Relying on the government to fund your retirement is a very bad idea


Americans’ most enduring retirement savings program has been at the center of a tax cut tussle between the White House and Republican lawmakers on Capitol Hill. GOP lawmakers want to see if they can wring some savings out of 401(k) benefits by slashing tax deductions from $18,000 to a paltry $2,000.

On the other end is President Donald Trump, who tweeted this week that the 401(k) benefits will be untouched.

Texas Rep. Kevin Brady, chairman of the House’s tax writing committee, said Wednesday that GOP leaders are trying to educate Trump on the benefits of at least looking at the 401(k) program.

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“We think in tax reform we can create incentives for Americans to save more and save sooner,” Brady said, according to the Wall Street Journal. “We are exploring a number of ideas in those areas.”

The Republican proposal is catching some serious heat from critics, who say that the plan would disincentivize American workers from saving for their retirement.

An editorial from’s Ellen Chang puts it like this: “Obliterating the impetus for employees to save more for their retirement would be a misguided move, since the average American already does not set aside enough money for retirement. An analysis conducted by Vanguard, which is one of the largest retirement and brokerage firms in the U.S. with $4 trillion in global assets and has 4.4 million retirement accounts under its management, found that the median amount of savings via their 401(k) plans remains woefully underfunded.”

Money expert Clark Howard says your retirement savings shouldn’t be left up to the government.

There are so many things involved with saving for the longer term, for retirement, and we’re not given the easiest path to navigate to do that. We have the confusing series of initials and numbers of plans ‘ 401k, 403(b), 457, 403(a), Roth IRA, regular IRA, traditional this that or the other ‘ and it can be overwhelming.

Clark adds: “There’s a tendency to expect somehow that the government is going to pay for our retirement and Social Security can be of some assistance, but that’s all it can be.” He says that statistics show that many people are going to be in financial trouble if they are depending on the government for retirement savings.

“When I saw recently that one estimate said that nearly a third of people in retirement ‘ all they had to live on was Social Security ‘ that’s a very difficult path to have any kind of decent time in retirement is all you’ve got is Social Security.”


Clark says consumers need to start saving now for when they get older.

“If I were your emperor, I would say that everyone would have to save for their entire working lifetime. Wherever you work, a dime of every dollar they make, that goes into your own controlled account.”

In a sign that the government is committed to the program, the IRS revealed that it raised the ceiling on the 401(k) limit to $500 in 2018, bringing the maximum deferral allowed to $18,500.

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