More Money Coming Out of 401(k)s Than In
The amount of money withdrawn from 401(k) plans exceeded the amount contributed to the retirement funds for the first time in 2013, according to a report in The Wall Street Journal.
The shift reflects demographic changes as more Baby Boomer retire from the workforce and begin tapping their savings, and young millennial workers put smaller amounts in.
Consumers may benefit from the trend as fund managers begin cutting fees and changing services in order to entice young workers to sock away more. “It changes the dynamic of the business itself,” J.P. Morgan Chase analyst Ken Worthington told The Journal.
Related: Here Are 7 Ways People Screw Up Their 401(k)s
Company-sponsored 401(k) plans had $4.6 trillion in assets last year, according to the Investment Company Institute.
The average 401(k) balance at the end of the first quarter was $91,800, up 0.5 percent from the fourth quarter of 2014 and up 3.6 year-over-year, according to Fidelity. For employees in a plan for 10 years or more, the average balance was $251,600, up 12 percent year-over-year.
Workers can contribute up to $18,000 in pre-tax dollars to their 401(k) plans in 2015, but most workers—especially younger ones—save far less each year. There are lots of reasons millennials are lagging in retirement savings: large numbers of them are still unemployed or underemployed in jobs that don’t have retirement benefits, and they’re diverting all their extra cash to student loans. Plus, retirement may not be top-of-mind for 20-somethings, no matter how many times they hear about the benefits of compound interest.
Tweet of the Day: The Black Hole of Big Pharma
Billionaire John D. Arnold, a former energy trader and hedge fund manager turned philanthropist with a focus on health care, says Big Pharma appears to have a powerful hold on members of Congress.
Arnold pointed out that PhRMA, the main pharmaceutical industry lobbying group, had revenues of $459 million in 2018, and that total lobbying on behalf of the sector probably came to about $1 billion last year. “I guess $1 bil each year is an intractable force in our political system,” he concluded.
Warren’s Taxes Could Add Up to More Than 100%
The Wall Street Journal’s Richard Rubin says Elizabeth Warren’s proposed taxes could claim more than 100% of income for some wealthy investors. Here’s an example Rubin discussed Friday:
“Consider a billionaire with a $1,000 investment who earns a 6% return, or $60, received as a capital gain, dividend or interest. If all of Ms. Warren’s taxes are implemented, he could owe 58.2% of that, or $35 in federal tax. Plus, his entire investment would incur a 6% wealth tax, i.e., at least $60. The result: taxes as high as $95 on income of $60 for a combined tax rate of 158%.”
In Rubin’s back-of-the-envelope analysis, an investor worth $2 billion would need to achieve a return of more than 10% in order to see any net gain after taxes. Rubin notes that actual tax bills would likely vary considerably depending on things like location, rates of return, and as-yet-undefined policy details. But tax rates exceeding 100% would not be unusual, especially for billionaires.
Biden Proposes $1.3 Trillion Infrastructure Plan
Joe Biden on Thursday put out a $1.3 trillion infrastructure proposal. The 10-year “Plan to Invest in Middle Class Competitiveness” calls for investments to revitalize the nation’s roads, highways and bridges, speed the adoption of electric vehicles, launch a “second great railroad revolution” and make U.S. airports the best in the world.
“The infrastructure plan Joe Biden released Thursday morning is heavy on high-speed rail, transit, biking and other items that Barack Obama championed during his presidency — along with a complete lack of specifics on how he plans to pay for it all,” Politico’s Tanya Snyder wrote. Biden’s campaign site says that every cent of the $1.3 trillion would be paid for by reversing the 2017 corporate tax cuts, closing tax loopholes, cracking down on tax evasion and ending fossil-fuel subsidies.
Read more about Biden’s plan at Politico.
Number of the Day: 18 Million
There were 18 million military veterans in the United States in 2018, according to the Census Bureau. That figure includes 485,000 World War II vets, 1.3 million who served in the Korean War, 6.4 million from the Vietnam War era, 3.8 million from the first Gulf War and another 3.8 million since 9/11. We join with the rest of the country today in thanking them for their service.
Chart of the Day: Dem Candidates Face Their Own Tax Plans
Democratic presidential candidates are proposing a variety of new taxes to pay for their preferred social programs. Bloomberg’s Laura Davison and Misyrlena Egkolfopoulou took a look at how the top four candidates would fare under their own tax proposals.
