Corrupt retirement savings system

Before I get into this, let me say that Linqia is a great company to work for. I have many friends from my time there and I have no problem with them as friends knowning any of this info. My complains are of the system and how it would hurt you if your company wasn't full of friends. Mostly it's just a rant.

Giving people the "right" to save for themselves

This country (and seemingly most of the western world) has been moving away from pensions towards encouraging personal savings. This has some issues, like presuming everyone is paid a high enough wage to have extra for putting away, but I can at least respect it as an intellectually consistent argument.

Back in Canada, my limited experience was that RRSPs (registered retirement savings plans) were basically a generic tax shelter provied by the government. You could open the account with any bank or other financial company, but the key was that every adult citizen (or maybe just adult resident) got an allotment of $X per year they could put in and have sheltered from income tax. When you took the money out, it would be taxed as income. If you took the money out early (before 60ish) you got an extra punishment tax. There was also some provisions for removing (maybe temporarily) the money for school, buying a house, or probably medical issues. If you were lucky enough for your company to do RRSP matching, that extra money counts against your yearly tax-free limit. Everyone in the country gets the same limit regardless of circumstance.

Down in America, there's a two-class system. Everyone gets to put away up to $5500 into an IRA. An IRA seems to work identically to an RRSP. Tax free deposits up to a maximum per year. Taxed as income when you withdraw. Punishment fee if you withdraw early. Allowable withdraw for buying a house. Can open an IRA account at any bank. Everyone gets this allowance.

Then there's the 401k. Your company can set up a 401k for you, where a chunk of your paycheck goes into it every pay period. Your limit for this system is $18000 per year. You can't lump-sum put the $18000 in at the end of the year. You can't set one of these up yourself. If your company is doing 401k matching, the extra contributions DO NOT count against your yearly maximum. One good part is if you withdraw money from your 401k for a house, you have to pay it back into the 401k with interest. The downside is that if you loose or quit your job, you then have 30 days to pay back ALL that you borrowed from the fund.

So the US, the land of "job creators" has setup a system where if you go out on your own and try to start a business, the government takes away a tax shelter it was giving to regular wage slaves. Your now stuck with a fraction of the ability to save tax free.

This is yet another thing hurting our economy and worker mobility. When I quit a stable job to join (or create) a startup, I should expect to take on the risk of the startup failing. I should expect to be paid less and have less perks than the established company I'm leaving. I (unfortuately) should also expect to have crappier and more expensive health care, since they had less bargaining power to get a better insurance deal. I shouldn't also expect to have my ability to save tax free cut by almost 70%. There's no justification for the IRS to treat me worse. This was the case, however, for the first year or so of my time at Linqia. There was no company-offered 401k so I could only take advantage of the $5500 IRA plan.

One additional thing driving home the point that this system is garbage is that when I went to roll the money from the Linqia plan into the new Apple plan I have, I was told there's a $95 processing fee to get my money, and that the withdraw requires approval of the plan administrator at Linqia. So Linqia, whom I no longer work for and should have no part in my personal savings, gets to see exactly how much I have saved, and apparently has the power to block me from moving it to a new plan.

In general, this whole system seems like the kind of legislative cruft that builds up to support an incumbent without anyone ever stepping back to thing if it's good for the public or society in general. It's just disappointing how obviously at odds it is with all the goals it seems to be promoting.