Will the government shrink my 401(k)?

I have noticed an uptick this year in the number of people who seem worried that government action of one sort or another might have a negative effect on their 401(k) plans.

Many people have also expressed concern that government meddling might somehow restrict participants’ control over their 401(k) balances.

Back in February, the administration released the first Annual Report of the White House Task Force on the Middle Class. Among other things, the report recommended further study of “the creation of Guaranteed Retirement Accounts (GRAs), which would give workers a simple way to invest a portion of their retirement savings in an account that was free of inflation and market risk, and in some versions under discussion, would guarantee a specified real return above the rate of inflation.”

That same month the Department of Labor and Treasury asked for public comments about making it easier for 401(k) participants to access annuities and other guaranteed income products.

The language in the DOL’s request seemed like the usual bureaucratic banal fare, noting mildly that DOL and Treasury wanted “to determine whether, and, if so, how, the Agencies could or should enhance, by regulation or otherwise, the retirement security of participants in employer-sponsored retirement plans and in individual retirement arrangements (IRAs) by facilitating access to, and use of, lifetime income or other arrangements designed to provide a lifetime stream of income after retirement.”

The issue is whether you should be concerned that government policy of various sorts might disadvantage your 401(k) and, if so, what you might do about it.

I think it’s perfectly reasonable to be concerned that a boost in tax rates might effectively shrink your 401(k). It’s not as if Congress has been historically shy about income tax hikes.

A future Congress desperate for funds could always come up with new tax schemes that subvert your planning. But it still makes sense to do what you can.