Cares Act- How will this effect the economy down the road?

[so98nn]

These are pension money and taxes that were once used by government or still use for the development of nation. Honestly, it's money that is owned by the tax payer, provident fund contributors, EPF contribution and much more. It does go into government treasures and used by them for development.

In the process they are securing the funds and also giving interest money to these holders. It means though government is using it they have to payback the interest rate on that holding. Thus if at the retirement people are taking back the money then it's not bad thing since they owe it.

However, in the pandemic situation like this it can cause negative impact. Think of government employees, doctors who are salaried on our taxes will get hampered more due to this. Over the time this could lead to chaos and it is already showing up in the current time also.

If majority of people take it out then government will have to take laons from reserve Bank of Nations and could go in debts badly over the time.

I could think of more chaos and nothing else with this act.

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[exstasie]

If you're saying that investing in the stock markets is not productive then you don't know history very well.  

The returns in the stock market are okay. I'm personally glad I cashed out my 401K and built my business with it instead of leaving it in the market. The returns have been exponentially larger.

I also think the stock market is a bubble, a ticking time bomb. The Fed averted collapse this time but I don't think QE infinity is going to work forever. It's not going to be fun when that house of cards topples down.

[jostorres]

Yeah the facts you have stated here are right, there are going to be some consequences for this action that some people are taking right now, although that will be depending on how they chose to invest the money right now, those of them who would be careless and spend the money without plans are going to be the ones that would be regretting it later.

That aside, I know that some of the people that are taking advantage of a chance like this are not doing so just to squander the whole money on unnecessary things, they have better plans and they are aware of the consequences that would follow if they misuse this kind of opportunity.

[ChiBitCTy]

If you're saying that investing in the stock markets is not productive then you don't know history very well.  

The returns in the stock market are okay. I'm personally glad I cashed out my 401K and built my business with it instead of leaving it in the market. The returns have been exponentially larger.

I also think the stock market is a bubble, a ticking time bomb. The Fed averted collapse this time but I don't think QE infinity is going to work forever. It's not going to be fun when that house of cards topples down.

Now taking your 401k money and investing it in a business can be a great move, no question.  Now that of course comes with stipulations and heavy factors to consider such as age, penalties, low cost basis = heavy taxation ( unless of course we are speaking about a Roth 401k that's been held for 5 years or longer).  Kudos to you for making it work though.  This is often how the wealthiest men on the planet get to where they are today.  But, of course, this is without question not a good idea for the majority.  

The stock market returns have been excellent compared to other traditional/commonly used financial vehicles such as bonds, CDs, Interest barring bank accounts, notes, etc ..which is what 50% of US citizens are invested in ( & obviously lesser % in most other nations). The vast majority of people aren't suited for higher upside financial products/ riskier investing ..such  as options, futures, real estate, business ownership, commodities etc.

I agree, the markets are over-bought.  It will crash again, likely in the next year or two IMO..but that's pretty much moot for those who have a mid to long term outlook for their portfolio.  That means I can buy low, and with my mid-to- long term outlook, as long as I don't panic sell out of my positions then I haven't lost anything as I still have the same amount of shares that will eventually grow back.  Most major US market declines only last a few months, some a few years at most ( past 100 years anyhow ).  

QE is used by every single Central Bank.  There's a reason though why countries don't just go print ridiculous amounts of money..and why some are able to do so more than others.  The U.S. is able to do more QE because the economy is the worlds strongest.  Our national debt is out of control and will have negative impacts that will only get worse, but luckily for the US it's foundation of businesses is far superior to the rest of the worlds overall in terms of profitability/mid to long term outlook etc.  US gov bonds also continue to be eaten up by foreign nations, even with low interest rates & are considered the safest investment vehicle on the plant ...despite the massive debt and ramp-id QE.    

Sorry for the novel.

[fiulpro]

See I do believe this is a good act for sure and people will be able to get a lot of benefits from it. But I believe we have to focus on the fact that *will they be able to actually help people*, what is the stats of the people they helped ?

Ofcourse this is a good act and would help people in the long run and at the same time the economy will recover way faster.

Plus I do believe investing in stock markets is actually very beneficial at this time since right now due to downgrade of the market people have the potential to buy stocks at much lower rates and at the end they would easily make a lot of profits in the end.

[coolcoinz]

First of all, as a libertarian I treat social security as a tax. It's not savings because you cannot opt out, so if they'd allow me to take my money out I'd do it in an instant.
The whole system should be disbanded if you ask me. The usual argument of its supporters is "what if you couldn't manage your money because you weren't smart enough and lost everything?" I'd ask someone smart to do it for me, but at least I'd know that I can withdraw at any point. Retirement plans should be managed directly or by private companies, not by a centralized institution that makes you wait until a certain age.

[jaysabi]

First of all, as a libertarian I treat social security as a tax. It's not savings because you cannot opt out, so if they'd allow me to take my money out I'd do it in an instant.
The whole system should be disbanded if you ask me. The usual argument of its supporters is "what if you couldn't manage your money because you weren't smart enough and lost everything?" I'd ask someone smart to do it for me, but at least I'd know that I can withdraw at any point. Retirement plans should be managed directly or by private companies, not by a centralized institution that makes you wait until a certain age.

I think it's absolutely correct to view social security as a tax. Logistically, the money you're taxed isn't put into an account for you to withdraw later when you retire. It's paid out to current retirees in the present. In the future when you retire, your payments will come from younger workers who are paying the social security tax.

[bitgolden]

This could be used for very well reasons and it could be used for very wrong reasons as well, it all depends on the individual how to use it. I know people who will take out everything just to buy a big tv and a car or whatever and I know people who will take out to pay debt so that they could live better and even be able to save again.

You might imagine it is not a good idea but there are people with school debt or credit card debt and even maybe loan and they could pay that off and when they do they could put half of that into retirement fund, allowing them to save even more. When you have debt, you get 100 but pay back 120 (or even more) but when you save 50-60 instead of that and have zero debt, you could put even more money aside for your future.

[coolcoinz]

First of all, as a libertarian I treat social security as a tax. It's not savings because you cannot opt out, so if they'd allow me to take my money out I'd do it in an instant.
The whole system should be disbanded if you ask me. The usual argument of its supporters is "what if you couldn't manage your money because you weren't smart enough and lost everything?" I'd ask someone smart to do it for me, but at least I'd know that I can withdraw at any point. Retirement plans should be managed directly or by private companies, not by a centralized institution that makes you wait until a certain age.

I think it's absolutely correct to view social security as a tax. Logistically, the money you're taxed isn't put into an account for you to withdraw later when you retire. It's paid out to current retirees in the present. In the future when you retire, your payments will come from younger workers who are paying the social security tax.

Which, if you think about it, makes the whole idea a big scam. If your money is being spent to pay off the previous generation and the next generation will pay for you, what happened to the money paid by the first ever participants in the program? Those people who were told that if they keep paying, their moeny will later be paid out to them. Who stole that mone and indebted the system?

[pokeronlinestatus]

Even those who are withdrawing because they encountered hardship are still taking some risk there. Those who are not having any hardship might withdraw and keep the money and use it for other purpose that will maybe generate more income for them, but those seeing hardships will literally spend the money on feeding and all that.

So, you can see from here that those who are experiencing hardships are the ones that are mainly at risk here, but I hope that they utilize the money wisely so that they don’t do things that they are going to end up regretting later.

[Salauddin1994]

The wisest thing to do before the economy hits the road is to save money for the future the difficulty here will be less and the risk will not fall because money cannot be spent if it is withdrawn most of the projects are usually under government projects so taxes are levied. That's why you need to protect yourself and spend money before you fall into remorse.

[el kaka22]

The idea of putting your money into that is not because they want to take your money, but because it is quite difficult to put money aside when you are not forced to do that. I can guarantee you that if you do not force people and just suggest it, they will live spending their money regularly and when they get old they will not have any money at all, and they will die very poor.

However if you force them to put money aside this way, they are going to be well off when they are older and will not worry about money. So, I wouldn't take my money out instantly if I were you, it is not really acceptable to be 80 years old and not have money, at that point you are better off dead because you are going to suffer a lot worse life until you die if you do not have money, can you imagine being homeless at 80?? It would be insane.

[RealMalatesta]

Investing your retirement fund to a business is not a great idea depending on what business we are talking about but putting your retirement fund to a stock is basically the same thing as well so I can't say what type of business.

If we are talking about withdrawing that money and putting it into your own business and starting from zero to build a whole business, that may not be a great idea, not just because you may fail because the opposite of that is you might succeed so I can't say that, but also because if you own a business you need to own one that you can sell later when you retire, and retirement is something everyone should have the luxury of as early as they want, even if you want to continue working at least have that cushion, starting a new business would make you work and retirement is literally the opposite of that, help you survive without working.

[teosanru]

For those of you not familiar with the Cares Act, here is a good guideline of everything that's involved- https://home.treasury.gov/policy-issues/cares

I work in the finance industry and in particular with retirement plans.  The cares act allows for individuals still employed and under 59.5 years of age to take withdraws from their retirement plans, up to $100,000, as well without the normal 10% penalty.  I am constantly getting calls from clients who are utilizing this feature.  In theory it's a good thing for those whom have encountered hardships due to Covid-19, however many are taking advantage of this and simply taking out money just because they can.  

I foresee serious problems down the road with so many dipping in to their retirement, many of which are depleting their entire accounts.  The question I ask myself and everyone else..what are all the negatives consequences likely to come from this?  I think there will be all sorts of issues in terms of social security, homelessness, reliance on government assistance etc.

See one thing I have realized after Coronavirus is that people have developed that mentality of YOLO more and more now looking towards life in a more short term perspective which isn't totally right or wrong. But here I think there would be a situation a of micro macro paradox kicking in. At micro level yes people might suffer problems with lack in their savings in future as you said some a re depleting their accounts so could be in grave trouble especially if they are retiring in anywhere around 10-12 years.
While on the macro front this looks like a band aid on the wound given by covid. By that I mean this was an intentional act done by Trump government to increase liquidity in markets to keep the economic growth trending. By this I mean if this remedy would not have been taken the markets for 2-3 years might have gone in a grave slump which anyways would have eaten returns of a lot of people. So in a way this is a step which could protect their savings in longer term. But yes coin has two sides it's too early to foresee it's real impact.

[ChiBitCTy]

See I do believe this is a good act for sure and people will be able to get a lot of benefits from it. But I believe we have to focus on the fact that *will they be able to actually help people*, what is the stats of the people they helped ?

Ofcourse this is a good act and would help people in the long run and at the same time the economy will recover way faster.

Plus I do believe investing in stock markets is actually very beneficial at this time since right now due to downgrade of the market people have the potential to buy stocks at much lower rates and at the end they would easily make a lot of profits in the end.

Right now the stock markets are almost at all time highs.  Many stocks are at all time highs.  So there really isn't a buy low opportunity at the moment ( though this can change quickly).  Also, there is no such thing as "easily" making profits.  Though your point does hold true, buying low is the smart move.

First of all, as a libertarian I treat social security as a tax. It's not savings because you cannot opt out, so if they'd allow me to take my money out I'd do it in an instant.
The whole system should be disbanded if you ask me. The usual argument of its supporters is "what if you couldn't manage your money because you weren't smart enough and lost everything?" I'd ask someone smart to do it for me, but at least I'd know that I can withdraw at any point. Retirement plans should be managed directly or by private companies, not by a centralized institution that makes you wait until a certain age.

It is certainly more of a tax than retirement plan for the younger generation, that much is true.  I have family members who currently take their social security income and it's working out great for them, but for myself and other young professionals..I'd not get too excited.  I personally have no faith that money will still be there by the time I can take it.  I think SS will be around in some fashion, but I doubt the money I deserve ( that I've been paying in to ) will be there when the time comes. 

The idea of putting your money into that is not because they want to take your money, but because it is quite difficult to put money aside when you are not forced to do that. I can guarantee you that if you do not force people and just suggest it, they will live spending their money regularly and when they get old they will not have any money at all, and they will die very poor.

However if you force them to put money aside this way, they are going to be well off when they are older and will not worry about money. So, I wouldn't take my money out instantly if I were you, it is not really acceptable to be 80 years old and not have money, at that point you are better off dead because you are going to suffer a lot worse life until you die if you do not have money, can you imagine being homeless at 80?? It would be insane.

Absolutely.  The sad fact of the matter is most people do a horrible job of saving, that is the ones who even do it at all.

[Harlot]

It would really depend on the person's situation because like what you said some of your clients are just getting money from their accounts because they can so I think even if they deplete their own retirement accounts I don't think they will be really affected by their actions. But for people who are taking advantage of this because they are hit by the pandemic they are really the ones that will be hit from this, yes it can be their temporary aid for their financial problems right now especially the ones who became unemployed because of the pandemic they will experience some financial problems on their retirement.

[Shasha80]

No need to be surprised, saw more and more people drawing up their retirement plans. Because the current situation urges people
to have cash to buy daily necessities. Due to the increasing number of unemployed, it makes some people have no choice but to
withdraw fund retirement plans. Because we cannot expect only from government assistance, so it is natural that many people draw
their retirement plans.

[Xembin]

I foresee serious problems down the road with so many dipping in to their retirement, many of which are depleting their entire accounts.  The question I ask myself and everyone else..what are all the negatives consequences likely to come from this?  I think there will be all sorts of issues in terms of social security, homelessness, reliance on government assistance etc.

Yes, sometimes depending on government assistance make some people not to concentrate in others issue that will sustain them after retirement. I think if there's lack of security in a country there will be economy effect because every investors need security in their various places to carry out their well.

[rodskee]

I foresee serious problems down the road with so many dipping in to their retirement, many of which are depleting their entire accounts.  The question I ask myself and everyone else..what are all the negatives consequences likely to come from this?  I think there will be all sorts of issues in terms of social security, homelessness, reliance on government assistance etc.

Yes, sometimes depending on government assistance make some people not to concentrate in others issue that will sustain them after retirement. I think if there's lack of security in a country there will be economy effect because every investors need security in their various places to carry out their well.

Being a people of a country we are entitled for government care when we retire but it is also our obligation to make our life easier when time comes that our age come to the highest in which 60-70 because we can save small amount each day for our retirement.
the problem with the people is they spend their money all and all when they are still strong and capable to work and starts becoming problematic when they are retired.
i will never let this things happen to me,because as of now i have already saving Fiat in my bank accounts and crypto in my nano ledger so when time comes i know that i am ready and need not to bother the government for assistance.

[ChiBitCTy]

Many of you I think aren't understanding the point of this thread.  It is not about deciding whether people who are enduring hardships due to Covid-19 should be eligible for this money or not, or whether they truly need it or not...it's about the long term implications of what this could/will do to the economy.  Being on the front line of this, I know for a fact that many people are abusing this Act, and using the money in a way that is not in their best interest.  I also know that many are using in their best interest.

The point of this thread is how this will effect the economy down the road when countless people have blown through their retirement during Covid and will need government assistance or some sort of help down the road.  This will effect how their plans play out down the road, maybe increase subsidized housing, the need for food banks etc etc.  These are the implications and long term issues I was trying to discuss.