Thoughts re: 401k, IRA, GRA, retirement

[masraum]

First, please let's try to keep this from going PARFy! I try to avoid that place like a leper colony.

I don't know where, but my wife heard something about the nationalization of retirement accounts. I guess there are articles on the Internet about a few countries like Ireland, France, Argentina, etc... taking over retirement accounts to help the countries bail themselves out of financial issues, and if you search the 'Net there are TONS of articles about that happening in the states. I'm sure it could happen, but I think it's unlikely, and most of the articles that I saw in a quick search seemed to be on small sites, blogs, and sites that sounded like they were probably conspiracy rich. I did a few searches for articles on the bigger news sites and found very little.

I did find a few articles about the failures of the 401k system and the creation of GRA (Guaranteed Retirement Accounts).

What are your thoughts (hopefully, more financial than PARFy) on retirement accounts and savings and (I hate to ask) the possibility of the nationalization of retirement accounts?

[pavulon]

Can't see it happening...but also can't buy into many (?any?) conspiracy theories either. Maybe I should wise up.

[ErVikingo]

Very unlikely in our country.

Now changes to limits on amounts invested, etc. might come down if the government needs a higher taxable base to increase revenues.

Remember that, like many deductions, credits, etc., IRA's, 401K's, 403B's, etc are a type of social engineering.

[masraum]

For the last few years, the max 401k contribution has been going up. I think it started at $15k and this year it's $17k, but after this year, it's variable and linked to an index that allows changes of $500 per year. I don't know if the changes can be up or down or up only.

[cmccuist]

It's $17,000 now but you get an additional $5,000 "catch up" contribution if you are over 50, so you can put in $22,000. And your employer can match that or contribute to it as well.

There have been several politicians that have pitched that idea to take the money in people's 401k's and use it for, well how can I say it in non-PARF language, "government programs" ie waste it! I think there is between $7 and $9 trillion out there in 401k's. That's what retires will have to count on when SS fails.

But there are not enough crazies in congress to actually attempt that kind of money grab.

[Aggie93]

If (when) the deficit /debt really hits the fan, I envision a wealth tax of some sort. Watch Europe for hints on how tax policy might change here.

There is too much money being made by the investment firms and administrators of retirement accounts for those to be messed with.

[Rick Lee]

I think the gov't. will eventually try to take over retirement accounts. Our debt is already at 100% of GDP and the gov't. borrows $.40 of every $1 it spends. Just over half the population pays fed. income taxes. These things make it likely that nationalizing retirement accounts becomes the last viable resort.

The day will come when other countries no longer want to buy our debt because our gov't. is not serious about getting the debt under control. Who's left after foreign countries stop buying our debt? The Fed. How much more funny money can they print? I don't know, but when they run out of ink, I don't expect the gov't. to then start to take the problem seriously. They'll go after the last big source of cash they can and that's retirement accounts. I expect by then that taxpayers will be a minority, while also being the demographic with the most retirement money for the gov't. to take. And as a minority voting bloc, they'll be powerless to stop it. Why would non-taxpayers care? It's not their money, they pay nothing. Why wouldn't they go along with it?

[MRM]

Basically Rick's fear has been articulated by a number of commentators as a possible or likely scenario in our country trying to fix its fiscal problems. That's the sum total of substance to the issue of nationalizing private retirement accounts. There is no legislation on the horizon, and the 5th Amendment prohibition against taking property without compensation should prevent such an idea being put into action. But a confiscatory tax on 401 (k)s is at least hypothetically possible.

It's unlikely and there are lower hanging fruit to be harvested before they get to retirement savings accounts. But if you're really afraid, just keep your accounts off shore. It's perfectly legal and if it makes you sleep better at night, go ahead and do it. But don't stop saving based on the premise that the government is going to nationalize private retirement savings accounts in our lifetime.

[masraum]

Originally Posted by MRM

But don't stop saving based on the premise that the government is going to nationalize private retirement savings accounts in our lifetime.

Absolutely not! This year I should hit the max with a few checks left for the year. I plan/hope to max out every year from here on out, and I'm thinking about begining to make some Roth contributions as well.

[Rick Lee]

Oh, I max out my 401k too and will keep doing so. But there are several ways the gov't. could do this confiscation and call it something else. Due process can be defined as a duly elected Congress writing a law that the duly elected POTUS signs. And it's not like the gov't. feels encumbered by the Const. anyway.

They write a new law that says untaxed retirement accounts are now managed by a quasi-gov't. agency and are untouchable by individuals except by limited vouchers and only above a certain age and there you have it. It will be another giant pool of cash like Social Security for the gov't. to borrow against and repay with IOUs that will only be paid for by future retirement account holders' contributions - basically another ponzi scheme like our current SS system. Except this time only the fiscally responsible people will pay and there's nothing at all to fall back on when this one fails.

I firmly believe nothing but hitting rock bottom will ever stop our gov't. from runaway deficit spending.

[Hugh R]

BOTH parties have mentioned "means-testing" for SS in the future. So if you saved in an IRA/401k, their approach may well be to limit what they pay you in SS, regardless of whether you paid in the maximum every year or not. Seizing IRA/401k monies would not surprise me at all. The penalties for not taking IRA/401k withdrawls when you are required to can be very substantial, like 50% plus whatever taxes you owed. The government is NOT your partner in your pension fund.

[tabs]

Originally Posted by Rick Lee

I firmly believe nothing but hitting rock bottom will ever stop our gov't. from runaway deficit spending.

Hmmmm this sounds so familar????? Where did I hear this one before....OU OU I KNOW, I KNOW...I said it way back in 1980 and quite a few times since....

[tabs]

BTW..they..the government doesn't need you Retirment Accounts....they already have them and every sort of other financial instrument in the world....THE FED IS PRINTING AN UNLIMITED AMOUNT OF MONEY WITH THE QE PROGRAM..In other words anybody who has financial assets is BEING TAXED...So BEND OVER AND KISS YOUR BROWN EYE GOODBYE!!!

And the answer to the question is...

1. The USD is the Reserve Currency to the World...now the Chinie are starting to use the Yuan to trade oil with Iran, granted but it is far too late for the Chinie to avoid getting their feet wet.

2. Everybody in the World hols US debt instruments

3. US financial instutions are intertwined Globally..as the US is the progenitior of the Global economy

4. The US military acts as the Policeman to the World and if we cannot pay to keep the US Navy on the JOB????

Now some of U might understand why I said about 2 years ago that we are in for an Age of Darkness...anybody wana tell me to CHILL NOW?

Hey even Issacs former head of the FDIC the week before last said on CNBC that if Barry gets reupped in November that we are in for a "long dark period."

[fintstone]

Originally Posted by cmccuist

It's $17,000 now but you get an additional $5,000 "catch up" contribution if you are over 50, so you can put in $22,000. And your employer can match that or contribute to it as well...

To be precise, you can start "catch up" the calendar year you turn 50...so if you turn 50 on Dec 29th (for example), you can start investing the extra amount on Jan 1 of that year.

[red-beard]

Originally Posted by ErVikingo

Very unlikely in our country.

Now changes to limits on amounts invested, etc. might come down if the government needs a higher taxable base to increase revenues.

Remember that, like many deductions, credits, etc., IRA's, 401K's, 403B's, etc are a type of social engineering.

I disagree. This country nationalized gold in 1933. Was that constitutional? Technically, you were compensated with paper money, backed by gold.

I agree with most above. It will not takr the form of confiscation. It will be collecting and restructuring so that the Federal Government holds the accounts on it's balance sheets. This way, it can count these assets against the debt, and start to unload the treasuries the Fed and others are holding.

Tabs is correct. The new "QE3" is really continuous QE, at $40B per month. That is almost 1/2 Trillion per year. This is bad. Really really bad.

[ErVikingo]

Originally Posted by red-beard

I disagree. This country nationalized gold in 1933. Was that constitutional? Technically, you were compensated with paper money, backed by gold.

True but now there are so many people invested and so many lobby groups that I see it as remote (not impossible). I hope I'm right.

[lukeh]

I doubt the government ever takes over retirement accounts. However, I do agree with the person that said that those that retire wealthy will lose their social security. It will be like college aid. If you open a 529 account when your kid is born and save monthly your kid will have a bunch of cash and not get financial aid. Those kids whose parents don't save a dime for their college will get all the aid.

I guess the answer is to save but hide the assets so you have the cash and yet still look broke enough to qualify for the aid.

[red-beard]

Originally Posted by ErVikingo

True but now there are so many people invested and so many lobby groups that I see it as remote (not impossible). I hope I'm right.

By percentage, more people had gold in the 1930's than have 401Ks or IRAs. EVERYONE had gold.

[74-911]

Originally Posted by Hugh R

BOTH parties have mentioned "means-testing" for SS in the future. So if you saved in an IRA/401k, their approach may well be to limit what they pay you in SS, regardless of whether you paid in the maximum every year or not.

They are already doing "means testing" in a way. Not limiting what you receive in SS benefits but by taxing your SS benefits. If you saved as you should in an IRA or 401K, when you start withdrawals the amount you withdraw (besides being taxed at earned income rates) also can cause up to 85% of your SS benefit to be taxes at earned income rates.

The real problem as usual with anything congress does is the unintended consequences. When the law was passed in the 1980's the income threshold for taxing SS was relatively high but the threshhold amount was not indexed to inflation so now if you have any kind of retirement income at all you can bet some of your SS benefits will also be taxed.

[dan88911]

The average balance in all 50 million 401(k) accounts is just over $60,000, according to the Employee Benefit Research Institute. Even people within 10 years of retirement have saved an average of only $78,000, and more than a third of them have less than $25,000. More than half of U.S. workers have no retirement plan at all. With Social Security averaging $14,780 a year for individuals and $22,000 for couples, many Americans will exhaust their savings in just a few years. Since millions of boomers are likely to live into their 70s and 80s, the country is headed toward a major crisis. "It looks like most middle-class Americans will become poor or near-poor retirees," said Teresa Ghilarducci, a retirement specialist at the New School in New York.

And for those that have amass tidy sum. Once you withdraw plus S.S over certain income levels S.S will be tax as much as 85%. One could use a roth ira to off set taxes. However, congress could change tax laws on roths in the future.
And there are minimum required distributions starting at age 70.
Uncle Sam has the ability to tax the hell out of you.