how 401K's have turned into 1K's, leaving many boomers with a quarter of what they expected for retirement. "That's a real kick in the pants," I thought impassively. I'm still to far away from retirement to be worrying over this stuff.

Mark provides the answer to the man who rightly laments over the sorrowful state of so many nest eggs: Confiscatory government policies drove us to this point.

Our Grandparents Knew Better

How did my grandparents, who were not rich at all, end up with money in the bank when they hit their 60's? Working class people didn't have exotic financial instruments that earned 15% per year back then. Ordinary people stuck their money in a bank or in US Savings Bonds, and earned 3.5% interest per annum.

According to Dinkytown's Saving Calculator, here's how Grandma and Grandpa ended up with a little over $100,000 at age 60: By putting $100 per month in a bank account over 40 years accruing 3.5% interest. $50 per month over the same period yields just over $50,000. They also may have bought a piece of property along the way.

Steyn's argument in a nutshell is that when government takes less from you, you are better able to care for yourself, and in turn you don't need the government as much. Yes, people were not rampant consumers back then, and there weren't so many McMansions and electronic goodies to temp them, but who's putting a gun to your head now?

Our grandparents understood the value of frugality, and government understood its limits, but that's all out the window now.

http://article.nationalreview.com/?q=YTNlZjcxOGZmMjA0YjU2OTE5ZjJmN2FkNmYyYzI3MjQ=&w=MQ==