I saw a recent article by Matthew Breunig, suggesting that instead of cutting Social Security, we should end the tax breaks for 401(k) plans. He claims that the tax advantage of IRAs and defined contribution plans is $371 billion and should be sacrificed because the bulk of the money belongs to rich people.
That’s simplistic because that’s if you really believe someone making over the highly compensated employee limit of $135,000 is rich, well then, you don’t know the cost of living in New York, Boston, San Francisco, and Los Angeles.
The problems with Social Security have nothing to do with 401(k) plans. The trust fund doesn’t exist, it’s just an IOU from the Federal Government, so the money was never invested like with a 401(k) plan. In addition, people live longer. I know infant mortality was high, so the life expectancy in 1930 for women was 62 and 58 for men when it took age 65 to get benefits. People live longer these days and that has hampered the system. But does cutting back the 401(k) benefits, help social security? It probably won’t and any serious discussion on saving the system will be kicked further down the road for our kids and grandkids to handle.