Retirement Funds, Financial Assets Vulnerable to Government Seizure

I hate to use the “S” word, but the American government would never do something as, well, socialist as seize private pension funds, right? This is exactly what cash-strapped Argentina just did in the name of protecting workers’ retirement accounts. Now, even Uncle Sam isn’t that stupid, but some Democrats might try something almost as loopy: kill 401(k) plans. House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created “guaranteed retirement accounts” for every worker. The government would deposit $600 (inflation indexed) every year into the GRAs. Each worker would also have to save 5% of pay into the accounts, to which the government would pay a measly 3% return. Rep. Jim McDermott, a Democrat from Washington, said that since “the savings rate isn’t going up for the investment of $80 billion [in 401(k) tax breaks], we have to start to think about whether or not we want to continue to invest that $80 billion for a policy that’s not generating what we now say it should.” - James Pethokoukis, Will Obama And The Democratic Majority Congress Kill Your 401k Retirement Plan?, October 23, 2008

Teresa Ghilarducci would force all workers to save 5% of their annual income in a new type of retirement vehicle, which she calls a Guaranteed Retirement Account. These savings could not be controlled by workers like IRAs and 401(k) assets, but would instead be deposited with the government. Workers could not touch the money until retirement, she says, and even then the savings could not be drawn out any way workers might desire, but would be converted to an annuity -- a guaranteed stream of income for life. Ghilarducci argues that these new accounts would avoid stock market risks; the government would guarantee that the savings earn a 3% annual return on top of inflation. The government would also pay each worker $600 a year in the form of a tax credit, which would help workers who now earn too little to take advantage of a tax deduction because they owe little or no federal income tax anyway. At the Oct. 7 hearing, Ghilarducci further proposed that Congress address the recent stock market drop by allowing workers to trade their existing 401(k) or IRA accounts for her proposed Guaranteed Retirement Accounts. (Her words can be heard starting at 33 minutes and 23 seconds into the video of the hearing.) - IRAs, 401(k)s and You, FactCheck.org, November 26, 2008

Will the United States Government Seize Your Retirement Accounts?

July 25, 2010

Bonds Market - There is growing buzz on the internet and around office water coolers all over the country regarding the subject of the government confiscating the retirement account of its American citizens for the purpose of satisfying our national debts. One of my clients sent me an email from a gold broker who even went as far as recommending that he liquidate all of his retirement assets and put the money into physical non-confiscatable gold, better known as pre-33 coins and this way his money will both increase in value and be safe from all government confiscation.

While I do believe that gold is a good investment right now, due to the fact that the stock market is so weak and volatile, I would not suggest liquidating your retirement accounts to purchase gold; I would simply recommend setting up self directed retirement account, strictly for the purpose of holding physical gold (not gold stocks). This would avoid the tax penalties of withdrawal, because you are basically rolling over your money from your existing retirement accounts, into what is known as a gold IRA or precious metals IRA. The IRS basically says that as long as the gold is stored with a third party storage facility then you are ok to invest in gold and other precious metals and hold them within your self directed IRA.

There is no grand government scheme or plot to seize your retirement accounts. These rumors all stem from a committee hearing held on October 7, 2008. At this meeting, one house member suggested that it may be a good idea to create a new type of retirement account, called a guaranteed retirement account (GRA). This “GRA” would perhaps allow individuals to rollover their existing 401k’s or IRA’s into a “GRA” and receive a secure-government guaranteed return of 3%.

Audio of the Hearing
(Her words can be heard starting at 33 minutes and 23 seconds into the video of the hearing.)

After this meeting the conservative John Locke Fountain, of Raleigh, N.C., released a publication with the following headline, “Dems Target Private Retirement Accounts: Democratic leaders in the U.S. House discuss confiscating 401(k)s, IRAs.” The report is wrong. There’s been no such suggestion by the government.

The House Education and Labor Committee held hearings On October 7th 2008 where Teresa Ghilarducci a professor at the New School for Social Research in New York City, suggested the following:

Ghilarducci, Oct. 7: I propose … that the Congress allow workers to swap out their 401k assets, perhaps at August levels, for a Guaranteed Retirement Account. Just a one-time swap, trading your 401(k) for a Guaranteed Retirement Account that will be composed of the equivalent of government bonds that pay a 3% real return.

Ghilarducci went further to suggest that a $600 tax credit should be given to those who make contributions into these government retirement accounts. These proposals are very big ideas and very controversial, but they in no way suggest any seizure of American citizens retirement accounts.

While we are on the subject of big ideas, I have one of my own for the members of congress to consider, maybe the government should give bigger tax breaks for those who use their self directed retirement account to purchase real estate, particularly bank owned real estate that the bank has seized through foreclosure. This would immediately have a positive impact on the economy. In a recession, real estate has historically been a leading indicator as to the direction of the major markets. When the real estate market falls, stocks follow, when real estate rises stock do the same. This seems to be the traditional ebb and flow of our markets. If more Americans knew that they could use their existing retirement account to buy property instead of stocks, then we could be on our way to economic recover very quickly. What better way to enlighten Americans than to offer a tax incentive for making such purchases.

Currently there are two trillion dollars sitting in American retirement accounts and only 2% of them are “self directed retirement accounts” — which simply allow you to use your IRA, 401k and various other retirement accounts to purchase real estate, businesses and other no traditional investments.

American citizens could individually leverage their retirement accounts and purchase ALL the foreclosed real estate in our country. Everybody would win. The banks would get these none performing assets off their books and start loaning out money again, this would stimulate the economy, the retirement account holders would own the best asset that the country has to offer (land) and the rents would build the retirement accounts month after month. The real estate market would rebound and stocks would follow suit. It may sound nuts, but it’s better than another trillion dollar bail out. The “Bail Out” days are over. Americans need to wake up and begin anew; think smartly and act more boldly than we have in the past.

Government Seizure of 401(k) / Pensions to “Fix” Social Security?

August 18, 2009

20s Money - I listened to a long explanation by Neal Boortz on his radio show today on why he thinks that in the name of saving Social Security, politicians could easily seize outstanding pension funds including money in IRAs and 401(k) plans. Interestingly, I also had a spike in my search traffic for my previous article: Should Government Take Over Your 401(k) [October 28, 2008].

Whatever your political stance, it is a fact that there are some politicians with some level of power in Washington that want to either tax these funds (that are supposed to be off limits from government officials) or potentially even seize them in the name of the “public good.”

Obama has made it known that after tackling health care, he wants to “fix” Social Security. The push back from the public on his health care reform agenda may delay or even prevent Obama from moving forward with plans to shore up Social Security. If seizing retirement funds and accounts is in any way a part of a future plan to shore up Social Security, well, I sure hope that his plan never sees the light of day.

Remember, the Social Security trust fund is not a trust fund. It has no money in it. It’s merely IOUs from the government. Why? Because the government spends the money collected by social security taxes in order to fund government programs and buy votes. Make no mistake about it, if anybody in the government proposes seizing private retirement funds, it’s not to shore up Social Security; rather, it is to find money that government previously cannot touch and use it to buy more votes.

A good article over at WSJ discussing scary death panel scenarios with government health care has a great quote:

Free people can treat each other justly, but they can’t make life fair. To get rid of the unfairness among individuals, you have to exercise power over them. The more fairness you want, the more power you need. Thus, all dreams of fairness become dreams of tyranny in the end.

Withdrawing from IRA to Avoid Potential for Federal Seizure?

June 6, 2010

ObjectivismOnline.net Forum - I have read repeated claims that as the government becomes more and more broke, they might tap into the trillions of dollars in retirement accounts to keep the money flowing, under the guise of offering a mandatory retirement account (Joe Biden called it a "Guaranteed Retirement Account"). This would probably just become an unsustainable Ponzi scheme like Social Security.

Granted, this could just be a scare tactic by the Republicans, but is there any precedent of retirement seizure occurring? I guess with FDR's seizure of gold from bank safe deposit boxes, anything is possible.

Could it be a good idea to withdraw early from an IRA program, take the 10% penalty and income tax hit, and keep the money in a safe, or better yet convert it to a non-fiat commodity?

(Obviously this depends on how close to retirement you are.)

On October 21, 2008, Argentina's government, led by Peronist President Cristina Fernández de Kirchner and her predecessor, Néstor Kirchner, announced their intention to expropriate $30 billion held by Argentine citizens in private pension funds [similar to 401(k) retirement savings accounts]. The Kirchners need the money to refinance old bad debts so that they can borrow yet more money to keep the country afloat. - Kirchner's Make a Grab for Private Pensions to Bail Out Argentina, Heritage Foundation, November 7, 2008

The last time the government sought to tap workers' savings to help finance debt payments was in 2001, just before it stopped servicing $95 billion of obligations. - Argentina Default Looms, Pension Fund Seized, Free Republic, October 22, 2009

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Internal Revenue Manual: International Seizures and Forfeitures
Toward an American Police State: U.S. Government Seizures

Fed to Steal State Pension Funds: It’s Not a New Idea

Originally Published on August 24, 2009

American Daughter - ... From the Friday, January 29, 1993, issue of the Washington Post we have this article (archived by the Seattle Times) — Budget Cuts Vs. Social Security — Tap Pension Funds Worth $4 Trillion, Panel Tells Clinton — Employers Sense Danger ‘Once They Get Taste Of This’:

A bipartisan government commission yesterday recommended to the Clinton administration that it launch an aggressive effort to tap the retirement funds of millions of Americans to help pay for rebuilding the nation’s roads, bridges and highways and give the economy a lift.

President Clinton has indicated past support for the concept, which would represent an unprecedented effort by the federal government to deal with its budget woes by turning to the more than $4 trillion in cash, stocks and other investments held by pension funds.

Some opponents in the pension industry, who worry about protecting retirees, said they fear Congress might revoke the generous tax treatment afforded pensions if they actively oppose the initiative.

The recommendations by the Congressionally-chartered Infrastructure Investment Commission, which has had the strong support of Senate Finance Committee Chairman Daniel Patrick Moynihan, D-N.Y., include establishing the National Infrastructure Corp. It would be a new government-sponsored corporation that would encourage at least $30 billion in investment by pension funds. Several billion dollars in seed money for the new corporation would come from a new energy tax now under consideration.

Energy tax. Sound familiar?

And two people who watched the Democratic convention in 1996 said:

I was absolutely horrified to hear the Democrats propose at their convention that the government should take money out of private pension funds to sink into yet more federal programs.

The Democrats have already raided the Social Security fund to pay for their unending government spending. We do not need them ruining our pension funds the same way!

This is another Democrat scheme to take even more of our money without having to face public opposition to tax increases. We already have to work over four months a year just to pay the taxes on our wages — we should not have to sacrifice our pensions, too!

Vote against the Democrats and Clinton while you still have money in your pension fund, or you may not have any pension fund left when you retire.

The Argentine government seized control of the private pension funds in that country last fall. At that time the Telegraph considered the possibility that other countries would follow suit — Argentina seizes pension funds to pay debts. Who’s next?, October 21st, 2008:

Here is a warning to us all. The Argentine state is taking control of the country’s privately-managed pension funds in a drastic move to raise cash.

Should we worry about our pensions?

It is a foretaste of what may happen across the world as governments discover that tax revenue, and discover that the bond markets are unwilling to plug the gap. The G7 states are already acquiring an unhealthy taste for the arbitrary seizure of private property….

Obama Retirement Trap

January 25, 2010

Right Wings News - As noted earlier, it's only a matter of time until our insatiably greedy socialist rulers seize our retirement accounts. Another ominous warning:

Washington is in a desperate search for more revenue and a solution to the future financing of the trillions in national debt obligations currently held by foreign central banks and investors. Economists, politicians and smart investors know the dollar's days as the world reserve currency are numbered as is our ability to finance the national debt.

Although the historical government solution to unsustainable government debt loads has always been the destruction of the debts by currency depreciation and eventual hyperinflation, there is always an intermediate step used to buy more time for the politicians in power. This action … is wealth confiscation …

The largest source of liquid private wealth remaining in the United States [is] the $15 trillion in private retirement funds and the ultimate ownership, control and future of these funds have already been compromised and exchanged for the favorable tax treatment of private retirement plans. Congress writes the laws, so they can tax, penalize, hold your funds hostage and, although they'd never use the word, "confiscate" your assets at their discretion.

This confiscation will take the form of compelling participation in a Social Security-style Ponzi scheme that will pay a 3% return (instead of the ~10% you'd make on the stock market in the long term). When you die, Big Government will keep half of what's left in the account.

Despite the full-throated support this multi-$trillion heist can count on from the statist media, many would resist having their life savings stolen by ignominious blackguards. That's why governments create crises, which as Rahm Emanuel observes, should never be allowed to go to waste. Likely crises that might precipitate seizure of retirement accounts include:

• Loss of Triple-A Status for U.S. Treasury Bonds
• Terrorist Attack or Military Disaster
• Another Economic Meltdown

All three crises are not only possible under our current leadership, they appear to be policy objectives. How else could you explain Comrade Obama's pro-terrorist policies, economy-crushing initiatives (Cap & Trade, ObamaCare), and obviously unsustainable spending?

We are heading straight for an iceberg because our rulers are steering for it deliberately. When we hit, one of the first things to go overboard will be private ownership of pension accounts.

On a tip from Funkendunkel. Cross-posted at Moonbattery.

Meltdown: Retirement Funds, Financial Assets Vulnerable to Government Seizure

February 4, 2010

Examiner.com - As the Obama administration assures Americans that 'there are signs of hope' in the economy, the facts say the opposite. The forecast is so dire, in fact, that the retirement funds and financial assets of all Americans are vulnerable to government seizure.

Economists and market analysts who predicted the last meltdown are joining in a united chorus to warn that yet another is on the way for 2010, and this one will be much worse than the last.

In an alarming piece at WRSA the assertion is made by several respected authorities on economics that the U.S. Treasury Department will attempt to seize retirement accounts and other private assets in order to address the growing probability that a financial meltdown is on the way for the United States.

Karl Denninger at Market Watch put it this way:

Now this is a guaranteed rape job.

In a short conversation this noontime that CNBC apparently has omitted from their archives (Why's that folks?) Rick Santelli was talking about a potential to effectively force money into the Treasury market.

Where would they get this?

From your 401k and IRA accounts!

From Businessweek:

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

Let me tell you what this is — it is an attempt to prevent the collapse of the Treasury market!

The upshot? This is tantamount to outright theft, courtesy of the federal government. And your life's savings are at stake.

Further, Denninger blows the whistle on the supposed 'option' that gives Americans a 'choice' of whether or not to put their funds into short-duration Treasuries:

I have no quarrel with the government mandating that you have a choice in your IRA or 401k account to buy short-duration Treasuries — much like the "G" fund that government and civil-service workers have.

But "choices" have a funny way of turning into mandates, and this looks to me like a raw admission that Treasury knows it will not be able to sell its debt in the open market — so they will effectively tax you by forcing your "retirement" money to buy them!

In other words, the U.S. Government sees a massive financial storm on the horizon that is moving in fast. The Feds know that under current conditions with our 13 trillion-dollar debt there is no way we can weather that storm. And they are fully aware that at least 3 trillion dollars are sitting there in the private sector in IRAs, retirement accounts, and 401K plans.

By effectively seizing those accounts through the back-door method, carefully avoiding referring to the plan as a 'seizure,' the Feds can get their hands on funds that they can convert to Treasuries, which will in turn help the government weather the coming storm.

But the losers are you and me. Be prudent. Protect yourself.

For commentary on a variety of issues, visit my blog at The Liberty Sphere.