Retirement Alert: The Government Has Plans for Your 401(k) and IRA

In the near future, the government may be planning to take over your 401(k) and Individual Retirement Accounts (IRA) and managing it on its own. Why, you ask? Well, mainly because there is an unprecedented trillion-dollar deficit that needs to be taken care of.

Plans for Your Money

So this is the deal: somewhere out there is a major deficit that is struggling to lower despite the government’s efforts. However, there are tons of 401(k) and IRA accounts floating around with tons of money (well, at least what’s left after the financial crisis).

So now, according to BusinessWeek, the Treasury and Labor departments are asking for public comment on “the conversion of 401(k) savings and Individuals Retirement Accounts into annuities or other steady payment streams.”

How Would the Conversion Work?

Basically, in order for the conversion to work, the government would take over you retirement savings. In return, it would promise to pay you some type of monthly benefit in your retirement years.

One suggestion from Teresa Ghilarducci of the New School for Social Research in New York, who was a part of hearings last fall held by the House Education and Labor Committee, was to give all workers “a $600 annual inflation-adjusted subsidy from the U.S. government.”

In exchange, the workers would be required to invest 5 percent of their pay into a guaranteed retirement account that would be administered by the Social Security Administration.

However, this guaranteed retirement account would actually be an investment in U.S. Treasury bonds that would go toward paying down the huge trillion-dollar budget deficits.

Will This Actually Happen?

While the government is only asking for opinions now, experts think that this conversion will actually happen. It will probably start off as a choice at first; however, as noted by Karl Denniger of the Market Ticker site, “‘Choices’ have a funny way of turning into mandates.”

What’s even more unfortunate is that if the conversion does occur, the benefits based on Treasury bond interest rates may end up being inadequate compensation for years of saving since the government has been suppressing yields since the crisis started.

So what will happen to your retirement savings? There’s no guarantee at this point. Based on the plans, there’s now no clear-cut guarantee of how much would be available at retirement – or whether you’ll have a retirement account at all.

This may be a good time to consider exploring options outside of the 401(k) and IRA just to make sure you’re able to diversify your savings. It’s okay to trust in the government, but remember, this is your money. It’s best to make sure you’re protecting you and your family first.

How do you feel about the government’s desire to take over your retirement savings?

Lpp

I have invested in the stocks myself and I’m very pleased with the % of my investments, to think that the government wants to take over my Ira just sucks!! I have put to much sweat into getting back into the game and I will find another way with my cash and I say it again my cash!! I am all about less government and less taxation. This is just taken more freedom away from us and it’s just not right! Don’t tread on us!!
J.E.M

Lord Behold! Between this and HR-4646 the commoner will be screwed! If you do not know what HR-4646 is well you better find out! Do you think the uber rich will lose money? That answer is NO! These bills are targeted at the less than a million dollar a year club.
Carolyn Gorsuch

I am appalled the US Govt. thinks it knows how to manage my 401K, when it is trillions of dollars in debt. Thank goodness private enterprise does not manage money the way government does. No amount of money is ever enough for them.
Anonymous

The government has no right to manage our money just look at how they manage there money. They will pull funds out and pull it into bankrupcy just like the S.S. susytem. If this is the case I will take the 10% early withdrawl penalty and put my money into something I can totally control.
ObamaDoucheBag IMAMUSLIMSCREWINGAMERICA

If the governmnet steals our retirement funds…the peaceful protests are over.
Sheri

I agree. My husband, a retired army officer, will start forming a citizens militia if this happens. And we will withdraw all our money from US banks and deposit it overseas. The IRS can try to find us but I doubt they will be able to catch everybody who will do this. We have a special needs child to support and we are not going to sit by and watch while the government steals even more of our money. Much of our savings has already been taxed.
http://dttlaw.com Doug

This would be an unlawful and unconstitutional taking. I cannot fathom how the government would get this done and, if it decided to do so, that it would withstand the inevitable challenge in the courts.
http://jcopro.net JC

Seems like they tried that before, it was called Social Security.

Hopefully anythingn like this is a long way off, besides I don’t see how this could be passed by the senate or house. Maybe it’s time for a Roth conversion. That wouldn’t solve everything, but it would give you more options if you saw it coming.
Joel Manville

What a farce!!! You people run with anything to try to bring down the other political party. Read the following from POLITIFACT web site. Be sure to read to the very end to understand how uninformed you are. This rumor is all over the internet and has no facts to support it. Some moron from a “think tank” named Teresa Ghilarducci did suggest a different approach to retirement plans but was misquoted and no political action has been reported from any Washington records on this “plan”. Read on from POLITIFACT. Oh they have many other debuked reports by Polititions.

Virginia Speaker William Howell says Congress is considering confiscating 401(k)s and IRAs
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Your tax-deferred retirement savings are in danger of being seized by the federal government warns William Howell, speaker of Virginia’s House of Delegates.

“There’s talk in Congress now about basically confiscating your private 401(k) or IRA plan and rolling it into Social Security to strengthen Social Security,” Howell, R-Stafford, said during a Nov. 13 interview on Freedom & Prosperity Radio, a conservative weekly show broadcast in much of Virginia.

Howell made the statement to bolster his pet cause: Passage of a U.S. constitutional amendment that would give states the collective right to repeal any law or regulation approved by the U.S. Congress. Under the proposed amendment, which Howell will ask the Virginia General Assembly to endorse this winter, a federal act would be nullified if two-thirds of the states passed resolutions demanding so.

Howell brought up the confiscation of IRAs and 401(k)s, then added: “Well, if Congress were ever to pass a law like that, I would think two-thirds of the states would rear up and say, `I want to repeal that law,’ and this (amendment) would give them the right to do that.”

When we asked Howell for the basis of his confiscation claim, he said, “That idea has been floating around from Democrats for years.”

That was news to the AARP, a powerful lobby for Americans for seniors that watches legislation affecting retirement accounts and Social Security.

“Haven’t heard anything like that at all,” said Ginger McDaniel, communications director of AARP Virginia, when read Howell’s confiscation comment. “I’m sure we would know if anything like that was being considered.”

It was also a surprise to Roberton Williams, an economist and senior fellow at the Tax Policy Center in Washington who specializes in pensions and retirement accounts.

“I’ve heard absolutely nothing about that,” he said. “If that was a serious suggestion, it would be all over the place in this town.”

Howell’s office later sent us a variety of sources to back his claim.

They all seem to stem from an Oct 7, 2008 hearing by the House Committee on Education and Labor probing the recession’s impact on retirement security. The values of 401(k)s and IRAs were plummeting. The panel discussed whether the federal government should promote alternative plans that would shield retirement savings from economic turmoil.

One of the speakers was Teresa Ghilarducci, an economics professor at the New School for Social Research, a New York City think tank. She urged creation of a new savings plan that she called a Guaranteed Retirement Account. It would require workers to save 5 percent of their annual pay. The accounts, unlike IRAs and 401Ks, would not be controlled by workers but instead deposited with the federal government, which would kick in $600 a year in the form of a tax credit. Upon a worker’s retirement, the government would guarantee an annual return three percent above inflation.

Ghilarducci also proposed that Congress “allow” workers to convert their IRAs and 401Ks into a Guaranteed Retirement Account, according to a video of the hearing. There was no talk about coercion or government seizure of existing accounts. A story on the hearing in the next day’s Washington Post made no reference to a confiscation plan and waited until the 12th paragraph to make its only mention of Ghilarducci. There was no coverage in The New York Times.

Almost a month later, on Nov. 4, 2008, the conservative Carolina Journal Online used Ghilarducci’s testimony to write, “Democrats in the U.S. House have been conducting hearings on proposals to confiscate worker’s personal retirement accounts, including 401(k)s and IRAs and convert them into accounts managed by the Social Security Administration.” Howell’s office sent us a copy of the story.

The web has been replete with unfounded rumors of retirement account confiscation ever since. They usually cite Ghilarducci’s testimony.

Another rumor — although Howell doesn’t mention it — puts Vice President Joe Biden behind the seizure effort. The source is said to be a report Biden released in February on the state of the middle class. We read the section on retirement security and found proposals to encourage savings, but nothing that remotely suggested confiscation of retirement assets.

Howell, despite his radio comments, said the public shouldn’t lose sleep worrying about the seizure of retirement plans. He said the November 2 elections, which put Republicans back in control of the House of Representatives, have eased his mind.

“I know its not going to happen now that the Republicans have the House,” he said. “But I use it as the kind of thing that could happen in Congress if its powers are unchecked.”

Howell’s radio comments, sounding the confiscation alert, came 11 days after the election.

So let’s review:

Howell says there’s “talk in Congress about basically confiscating your private 401(k) or IRA,” which suggests there is serious consideration of such a proposal. He cites two-year-old testimony by a think-tank economist that makes no mention of seizing tax-deferred saving plans.

We can’t find a single story in a national newspaper that warns of confiscation. AARP, the nation’s largest lobby for seniors with a reported 40 million members, says it “hasn’t heard anything about it at all.” The web sites reporting government seizure efforts cite statements and reports that, in fact, make no such suggestion.

And it gets even more ridiculous when Howell, himself, says he knows it’s not going to happen. We rate his claim Pants on Fire.
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About this statement:

Published: Friday, December 3rd, 2010 at 5:41 p.m.

Subjects: Retirement

Sources:

William Howell, interview on Freedom and Prosperity Radio,Nov. 13, 2010.

William Howell, phone interview, Dec. 1, 2010.

Interview with Ginger McDaniel, communications director AARP Virginia, Nov. 30, 2010.

FactCheck.org, Are congressional Democrats talking about confiscating IRA and 401(k) investment accounts? Nov. 19, 2008 .

U.S. House Committee on Labor and Education hearing,Oct. 7, 2008.

Annual Report of The White House Task Force on the Middle Class,February, 2010

Carolina Journal Online, Dems Target Private Retirement Accounts,Nov. 4, 2008

E-mail interview with G. Paul Nardo, chief of staff to Speaker William Howell, Dec. 2, 2010

Interview with Roberton Williams, senior fellow, The Tax Foundation, Dec. 3, 2010

Written by: Warren Fiske
Researched by: Warren Fiske
Edited by: Daniel Finnegan
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In the Richmond Times-Dispatch
UScitizen

The government has NO business taking over MY hard-earned money to pay off the mess THEY have made of America. They have already taxed me half to death, and now they want my life savings. I am now self-employed and will move my money out of the 401K it is still in before they can get their hands on it and squander it like they have everything else they have taken from me!!
feeduptaxpayer

Joel Manville from POLITIFACT needs to read part 5 of Obamas new deficit reduction plan. It was in last saturdays USA today biz section. It refers to his plan to “combine all retirement investment vehicles into one plan”. Is this “Mainstream news media” enuff for him? It is for me and Ill bet AARP is noticing now too.
Molli

To think that Americans hard earned money that has been saved for years of their dedicated service to this society is going to be taken away, is horrifying! So far my dad has put in 26+ yrs with his company and arrogant irresponsible government who that thinks the solution to getting out of debt is to create more debt and build mosques with TAX PAYERS MONEY, is the solution??? How did citizens vote these people in office? Did they just start their internship in the white-house and all the sudden decide this is the solution for our future prosperity?? This is a disgrace! There is no way in hell I’ll let government take my hard earned money away from me, because it’s bad enough that I have to work 2 days or more for no reason just to cover taxes! Ridiculous! I say NO!!!! Get Obama out of office and all of his nut jobs that follow him!
Sue

Let’s remove all of the old farts and send new educated men and women.
David says

No let’s put some people in their with some common sence because the ones in their now only have book sence
Kenny

I pretty sure this isnt going to happen. Just fear mongering, but if it did. You can bet I’ll stock pile and start planting bombs to take out some Senators.
jim mckennon

Total BS. Folks use commom sense when your family is starving you will do whatever to get food and our gov is starving for money so not only is this possible but I would bet they try unless we raise up in arms if necessary and say NO. I believe this is a real possiblility unless we wake up and get off our back sides and re-elect NO ONE
http://gmail.com Jim

In his book written in 1990 called THE COMMING ECONOMIC EARTHQUAKE,Larry Burkett predicted that the gov would take over our retirement accounts and maybe merge with social security. Larry also made 5 other predictions, all of which have come to pass. The last one is a depression with hyperinflation just like 3 other countries have already had. Now on a book written in 1990 5 out of 6 predictions have come true. Anybody want to bet #6 does not happen
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Mark

It’s time to wake up people! Our government is out of control! Time for a revolution!!!!
http://RetirementAlert Loretta

And….he was elected to the Presidency again!

How stupid can people be?
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