The Feds, your 401k retirement savings & total financial collapse

By Cathy DeWitt Dunn

Our recent article, “Is the Federal Government Eying your 401k,” raised awareness—and a few eyebrows––across the blogosphere, social media, and more.

As we suspected, it also raised a lot of questions.

Following are just a few questions we have received regarding this very complicated subject. We will continue to address additional questions as our readers send them. And, as always, you are welcome to give us a call anytime at 972.473.4700 to discuss your specific questions and concerns.

“How is the value of a fixed index annuity protected if the dollar collapses?” The key word to focus on here is “value.” If the dollar collapses, a dollar won’t be worth much of anything no matter what you are invested in or have in your bank account. Thus, there’s no true way to protect a dollar against losing value outside of just not owning dollars. As insurance products, fixed index annuities (FIAs) provide principal protection guaranteed by the issuing insurance company. Therefore, in the worst possible scenario, in a total economic collapse (and the insurance company happens to survive) your principal plus any interest earned would still be “the same” amount. If you started with $100,000, you would still have $100,000. However, the purchasing power (“value”) of those dollars would be decimated. If you take a not-the-worst-case-scenario approach and just believe we’re in for a rocky market ride, then a FIA with its principal protection and ability to make money in up markets and down may be a good option for you.

“If I’m in a FIA why can’t the government force me to liquidate it and put the proceeds into their forced retirement accounts?” This is difficult to answer because, well, if the government decides to run amok…the government will have tried its best to run amok. Our take on this is that there are very different laws governing contracts. An annuity purchase (made from your IRA) is a legal contract between you and the insuring company. The question then becomes “Does the government really want to take on contract law in order to confiscate your money?” It may … but it’s a huge hurdle above and beyond its proposed intent of confiscating retirement money held in brokerage accounts.

“Do you have options for annuities in foreign currencies like a Swiss Fixed Index Annuity?” Unfortunately, there is not a foreign currency-based annuity available in the market.

Remember, there are numerous options available for retirement planning in an ever-changing and uncertain economy; however there is no “one size fits all” financial strategy as some seem to think. We strongly suggest that you consult with a retirement planning expert to discuss your own personal situation and your options.

Once again, feel free to contact us with your own questions.

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