How the US Government Will Seize Your Retirement Account

EPJ ^ | 5-12-2011 | Simon Black

[blam]

How the US Government Will Seize Your Retirement Account

By Simon Black
May 12, 2011

Following in the footsteps of a rather ignominious list of nations like Argentina and Hungary, the government of lreland is set to take its 'fair share' of private retirement funds.

Drowning in debt and faced with unpopular, unrealistic, ridiculously unpopular austerity measures, the government has announced that it will now tax private pension savings in order to raise 470 million euros (roughly $675 million) per year... a lot of money in a country of only 4.4 million people.

Somehow, the government expects to be able to create 100,000 jobs to bring down an unemployment rate at 14.7%. Perhaps they plan on hiring 100,000 new workers to go around the country and collect the tax.

It reminds me of what I saw in Bolivia a couple of weeks ago-- there's a tax or toll or fee for nearly everything you do. Driving on the highway (if you can call it that) outside of Santa Cruz, you pay a toll... obviously not for the maintenance of the road, but to pay the salary of the toll collector.

At the airport, you have to pay an airport tax before departure... obviously not for the upkeep and efficiency of the airport (it took 2-hours to make it to my gate), but to pay the salaries of the guys who collect the airport tax.

This is what politicians consider 'job creation,' yet these positions only serve to destroy value. That they would stick up the retirement funds of hard working people is even more immoral.

Here's the best part, though. If you are a government worker in Ireland, your pension is exempt. They're only going after people in the private work force. It's truly disgusting logic to force private workers to pay for years of political incompetence while absolving government employees.

Coincidentally, there are a few other loopholes as well, particularly for non-residents and non-resident funds. Apparently those Irish who saw the writing on the wall and got busy moving themselves and their assets offshore will get to keep all of their savings.

Ireland is not the first country to call this play, nor will it be the last. Pension funds are attractive targets for politicians who have wide eyes and the most carnal thoughts at the site of any large pool of cash.

Think it can't happen where you live? Think again. Late last year, the French government went through an elaborate process to change its pension laws, 'legally' allowing politicians to steal retirement funds from the public in order to pay off other debts.

In the US, public pensions have been raided for years, Congress routinely 'borrows' from Social Security to make up budget shortfalls. This is what talking heads mean when they play down concerns of a $14 trillion debt "because we owe it to ourselves--" $4.6 trillion of the debt is owed to intragovernmental agencies like Social Security.

Chances of this money being repaid to Social Security in full? Slim. The trend is more debt, not paying off existing debt. In fact, I'm convinced that politicians have their eyes firmly fixed on the trillions of dollars in private, individual retirement accounts (IRAs) in the United States to fund new spending.

Here's how it will go down:

First, there will be some event... some sort of financial cataclysm, similar to the market meltdown we saw in 2008 after Lehman.

Bear in mind that most IRAs are managed by boneheads at big financial institutions; they get compensated not based on the performance of their portfolio, but on the total amount of assets under management. Your interests and their interests do not align.

As such, most IRAs are callously tossed into S&P index funds or some such generic vehicle, citing the safety of broader market diversification, as if that nonsense they teach in MBA finance classes is how the real world actually works.

When a big crash occurs, these unhedged broad market positions get hammered the most. Don't worry though, your fund manager will still get a big fat bonus check, because his performance is irrelevant.

This is when Congress will step in. Citing its desire to 'protect' the American people from future market shocks, the politicians will mandate that a portion of all managed retirement funds be invested in the 'safety and security' of US Treasury bonds. And, just to be on the safe side, let's park them in 30-year bonds that yield 4.35%.

Sound fair? Well who asked you anyways... just be a good citizen and turn over your money already. The important part is that the big financial institutions still get their big fat fees, and the government gets its hands on the mother lode.

This is how US taxpayers will end up being forced to loan their hard earned retirement savings to the government at rates far below any expected inflation.

Right now, there is a window of opportunity to take action; US taxpayers with retirement accounts can set up a special kind of IRA structure that allows you to take control of your retirement savings, and even ship it offshore if you want to, completely legitimately.

After taking control of your IRA, you can do any number of things-- buy and store gold and silver coins overseas; hold foreign currencies in an offshore bank account; buy securities on international stock exchanges; purchase agricultural property overseas, or even a beautiful apartment on the beach in some sunny country.

The possibilities are incredible... but the most important thing is that you get this retirement money off the radar of the politicians before they pull an Ireland and announce some new measure, virtually overnight. These things can happen very, very quickly.

I've talked about this before a number of times, and every time I read the news of yet another country taking this approach, it serves as a reminder to take action.

( You can read more about it here.)

[Lancey Howard]

I always have this nagging suspicion in the back of my mind that America’s scumbag politicians always have the nagging understanding in the backs of their minds that some people in this country take the Second Amendment very, very seriously. That, at least, slows them down a little.

[Eska]

I have a neighbor, buying 2 new trks, snowmachines, everything he feels he will need (major purchases) for the rest of his life. Believes the govt will come after gold & silver like in the 1930s and it will be about worthless when they do, until our country no longer exists. He figures it's a better move to put his money in items that are going to go way up in price with inflation while there still is some value in his money. He might be right too.

They have been taking 8.6% a year out of both wife & my paychecks for a good many years for our retirement plans. Trouble is the only way I can move it is by moving out of state or retiring; figure we are further ahead by working until we die. The buggers got all of us by the balls. It will still upset quite a few Americans if the govt steals several hundred thou from each & everybody's 401s.

[OB1kNOb]

I like the way you think!

[CodeToad]

Hells Bells! You’ve got a rocking chair and a fishin pole?? You’re a rich white guy, huh?! Tax him!

[MrB]

This is how the elites will attempt to “keep their balls in the air” before the whole house of cards collapses.

[MeganC]

Time to convert dollars to fungible gold and silver. My family hedged into gold silver years ago so we’re sitting pretty and the people who derided folks like us as ‘gold bugs’ are wishing they’d listened when gold was around $300 an ounce and silver could be had for $3.50 an ounce.

[Red in Blue PA]

See the Beatles Taxman....they will tax the air.

[Tucsonican]

The sad part of this is that people will absolutely flock to the polls to support a decision like that. After the crash in 2008 I had more clients than I could shake a really big stick at crying for precisely this kind of “protection”. The foundation is already in place; the government has been bashing “big business” for more than 2 years and even on sites like this I’m seeing fanatical ravings against “corporate abuses”.

[happilymarriedmom]

Don’t they already tax these funds when they are withdrawn? And if you took all of your money out and did something else with it, wouldn’t you be taxed?

[rawhide]

What happens if all taxpayers are dead and only government workers are left, will the government survive?

[CharacterCounts]

This is when Congress will step in. Citing its desire to 'protect' the American people from future market shocks, the politicians will mandate that a portion of all managed retirement funds be invested in the 'safety and security' of US Treasury bonds. And, just to be on the safe side, let's park them in 30-year bonds that yield 4.35%.

I don't think they will directly take it. Instead, look for them to require all future payments to the plan to be put in a government "secured" type of trust with a "guaranteed" payout. If that sounds like Social Security II, it should.

Current funds will have a "grace period" where the owner can withdraw the funds and pay the income taxes on the immediately.

Just think what would happen to tax revenues, if every American suddenly opted to pay taxes on his or her 401(k) and 403(b) accounts.

[meyer]

If they take mine, they had better be prepared to die for I will go to war over this.

[muir_redwoods]

I’m thinking that converting IRA’s to gold, silver and lead might be a great idea. Doing so quickly and keeping it below the radar are the issues.

[Nip]

The scenario discussed isn't that much different from what happened to teh Social Security Funds in the late 1960s. That's right folks, nearly 50 years ago the Social Security was managed as a separate account. But, running short of money and since the dollars in Social Security were orphans the Federal Government seized all of the money, closed the Social Security accounts and moving the money into the general funds, and began issuing IOUs.

That act meet very little resistance. The IRA money will be the opposite. Why? The money in the various IRA programs aren't orphans that can be used for the general good. Each dollar is linked to a specific person and there is an audit trail to prove it.

When this happens, not “if”, it will be largest robbery every attempted. I call it robbery because that is exactly what it is. It will be the largest not because of the dollars involved but in the number of victims. And, the chance of a class action lawsuit to recover real, not imaginary, damages will never happen. After all, the Federal Government is immune to such legal activity, ain't it? Just ask them to find out.

[TheOldLady]

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[petercooper]

bttt

[muir_redwoods]

When you become convinced that the government has succeeded in making gold and silver worthless, please send me all you have. Gold and silver have never been worthless and, even when ownership became illegal, it still changed hands for value transactions.

[Joe 6-pack]

"...the torches to be sharpened and the pitchforks to be lit."

What exactly do you plan on doing with a sharpened torch or a lit pitchfork?

[twistedwrench]

"It's truly disgusting logic to force private workers to pay for years of political incompetence while absolving government employees."

Welcome to California

[Jack Hammer]

Kinda surprised Obama hasn’t done this yet; no doubt after he wins a second term he’ll start grabbing savings and pensions.