Is the Federal Government Eyeing Your 401K?

By Cathy DeWitt Dunn

The question as to whether or not the United States Federal Government is looking into taking over private 401K assets has been asked many a time over the last few years. In 2009, The Wall Street Journal ran an op-ed titled “How to Fix 401(k)s“. In this article, it mentions a “radical structural change” for the 401K system.

Not everyone thinks 401(k)s can — or should — be saved. “It’s time for a radical structural change,” says Gene Steuerle, a vice president at the Peter G. Peterson Foundation. It goes on to say that plans to replace 401Ks would include that the “government would at least partly take over sponsorship of these accounts”.

Proposals to replace 401(k)s are varied. Most would continue the practice of having participants invest their savings in stocks and bonds. The big change? The government would at least partly take over sponsorship of these accounts, making them available to all. “One could make the argument that the economy would benefit from disentangling retirement plans from employment,” says Prof. Benartzi at UCLA. “Our current system has airlines running 401(k)s. Let them use their resources to fly planes.”

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On August 24, 2010, a reader asked J.D. Rosendahl on SafeHaven.com, “Will the Gov’t Confiscate My 401K and Should I Take My Money Out?” Rosendahl pointed out that Argentina had already done that very thing and here’s what he had to say about 401K confiscation in the US:

“If you haven’t noticed how our country really works, it’s crony capitalism in the good times and crony socialism in the bad times. During severe economic weakness and Social Unrest we will see the outcry from the public, most of whom will have already spent their 401Ks to live off of while the Social Security system is going broke.

Over the past 50 years, the US government has trained society to believe it’s the government’s roll to be the provider of last resort from everything to economic stimulus to healthcare to retirement. The masses may cry to further socialize retirement for all by confiscating the remaining 401K and IRA plans, which will only be held by those of wealth in a few years.

Therefore, by making the fundamental tax decision to take money out now to avoid higher tax rates we know are coming, you also protect yourself in case the government insanity gets so bad they come after your retirement plans. And remember this idea, much higher taxes in the future is a confiscation of your 401K and IRA without actually taking it.”

What Rosendahl fails to point out is that there are alternatives to “taking money out” of your 401K. A viable option to avoid paying penalties and taxes is to use some of your 401K assets and move them into a tax deferred fixed index annuity, but more on that in a moment.

In October of 2010, the National Seniors Council ran an article, “Obama Begins Push for New National Retirement System” in which it was stated,

“A recent hearing sponsored by the Treasury and Labor Departments marked the beginning of the Obama Administration’s effort to nationalize the nation’s pension system and to eliminate private retirement accounts including IRA’s and 401k plans, NSC is warning.”

Earlier just this month, Nilus Mattive reported on Money and Markets to get ready for Washington’s “Automatic IRAs”.

Take the subject of retirement planning.

As I point out in my just-updated video — The Death of Social Security — politicians have already run our nation’s current retirement system into the ground.

Yet rather than worrying about the mess they’ve made, they are talking about creating MORE government-mandated retirement systems!
One of those is the “Automatic IRA.”

The automatic IRA referenced above started with S.3760, the Automatic IRA Act of 2010 which was introduced by Democrat Senators Jeff Bingaman and John Kerry. This bill was referred to committee and subsequently died. However, the legislation resurfaced as S.1557 and was reintroduced in the Senate on September 14, 2011 as the Automatic IRA Act of 2011. It too died in committee, but wait, on February 16, 2012, H.R. 4049, the Automatic IRA Act of 2012 was introduced this time in the House by Rep. Richard Neal and again died in committee. I would say it is safe to assume that the federal government is very interested in the “retirement planning” industry and as you can see, is quite persistent about it.

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Jerome Corsi ran an article on November 25, 2012 on WND where he stated:

Recent evidence suggests government officials continue to eye the multi-trillion dollar private retirement savings market, including IRAs and 401(k) plans, eyeing the opportunity to redistribute private retirement savings to less affluent Americans and to force the retirement savings out of the private market and into government-controlled programs investing in government-issued debt.

Should you be concerned if you have an IRA and/or a 401(k) plan? Let’s ask that question another way; do you think “investing in government-issued debt” is a good way to use your IRA and 401(k) savings? I don’t think so either. What can you do about it?

One option you should seriously consider is a fixed index annuity. Safe Money Talk Radio co-host Matt Redding and I discuss a 401K rollover to an annuity in this brief video.

There are numerous options available for retirement planning in an ever-changing and uncertain economy; however there is no “one size fits all” plan as some seem to think. Every individual is unique and so is their financial situation. For that reason, I strongly suggest that you consult with a retirement planning expert to discuss your own personal situation and your options. Unless, of course, you trust the federal government to make these decisions for you.

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

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