Monday, December 10, 2012

How the Government Is Coming After Your IRA and 401(k) Plan

There are huge amounts of money in these plans, which makes it very tempting for government to try and get at it. The government may, or may not, tax the money, but there are other ways they may get at the funds.

An Investment Company Institute study published this month found that U.S. retirement assets totaled $18.5 trillion at the end of the second quarter 2012, of which 3.5 trillion was in IRAs and $5.1 trillion was in 401(k) plans.

World News Daily reports on how the government may try to expand the IRA program and then get its hands on that money:
Recent evidence suggests government officials continue to eye the multi-trillion dollar private retirement savings market, including IRAs and 401(k) plans, eyeing the opportunity to redistribute private retirement savings to less affluent Americans and to force the retirement savings out of the private market and into government-controlled programs investing in government-issued debt...Since 2010, the U.S. Treasury Department and the Department of Labor have been holding combined hearings on various plans designed to introduce government-mandated retirement plans and investment options, including government annuities invested primarily in U.S. Treasury debt, into the private retirement savings market.

“This hearing was set up to explore why Americans are not saving as much for their retirement as they could,” explained National Seniors Council National Director Robert Crone, describing a recent Treasury-Labor hearing held in the Labor Department’s main auditorium.

“However it is clear that his is just the first step toward a government takeover. It feels like the beginning of the debate over health care and we all know how that ended up.”

With the issuance of the White House 256-page Budget Proposal for Fiscal Year 2013, the Obama administration endorsed “Automatic IRAs,” a plan introduced into Congress in 2010 by Sens. John Kerry, D-Mass, and Jeff Bingaman, D-N.M., in which private companies would be automatically enrolled into government-mandated IRAs, forcing those businesses to contribute on behalf of their employees a “default amount” equal to 3 percent of an employees pay, unless an employee specifically opts out of the plan.

The FY 2013 Budget proposal notes that currently 78 million working Americans, roughly half of the work force, lack employer-based retirement plans...

The Service Employee International Union, or SEIU, a key labor union ally of the Obama administration, has mounted an effort to create government-mandated worker retirement accounts as an entitlement program, with the possibility that a portion of all private retirement funds could be forced into U.S. Treasury debt.

Branding the program “Retirement USA,” the SEIU has joined with the AFL-CIO, the Economic Policy Institute, a Washington-based economic left-leaning think tank that receives substantial labor funding, and two other left-leaning interest groups, the Pension Rights Center and the National Committee to Preserve Social Security.

The Retirement USA idea is promote the concept that all workers in the U.S. have a right to a government retirement account that would fund a secure retirement with adequate dollars, in addition to Social Security and private ERISA-retirement workplace retirement programs such as 401(k) programs.

“Our goal is to involve all workers and all employees in a government-mandated retirement program, with the government putting up the difference for lower paid employees,” Nancy Hwa, a spokeswoman for the participating Pension Rights Center, told WND in 2010.

Put simply, the Retirement USA government-mandated workplace retirement account would require by law employers and employees to contribute to a retirement account for every employee and demand that a portion of that contribution go into a federal-government created annuity that would be funded by purchasing Treasury debt...

Under the guise of making workplace retirement savings accounts available to all Americans and insuring that existing retirement savings accounts pay lifetime income, the SEIU-led Retirement USA effort is quietly exploring strategies that would create “Universal IRAs” or “Guaranteed Retirement Accounts” for all workers.

Following lead of Argentina

Writing in the London Telegraph in October 2008, business and economics editor Ambrose Evans-Pritchard warned that G7 nations, including the United States, may begin following the path of Argentina in forcing privately managed pension funds to be invested in government-issued debt.
Bottom line: The government may not tax your money, it may instead force you to buy Treasury securities with your money. For the government, it is pretty much the same thing as a tax. It results in your money ending up in government coffers to spend at will by government. In turn you will receive government IOU's, i.e., Treasury securities, which may be among the worst investments in the years ahead as interest rates go up and price inflation eats away at the buying power of those IOUs.

43 comments:

  1. Is this guy Crone for real? Why aren't Americans saving more (wouldn't Keynesians object if they did?)? I'll give several obvious reasons:

    1. Zero interest rates on the Fed funds rate since October 2008, making traditional forms of savings meaningless
    2. Intentional dollar debasement via money printing.
    3. Excessive taxation at all levels income, profits, and capital gains.
    4. An open hostility by government for hiring people in the private sector through mountains of regulations, litigation for everything under the sun, minimum wage legislation, organized labor extortion...
    5. The moral hazard of the Ponzi scheme known as Social Security, which millions of people foolishly rely on not to supplement their retirement, but as the only means of income.

    Why aren't Americans saving? Because the government is openly punishing people who do so while rewarding those who borrow and spend. Duh.

    ReplyDelete
    Replies
    1. Well said and pretty obvious.

      Delete
    2. Dead on. I retired debt. My 'savings' is in hard assets. I intend to make it very, very hard for the Government to get at what I have.

      Delete
  2. Uh, isn't that what Social Security is?
    Guv'mint takes 12% and gives it back to you if you live long enough.

    ReplyDelete
    Replies
    1. If they don't give it all to illegal aliens, to ppl claiming to be handicapped and get out of work, or if the money isn't used for other "political expenses" then we MIGHT get some of it back... just saying...

      Delete
    2. If you believe that this plan is the guarentee, I have ocean front property on top of Laramie Peak to sell to you. They pay out to supposedly handicapped people, I've heard talk of them using ss for funding other "political responsibilities", and most don't get that much on ss income. Unless they made ALOT of money back in the day. Most I've seen was around 12k to 16k a year. That's with Medicare of $1200 taken out of that amount (I do taxes and see 1099ssa all the time. Can you live comfortably on that? Pay your med and dr co pays out of that?

      Delete
  3. Just as I start a long and budding career in the private sector with a healthy % of savings for retirement, I read this.

    Not to promote generational anxiety, but MAN the future looks crappier and crappier for the youth and the future youth. Government mandated retirement plans? Are you absolutely for real? Do they have any idea whatsoever how bad that road will be?

    ReplyDelete
    Replies
    1. Unscripted ThoughtsDecember 10, 2012 at 7:31 PM

      I suspect this will happen fairly soon too. The bastards will wait until there is another sell off in the markets (caused by their incompetence & sloth ala the 'fiscal cliff') and then get the Lame Stream Media to start sqwaking about how the population is incapable of saving/investing etc. and then the deed will be done. Of course the elitist will never mention that the money grabbed will be invested in UST's at the exact moment interest rates will rise thus GUARANTEEING a major loss of value. THAT will then lead to an outcry by the great unwashed to "save us" and we wil rinse and repeat.

      Delete
    2. Hay Frank, please read the Unseen Hand by Ralph Epperson in an answer to your question of "Do they have any idea whatsoever how bad that road will be."
      Yes they know how bad it will be. This book took 22 yrs to RESEARCH ! Time for a real world education so you can "see it coming" and aren't another deer in the head-lights.

      Delete
    3. Atlas Shrugged, 1984 come to mind. The Liberty Ammendments by Mark Levin is a good read and keep only what you need iin the bank. hard assets.

      Delete
  4. Anyone got any tips on getting your money OUT of a 401k? I asked my company's plan administrator and they basically said, "Sorry, that's not your money, you can't get out." Help!

    ReplyDelete
    Replies
    1. I think you can do a loan but that is about it. I have a SEP IRA and I tried to take it out last year when my income nosed dived thinking I pay the penalty and what ever little tax was due. But according to the company that manages it, if I pull the money out I terminate the plan. Sucks!

      Delete
    2. You can at a 10% penalty on top of your calculated taxes. I simply took the hit.

      Delete
    3. see an independent accountant

      Delete
    4. All the so called experts will tell you not to but I got rid of my 401k.....took the tax hit and bought gold bullion and silver.... did it it in 2008 the day after O got elected. I'm up well over 100% after taking the hit and the experts still tell you its a poor idea? My advice is think for yourself...if they print buy, if they raise interest rates and contract money supply sell. You tell me...are they printing money?

      Delete
    5. By law, you can't take it out until your employment terminates with that employer. However, in the meantime, you can take out up to 50% via a loan and invest it elsewhere.

      Delete
    6. I'm slowly exiting all my qualified plans, taking the penalty now, and transferring everything to Permanent Dividend-Paying (Mutual) Whole life insurance. You'll effectively get taxed on the seed not the harvest, allowing your money to begin working for YOU not the banks and the IRS. Anytime you want you can EASILY borrow up to your policy's cash value and have flexible repayments. Then at retirement either withdraw up to your total premiums paid tax-free, or take loans beyond that also tax free. Google debtdiagnosis for the blog of my IBC (Infinite Banking Concept) expert, or ParadigmLife for lots of good YouTube videos. Same or similar as Private Reserve Strategy; just stay away from Universal or Indexed Universal life. This is a LIFETIME inter-generational strategy, not a get rich quick thing.

      Delete
    7. If you quit, they have to either send it to you and you pay a penalty or roll over into an IRA. I would suggest the IRA, then get an eviction notice and pull it out so you can get the penalty exemption. I'd hurry before they get rid the the exemption, and it's only good on IRAs.

      Delete
    8. Change jobs. Roll it over into a self-directed 401k (trust account). Loan yourself 50% at 1% interest and buy the things you need for survival...........I'm just saying.

      Delete
    9. You can withdraw the taxed portion of your savings with a 10% penalty at any age. I've done it and I am not 59 1/2.

      Delete
  5. Getting out of a 401(k): 'hardship withdrawal.'

    Make up a story, put it in an e-mail, and give it to your HR folks:
    http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Hardship-Distributions

    ReplyDelete
    Replies
    1. it has to come out of an IRA. It doesn't count for employer invested retirement tho, only if you invested as well.

      Delete
  6. Obamanomics. YOU ARE INDENTURED SERVANTS !! YOU WORK FOR THE GOV'T !!

    You VOTED FOR FOUR MORE YEARS OF FASCISM SO ENJOY IT !!

    ReplyDelete
    Replies
    1. No I didn't!!! I call obummer a traitor which is what he is, if he's even a born citizen. Sheriff Joe and Co has reason to believe he's not. I say "FIRING SQUAD!" If he's not a citizen!

      Delete
  7. So if you have a 401k and can pull it out without penalty, except for the taxes, would it be advisable to pull it before the end of the year?

    ReplyDelete
    Replies
    1. you can't not take a 401k with penalty unless you are 59 1/2. You have to roll it over to an IRA then you can get an eviction notice and won't have to pay penalty

      Delete
  8. If people were intelligent this sort of thing would trigger a bloody rebellion. Unfortunately, that's not the case. We have a population of dumbed down consumers looking for handouts too afraid to speak out.

    ReplyDelete
  9. QUESTION??? What happens to the $$$ in your 'Retirement USA' account AFTER YOU DIE ??? Do your dependants get it??? OR... Most likely wouldn't every dime go directly to the Gov't? Its a 'no brainer'... the gov't will get ALL your $$$.

    ReplyDelete
  10. I'm a financial adviser and I'm telling my clients to pull their money out of any retirement plans - even the younger folks. Take the hit, pay the tax and do whatever with it. Having 70% of it or whatever is better than having none of it. Or worse, having the government 'invest' it for you so they can blow your savings (ie: using IRA/401 money to monetize the debt). I hope someone is willing to hire the few of us in this business that commit professional suicide by doing the right thing. You'll never hear this from 99% of brokers/banks and such.

    ReplyDelete
    Replies
    1. 35% bracket + 10% penalty= 45% tax hit. I'm seriously considering it, I have only a few more days to make the call. I don't see taxes ever going lower. It will either be the best call I've made or the worst.

      Delete
    2. Well, it is possible to 'earn' less money, thus putting yourself into a much lower tax bracket. It's your choice.

      Delete
    3. DUDE! Have them roll it over to an IRA, then get an eviction notice THEN pull it out of IRA! THAT is the exception to the penalty.

      Delete

    4. I read "The Demographic Cliff" by Harry Dent. He is predicting deflation coming soon, with a continuation of the real estate and stock market bubbles bursting. He attributes this to an aging population in the U.S., such as Japan has seen for the last ten years, during which their economy has been in a coma, in spite of massive government stimuli.

      If he is right, cash will be king, not stocks, commodities, or real estate. What do you think?

      Delete
  11. This is something only an illegitimate government would do. Oh, wait. I forgot. We DO have an illegitimate government.

    Taking private retirement funds is the same as trying to take our guns and would result, for them, in equal consequences.

    ReplyDelete
  12. You will pay taxes on anything that comes out of a 401. It is considered income. And I would not worry about anyone doing something to pre-existing 401's. Read this and nobody should tell investors to get out now... there gonna be mad at you!
    http://www.brookings.edu/research/papers/2009/07/automatic-ira-iwry

    ReplyDelete
  13. My company 401(K) is through Wells Fargo and although it wasn't easy to get it done through the system, I had my funds moved to a "Self Directed Account" (SDA) - this allows me to select whatever I want to invest in (not just their list of 25 really lousy mutual funds and REITs). I'm still in my 401(K) but have seen Significant growth as I've had it in good PM stocks for the past year. I understand that they watch the SDA accounts and have to explain it if the returns in an SDA are significantly higher than the standard 401(K) returns.

    ReplyDelete
  14. Well this whole "Retirement USA" thing may sound appealing to the economic illiterate, aka the modern left, it's important to note that it's just another coffer to raid... All one has to do is look at Social Security for proof.

    ReplyDelete
  15. 401(k) horror story - I left one job to go to another, and had not yet gained the priviledge of the wonderful 401(k) program (pure sarcasm), at the new facility. I chose to withdraw MY MONEY from MY 401(K) with the previous employer. TransAmerica was the "holder" and by that I mean the thief. It was bad enough I had to pay federal and state tax on my own money, but these POS had the nerve to charge me a fee to withdraw my savings... It was more than state and federal tax combined! That is a mistake I will never make again. Put your money in hard assets - gold, guns, real estate, anything but this fucking ponzi scheme known as 401(k), IRA, etc.

    ReplyDelete
  16. You folks are all a bunch of conspiracy theory junkies. I cannot imagine anyone so foolish as to liquidate their 401k. As for Obama being a fascist.....that was George W.

    ReplyDelete
  17. Currency printed out of thin air = purchasing power (credit).
    Currency someone receives 'after' they work = buying power.

    What happrnd when they print/ spend currency, then call it money? You may think the currency printed and spent already had value.
    If it did, then debt would decrease, not increase.

    However, the currency they collect from taxes/interest/fees etc...will contain *buying* power.
    Why? Because the currency containing buying power was brought into existence through someones energy and labor.

    ReplyDelete