In response to:

Fiscal Cliff Idea: How About We Tax Your 401k?

cjurgens Wrote: Nov 30, 2012 11:21 AM
As far as I know, that was the rule for tax deferred accounts right from the beginning. Note that these are tax DEFERRED, not tax free accounts. The idea was to defer taxes from your high income years to your retirement years when you are most likely to have a smaller income and therefore a lower tax rate. The rules require withdrawing a certain percentage based on life expectancy. I turned 70-1/2 this year and have known from the start that I'd be required to pull out some money. I'll pay income tax on it and put the remainder in some other investment. At the end of it all, though, 401Ks have been a terrible investment. I would have been better off paying the taxes and putting the money in CDs.

How do you feel about the government touching your private retirement account known as your 401k in order to "pay down the deficit?" Not so good? Already feel like the government has stolen your retirement through Social Security? Well get ready because taxing the 401k is floating around as an idea while the fiscal cliff talks on Capitol Hill continue.

One of the earliest fears about tax-favored savings accounts like IRAs and 401(k) plans was that when this pool of savings grew large enough Congress would not be able to resist tapping it to help solve the...