This proposal is in the 2010 Budget and may be a start of a Government take over of the American 401k and Retirement Account system. Obama is giving retirement, IRA, and 401k savers something to monitor closely....

President Barack Obama is calling for establishing automatic workplace pensions and expanding unemployment insurance as part of his spending plan for the U.S. Labor Department next fiscal year. We liken this to an "Obama 401k Plan"

The budget "lays the groundwork for future establishment of a system of automatic workplace pensions, to operate alongside Social Security, that is expected to dramatically increase" retirement and personal savings, Obama's Office of Management and Budget said in its outline, without giving details on the costs.

Obama 401k Plan: What it entails

The plan would force employers that don't offer retirement plans to enroll employees in a "direct-deposit IRA account," with the option for workers themselves to opt out. Currently, 75 million working Americans, or about half the workforce, lacks employer-based retirement plans, according to the administration.

The troubling thing to me is that the government would pay a 3% fixed interest rate on the accounts as opposed to the diverse mutual fund offerings in a traditional 401k plan. In effect, this would create a "Social Security" type structure to your retirement, IRA, or 401k.

The lack of equity options in your 401k plan would dramatically affect the possible returns, especially over an extended period of time. Just think, the average equity return over the stock market's history is somewhere between 9-11%. Do you think that you would be happy with 3%?

A traditional 401k Savings Plan vs. an Obama 401k Plan

$10,000 invested over a 30 year period at a 3% interest Rate
Final Savings Balance:$ 24568.42

$10,000 invested over a 30 year period at a 8% rate of return
Final Savings Balance:$ 109357.30

That is a $84,789 Difference!

$10,000 invested over 30 years with an annual contribution of $2,000 at 3%
Final Savings Balance:$ 121302.74

$10,000 invested over 30 years with an annual contribution of $2,000 at 8%
Final Savings Balance:$ 356756.97

That is a $235,454 Difference!

As you can see. Your 401k plan offers you a drastically higher return than Obama would give you at 3%. The nationalization of the nations retirement system could cost you a pretty penny.

Is an Obama 401k Plan what you want?

The proposal "raises more questions than it answers," said Representative Howard "Buck" McKeon of California, the top Republican on the House Education and Labor Committee.

"We need to take a step back and question this ever- expanding role for the federal government," he said in a statement.