401k/IRA Screw Job Coming?

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JIMV
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401k/IRA Screw Job Coming?

[quote]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.[/quote]

http://market-ticker.denninger.net/archives/1830-401kIRA-Screw-Job-Comin...

This scares the daylights out of me...I have a very modest IRA and 18 months before I can get at it without a tax penalty. If we are 'forced' into some federal scheme like an unsecured annuity, first the return is reduced vastly by inflation and second the increase in the fund will be at the treasury rate, way below the market....My $50K, which I was hoping to tap at $6K a year until I hit full SS age, will become some tiny amount much later not indexed for inflation.

It would be pure government theft.

I would have to pull my money early and pay taxes at an extortionist's rate.

Just what kind of a government are we creating?

I have read other articles on this scheme and discounted them as wild ravings but this is source to too many business sources to blow it off.

zmogus
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I always suspected this was

I always suspected this was coming. This is the wealth of America: our 30 year old retirement accounts. The freakin' Red Feds led by Pelosi/Reid/Obama/Axelrod/Emanuel are going to seize this asset of the American people. Michaud will blithely go along. Snowe and Collins have theirs.

Melvin Udall
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This is a huge source of

This is a huge source of untapped cash, and they can't resist attacking it.

My Medicare Advantage plan is about to disappear; once they take my 401(k)/IRA assets, the destruction of my standard of living for the years I have will be complete, plus I'll have nothing to leave my children.

What a country.

pmconusa
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Seems I saw this thread a few

Seems I saw this thread a few days ago and made a comment. It then disappeared. Never mind, it should be given the light of day and we all ought to start writing our legislators to get this thing nipped in the bud.

This isn't about removing the market risk from individual savings, or insuring a steady stream of funds in retirement. Its about getting their hands on the principle and when they do, there is no end to the mischief they will inflict.

The following is a letter to Senators Snow and Collins you are welcome to copy if you see fit.

It has come to my attention that the Congress is considering legislation that would convert individual’s life savings in IRAs and Roth IRAs into government annuities. The purported purpose is to insulate risk of loss and guarantee a secure income to the nation’s seniors. As a senior and a registered voter in Maine I am telling you to keep your hands off my retirement funds.

The real purpose of such legislation is to get the government’s hands on the majority of the invested wealth of this country in the hands of its people. No good can come from this effort and I implore you to come out strongly to reject such a move. If people want to turn their IRAs or other retirement funds into annuities there are multitudes of companies, who have been in business for decades that will more than be happy to sell them one. If I choose to invest my retirement funds in securities or keep them in my mattress that is my business, not the government.

If you think the uproar over the stupidity of government mandated healthcare insurance is any demonstration of the people’s outrage, it will pale in comparison to this latest scheme when it becomes public knowledge. You are now only beginning to awaken the vast majority of people who prefer to be left alone to exercise their right to self sufficiency and are tired of a government that seems to be moving hell-bent to create a nanny state. I suggest strongly that you start applying the brakes.

FXSTC
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From each according to their

From each according to their ability, to each according to their need in this jobless recovery!

JIMV
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Quote:My Medicare Advantage

[quote]My Medicare Advantage plan is about to disappear; once they take my 401(k)/IRA assets, the destruction of my standard of living for the years I have will be complete, plus I'll have nothing to leave my children.[/quote]

I very carefully planned my retirement around 3 things, a pension indexed for inflation (Bush inflation of 3-5% a year, not Obama super inflation), around 6 years worth of IRA money to supplement the pension until SS cuts in at age 67, and then a combination of SS and the pension. I know SS is broke and never expected to get more than perhaps 70% of today's benefit.

All that combined with moving to a low tax free state was to see my family through retirement....Since the dems took over they have printed so much money that a massive rush f Carteresque inflation is almost guaranteed, work as a fall back is scarce, and now they want to play with my IRA's...

I still have hope, aside from a November sweep of the Marxists, I suspect Congress will not push for mandatory confiscation into this sort of a new scheme unless they become certain they will retain power next year. So, right now my hope is that Congress simply does not have the time left to destroy our retirement system as well as the health care scheme.

I already know my 'Free Health Care for Life' from my military service will be destroyed or taxed under the ObamaCare scheme. This is not a good time to rely on any government promise.

JIMV
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...There is "a tremendous

...There is "a tremendous amount of interest in the White House" in retirement-security initiatives, Borzi, who heads the Labor Department's Employee Benefits Security Administration, said in an interview.

http://www.businessweek.com/investor/content/jan2010/pi2010018_130737.htm

FXSTC
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Forget about retirement, it's

Forget about retirement, it's the dawn of a new era. Arbeit macht frei!

JIMV
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"But above and beyond those

"But above and beyond those issues, the governmental class really hates IRAs and 401(k) accounts because in their eyes such accounts take all that glorious tax money away from the U.S. Treasury. Billions upon billions, deferred for decades — or given up completely in the case of Roth accounts — money that they could be spending to buy votes. It’s unconscionable! Who do all those little people think they are?"

http://pajamasmedia.com/blog/coming-soon-substituting-government-annuiti...

JIMV
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For some time, there have

For some time, there have been rumblings that the federal government might try to solve its budgetary problems by nationalizing (i.e., stealing) the money that millions of Americans have set aside for retirement in 401(k) plans and the like. One way they might do this is to confiscate the cash on hand in exchange for a promise to make future payments in the form of an "annuity." An involuntary annuity, in that scenario.

http://www.powerlineblog.com/archives/2010/05/026260.php

FXSTC
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Not yet, not at DJIA over

Not yet, not at DJIA over 10,000.

They need a crisis to implement this rip-off, drop the DJIA back around 6,000 and the sheeple will be greatful for this Ponzi scheme.

Mills Web Geek
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This kind of Government theft

This kind of Government theft of savings would trigger an amazing revolutionary sentiment across the country.

I haven't read the links yet but I suspect the Feds would plan to include language that any unused funds in the annuity would revert to the government instead of the person's heirs. That's the real theft in these schemes.

Uljas
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Why is anyone surprised? Look

Why is anyone surprised? Look at the theft of social security. You and your employer pay in for 50 years. You die before retiring or shortly after. If you are single or divorced or your spouse has died before you and you have adult children they get nothing. None of your relatives can get a cent of the money you were forced to pay in your entire working life . Your estate doesn't get the balance in the account, the government keeps it and that is either theft or extortion or both in my world. They have also raised the age of full retirement, decreased the percentage paid for retiring at 62 and passed a law that they don't pay partial months,which means you don't get a check for the actual month you retire. Example.. birthday sept 10,you retire on that date ,they start counting in October and send your first check in November. I called Rep. Pingree's office and checked on this. So why be surprised that they want to get their hands on the 13 trillion dollars in private investment accounts. It's for our own good to give us a stable guaranteed income that the fat cat money managers can't steal from us . They'll probably put the money in a lock box that no one can get into but us . All the risk will go away. I wonder if they'll also pay the same 0% interest they do on the social security account ?

Mike Beardsley
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As an alternative to having

As an alternative to having the meager "residual" funds revert back to the government would be to disburse it to the heirs along with the requisite estate and income taxes. All in an effort to to appear to be "compromising".

matt8888
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I'm all for getting rid of

I'm all for getting rid of 401k accounts. They were never meant to be a retirement account, they were designed for the very, very rich as a tax shelter. Not for everyday people.

The market could fall apart and your entire 401k could be wiped out. Would that be better? I'd rather see it secured by the feds.

Economike
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...they were designed for the

...they were designed for the very, very rich as a tax shelter. .... The market could fall apart and your entire 401k could be wiped out. Would that be better? I'd rather see it secured by the feds.

matt8888 -

So you'd agree that, since they alone can afford to take risks, it should be government policy that only the rich should get richer?

matt8888
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No. I'm saying that 401k's

No. I'm saying that 401k's are not safe and not the best place for your money. And when it falls apart, America will have a huge problem: A very large percentage of the population with no retirement income.

FXSTC
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The 401k is a good option for

The 401k is a good option for some, but not all. Putting the responsibility for retirement savings into an employee's hands comes with risk, and if you don't want to assume that risk, there should be an alternative, like Treasury securities or other government backed programs. There are many people that either don't care to watch their investments, or are unable to effectively manage them, and they should have a better choice than the current 401k approach.

Saying that no one should have access to a 401k is unreasonable. If I want to take the risk, I should have the choice. Changing the rules after someone has participated in 401k programs for many years is also unreasonable.

Economike
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The market could fall apart

The market could fall apart and your entire 401k could be wiped out. Would that be better? I'd rather see it secured by the feds.

matt8888 -

You are suggesting that government should secure the investments of ordinary savers and eliminate tax-deferred vehicles like 401(k)s. Is this a fair restatement of your idea?

The consequence of this idea is that the advantages enjoyed by the rich in accumulating wealth through holdings of equity capital will be denied to everyday people. Can you now see why your idea leads to a "rich get richer" policy?

FXSTC
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The premise that 401k's were

The premise that 401k's were designed as tax shelters for the very rich is faulty.

Economike
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I'm going to pick on matt8888

I'm going to pick on matt8888 and I apologize. I suspect he hasn't thought through the implications of his ideas.

It's clear to me, however, that his reflexive belief that government can - and should - insulate a citizenry from market risk is an instructive example of how and why the world finds itself in a growing debt crisis.

His belief is, of course, illusory. A defined benefit plan is far riskier than any 401(k) if its underlying asset is a promise to pay future tax receipts. This, of course, is what a government guarantee is.

No government can guarantee financial security by insulating a citizenry from its own economy. If the market fails catasrophically, then everyday people - not just the very, very rich - lose their wealth.

However, the market will not fail. If history is any guide, those who hold equity capital will achieve returns far greater than those who place their faith, or rather are required to believe, in government. A policy of discouraging "everyday people" from taking "risks" with their own savings is no benefit to them; it's a punishment.

matt8888
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Economike, Your debating

Economike,
Your debating skills are horrible. Your completely making things up and saying that "this is what i believe" and "this is what I am stating" When I never stated anything you said, nor believe it.

You have failed.

Economike
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matt8888 - I had understood

matt8888 -

I had understood you to mean that 401(k)s are too risky for ordinary people and that government ought to eliminate 401(k)s and instead guarantee their retirement accounts. I recognize that my broad conclusions from these apparently modest ideas might seem extravagant.

I don't see where I was wrong but, if you say so, I heartily apologize for misunderstanding your remarks.

Mills Web Geek
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I don't understand why 401(k)

I don't understand why 401(k) programs are inherently risky. A 401(k) is a retirement savings program much like an IRA. The funds can be invested in [i]anything[/i] including treasuries, CDs and other extremely low-risk investment vehicles. It's simply a way to save money and postpone payment of income taxes on the original amounts and any gains.

The vast majority of people toss all of their 401(k) funds into stocks and that's just plain stupid if you're within 10 - 15 years of retirement. It's stupidity that causes these problems not an inherent risk level of 401(k) plans.

Vikingstar
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As for the "safety of

As for the "safety of government", there is the minor detail that the government has for decades taken the money paid into Social Security and put it into the general fund--spent it, in other words, and put IOUs to itself into the SS "lockbox". Well. those IOUs are coming due, with nothing to pay them with. Sooner rather than later, it's going to become evident that those of us who have paid into SS for decades are going to get nothing for it but tax increases.

All Ponzi schemes fail, even "government secured" ones.

JIMV
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The problem with the

The problem with the government guaranteeing retirement accounts as the rumor go is that only folk with BIG 401K balances will get enough back from their accounts to really matter...it is an annuity for life. My meager $35K and my spouses $15K would shift from a bridge between early retirement and SS to something crappy like $50 a month for life...I need access to the money I saved for the 2.5 years between 59.5 and SS at 62...that is around $1500 a month, to be replaced with SS...

johnw
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Question for matt......

Question for matt...... After the gov confiscates my 401k and eliminates both the risk and reward I take by investing in one, will it be as generous as it is with SS? that nifty program where I get to pay in all my life and when I die my heirs will receive nothing??As an aside i have done ok on my 401k despite all of the trials and tribulations of the recent market volatility. I'm not rich or anything like it but the 401K has reduced my tax burden nicely....

jcmcards
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matt888.... I agree with

matt888....

I agree with Economike. Your lack of fiscal understanding on other posts relating to investments, the market, your 401K, and this latest comment of 401K's being tax shelters for the rich further clarifies it. A 401K should be a piece of retirement planning. The key word here is planning. If you just put away a percentage of your income while never paying attention to the market or where the money is being invested, that's a problem. I believe it is the individual who is responsible here, and not the government.

johnw
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jcmcards...planning now

jcmcards...planning now there's a novel idea!
I take it to mean that more people ought to not live to the edge of their paychecks and credit limits and actually save towards their own retirement..... but that would mean they couldn't have everything they want right now.

matt8888
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As I understand it, the 401k

As I understand it, the 401k (section) was added to the tax code in 1978 at the request of one bank (lobbyist). This allowed highly paid executive to avoid taxation on their income if they differed a portion of their income it rather than get paid cash.

I don't know many people that can defer most of their paycheck until retirement unless your making more money than you can spend. This is why I said it was created as a tax shelter for the rich.

This is my opinion. If you don't like it you can pound sand. This forum wouldn't exist without people's opinions.

Cigarsmoker
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Whether or not the 401k law

Whether or not the 401k law was due to one banker or not is irrelevant. I, for one, do invest in my 401k with deferred income, and I certainly do not make more money than I can spend. In fact quite the opposite is true. Whether or not I should go "pound sand" because I do not agree with you is just assinine, and that statement is indicative of your inability to have a constructive discussion.

I make sure that I and my family live beneath our means. We regularly go without. We do this because it is the right thing to do, and I have never received a single handout from the government. Nor, do I ever want to. Therefore your base premise is incorrect, and 401k's are not only for the rich, and for those whho earn more than they can spend. I could spend a great deal more than I make. I choose not to.

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