The Magic of Your 401(k)

What drives the attitude towards investing on the left? First of all, in a paternalistic way, the left thinks it's trying to do what's best for Americans. We need to be encouraged from playing with these dangerous stocks. "No, baby, dangerous."

However, like the overbearing parents whose efforts to keep you super-safe make you super-miserable, the anti-risk crowd keeps your money safe, but there's far less of it when you're done than if you'd been able to invest it as you see fit. For example, proponents of the plan cited earlier say that you can have a 401(k) (minus any tax incentives). However, the idea of investing more is impractical for most workers. As it is, 7.65% of a worker's income is eaten by Social Security and Medicare payroll taxes. If we add 5% more for government-funded "safety funds," the federal government will have consumed more than an eighth of a worker's pay before they've even paid normal taxes. This makes investing hard (if not impossible) for your average worker, which means that when stock markets come back and boom, Joe Average will be left with nothing more than a measly 3% return, as he has no extra money to be able to invest more in the stock market.

The second thing that must be understood is that the concept of the investor class represents a threat to liberals. Labor unions have shrunk and most Americans wouldn't want to be part of one. Unions partially brought their fate on themselves by negotiating impossible to sustain long-term retirement and health benefits. This stands in contrast to the concept of the 401(k) and IRA. Unions made short-sighted deals with management that hurt the overall company and its future, because shareholder value wasn't their concern. What's happening with 401(k)s is that the future retirement of America's middle class and the future of America's businesses are becoming interlocked. When it comes to self-interest, it make sense for those with retirement accounts to consider themselves investors rather than just consumers who buy products or laborers who will spend retirement sucking corporations dry through unsustainable benefits packages.

It's this type of thinking that can turn political paradigms on their head, and the left is trying to stop it through legislative and cultural means at its disposal. The greater the populace's dependence is on government, the greater the power of liberals.

The bad news for the left is that even in the midst of the economic downturn, their mass cultural efforts to stigmatize investing aren't working. A survey conducted by Deloit Consulting showed that even with the recent declines, the percentage of people planning to increase retirement savings outnumbered those cutting back by a 33-4% margin. Hardship withdrawals are not increasing significantly. Yes, some workers are planning to work a few more years before retirement, and they're going to be smarter about asset allocation and have more balanced portfolios, but they're not getting out altogether. While some people are pulling money out, there's no run on the 401(k)s; there's not even noticeable reductions in contributions. The investor class is voting with its wallet and is here to stay.

The left's only hope to stop this historic shift is through legislation that illustrates the legal axiom, "Hard cases make bad law." As someone who is investing for my retirement, I accept the risks. I read the legal disclaimers that tell me my assets aren't FDIC insured and may lose value. All I and tens of millions of small investors across this country ask is to be allowed to make this decision for ourselves -- and that this not be sacrificed for fear-mongering paternalism.