Confiscation of assets in IRA or 401k -- A false story for political gain?

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Confiscation of assets in IRA or 401k -- A false story for political gain?

In various places I've seen remarks to the effect that IRA and 401k account holders could potentially be forced to buy US treasuy debt, or be subject to some kind of confiscation.  The remarks are pretty murky about how this would be done.

FactCheck.org has a thorough report that debunks this story.

http://www.factcheck.org/askfactcheck/are_congressional_democrats_talkin...

It seems some remarks were taken out of context and blown out of proportion as a political ploy.  Does anyone have any hard information that contradicts FactCheck.org? 

 

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Re: Confiscation of assets in IRA or 401k -- A false story ...

There have been several articles covering this. No bills. No proposals, just talk. A lot of it is dressed up as people don't save enough, savings should be mandatory.

They did it in Argentina, it has 7 against and 3 for here.

Estimates I've read of 2-7 trillion between 401K's and IRA's.

Myself - mine are emptied. I would not put it past them. Desperate people do desperate things and with 122 trillion in debt and a take home of 2 trillion which all goes to interest and a 9 trillion dollar GAAP deficit - you tell me what you think is going to happen to these accounts?

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Re: Confiscation of assets in IRA or 401k -- A false story ...

Good points Davos.  It seems to me this has been blown out of proportion, but anything is possible with Congress.  You've probably heard about the provisions in the HIRE act (that was just sighned into law) about withholding on offshore accounts.  That came out of nowhere and has not made the news so far. 

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Re: Confiscation of assets in IRA or 401k -- A false story ...

I'm with Davos on this.  There isn't any direct, hard evidence of confiscation or forced direction of retirement accounts that concerns me... rather I'm just seeing a pattern of government doing whatever they need to do to maintain the status quo.  Since part of our current predicament involves huge deficits and a seeming inability to make substantial, necessary spending cuts, I see ANY pool of potential wealth as a target for increased taxation, forced investment in government debt, or (worst case) confiscation.  It just so happens that retirement accounts are one of the biggest pools of money out there, so given the current path it seems probable that an attempt to tax, redirect, or confiscate 401k's and IRA's will be attempted.  In my own best case scenario prediction, I see a situation where there's much increased restrictions and tax penalties on cashing out accounts before retirement.  I consider these possibilities significant enough (not to mention I see better places to put that money) that I would cash out my 401k now if it were an option.  I'm just hoping I get the opportunity to do so before such possibilities progress beyond the "speculative musing" stage...

- Nickbert

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Re: Confiscation of assets in IRA or 401k -- A false story ...
Dalevan wrote:

Good points Davos.  It seems to me this has been blown out of proportion, but anything is possible with Congress.  You've probably heard about the provisions in the HIRE act (that was just sighned into law) about withholding on offshore accounts.  That came out of nowhere and has not made the news so far. 

I have. Maybe I read HIRE and the last bit over in Switzerland a few months ago too quickly, but I'm not certain this came out of nowhere. From what I recall they got their talons in a lot of Swiss accounts fearing people were using them as tax havens. These people are so pathetically broke that if they aren't shaking kids down for lunch money next week I'd be surprised.

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Debunking the "There is no evidence" doctrine

First of all, I think it's very clear that there is no decisive evidence that this will hapen, and that all talk of it is "just speculation".

Please stop and consider your surroundings. If you are in the USA, you live in a country that is broke and refuses to admit it. If you are a student of the Crash Course, you already know this. The government is out of money. For now they just keep borrowing it from China, but the handwriting is clearly on the wall that this supply will eventually dry up. It's a question of when, not if.

So think in terms of necessity. The goverment needs more money. Where are they going to get it? By taking it from whoever has it.

This will mean retirement account "forced management", wealth taxes (asset as opposed to income), and who knows what else they will dream up.

My point is that the "there is no evidence that XXX is really happening" crowd is totally missing the point. The salient question is, "Is there any evidence that the government can continue spending without doing XXX"? I think the answer is pretty clear - everything's on the table and the most obvious capital sources will be tapped first.

Erik

 

 

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Re: Confiscation of assets in IRA or 401k -- A false story ...

Well said Erik!

I highly recommend this listen, it folks haven't heard it yet: Link to Sprott & King World News.  

One of the better salient points: We now have an equal number of public sector workers who make as much or more than the private sector. It took a minute for that to set in, but what I took from that is: Every dollar we make must go to the government to support JUST it's work force.

Where are the Princeton & Harvard economists?

My elementary school kid could do this math - no way in h*ll is this going to work. Ever.

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Re: Confiscation of assets in IRA or 401k -- A false story ...

Maybe this is way way out there, but if anything is on the table would the government relax early withdrawal penalties just so people can spend more and continue our happy consumption?  It would be another reckless form of "stimulus" except the government doesn't have to borrow to pay for it, they just let people use their last pool of wealth left.

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Re: Confiscation of assets in IRA or 401k -- A false story ...

Woodman,

What you describe is a grossly irresponsible move that would undermine the security of retirement savings and fundamentally compormise the financial security of the citizens! In other words, I'm surprised they haven't thought of it yet... Frown

Seriously, I think your scenario is quite possible.

ET

 

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Re: Confiscation of assets in IRA or 401k -- A false story ...

Little Red Writing Hood;

 When the basket was ready, the little girl put on her red cloak and kissed her mother goodbye.

"Remember, go straight to Grandma's house," her mother cautioned.  "Don't dawdle along the way and please don't talk to strangers!  The woods are dangerous."

"Don't worry, mommy," said Little Red Riding Hood, "I'll be careful."

But when Little Red Riding Hood noticed some lovely flowers in the woods, she forgot her promise to her mother.  She picked a few, watched the butterflies flit about for awhile, listened to the frogs croaking and then picked a few more.  

Little Red Riding Hood was enjoying the warm summer day so much, that she didn't notice a dark shadow approaching out of the forest behind her...

Suddenly, the wolf appeared beside her.

"What are you doing out here, little girl?" the wolf asked in a voice as friendly as he could muster.

"I'm on my way to see my Grandma who lives through the forest, near the brook,"  Little Red Riding Hood replied.

Then she realized how late she was and quickly excused herself, rushing down the path to her Grandma's house.  

The wolf, in the meantime, took a shortcut...
  The wolf, a little out of breath from running, arrived at Grandma's and knocked lightly at the door.

"Oh thank goodness dear!  Come in, come in!  I was worried sick that something had happened to you in the forest," said Grandma thinking that the knock was her granddaughter.

The wolf let himself in.  Poor Granny did not have time to say another word, before the wolf gobbled her up!

The wolf let out a satisfied burp, and then poked through Granny's wardrobe to find a nightgown that he liked.  He added a frilly sleeping cap, and for good measure, dabbed some of Granny's perfume behind his pointy ears.

A few minutes later, Red Riding Hood knocked on the door.  The wolf jumped into bed and pulled the covers over his nose.  "Who is it?" he called in a cackly voice.

"It's me, Little Red Riding Hood."

"Oh how lovely!  Do come in, my dear," croaked the wolf.

When Little Red Riding Hood entered the little cottage, she could scarcely recognize her Grandmother.

"Grandmother!  Your voice sounds so odd.  Is something the matter?" she asked.

"Oh, I just have touch of a cold," squeaked the wolf adding a cough at the end to prove the point. "But Grandmother!  What big ears you have," said Little Red Riding Hood as she edged closer to the bed.

"The better to hear you with, my dear," replied the wolf.

"But Grandmother!  What big eyes you have," said Little Red Riding Hood.

"The better to see you with, my dear," replied the wolf.

"But Grandmother!  What big teeth you have," said Little Red Riding Hood her voice quivering slightly.

"The better to eat you with, my dear," roared the wolf and he leapt out of the bed and began to chase the little girl.

Almost too late, Little Red Riding Hood realized that the person in the bed was not her Grandmother, but a hungry wolf.

She ran across the room and through the door, shouting, "Help!  Wolf!" as loudly as she could.

A woodsman who was chopping logs nearby heard her cry and ran towards the cottage as fast as he could.

He grabbed the wolf and made him spit out the poor Grandmother who was a bit frazzled by the whole experience, but still in one piece. "Oh Grandma, I was so scared!"  sobbed Little Red Riding Hood, "I'll never speak to strangers or dawdle in the forest again."

"There, there, child.  You've learned an important lesson.  Thank goodness you shouted loud enough for this kind woodsman to hear you!"

The woodsman knocked out the wolf and carried him deep into the forest where he wouldn't bother people any longer.

Little Red Riding Hood and her Grandmother had a nice lunch and a long chat.

 

 

That boys and girls is the story of the day, it ends well; the moral of the story is “Don't Trust the Wolf”.  Our current financial situation will not end so well.....  Moral still applies.

 

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Re: Confiscation of assets in IRA or 401k -- A false story ...

At this point, this all only a potentiality.  Theresa  Guilarducci (lots of info if you Google her)  Economics professor at "The New School for Social Research"  (what could go wrong here?!) first  proposed a version of this plan around  4-5 yrs. ago.  Her contention is that we plebians are mostly incapable of managing our own retirement assets, and should therefore give all of our saved money to the Govt. and trust them to give us a guaranteed income by investing in iBonds (again, what could go wrong?!!)  I've seen no mention of what would happen if one of us needed say, a 30k  lump sum for whatever reason.  This could be  a noble, and perhaps useful venture for those who are mystified and bewildered by most thing financial, but for those of us who are willing to handle retirement on our own, I don't see a lot of upside, while the 2-3 standard deviation in downside is terrifying.

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Re: Confiscation of assets in IRA or 401k -- A false story ...

Retirement savings are one of the last large pools of untapped wealth left to people.  I know they had some hearings on this.  And, a proposal was floated about creating GRAs (Guaranteed Retirement Accounts) controlled by the federal government.   I am sure this really tweaked up some democrats but the 2010 election put the republicans in control of the House and the 2012 election will put them in control of the Senate and the White House.  As long as the republicans control at least one piece of the federal government our retirement savings are fairly safe.

Davos is right though, desperate people do desperate stuff.  Up until recently the republicans have tended to go along to some degree with crazy federal government spending.  Just when the democrats were getting geared up for some serious spending to increase the size of the class of dependency even further, the republicans took over the House and all their plans in this area have been put on hold.  They also have been considering a host of new taxes and those are also on hold.  So, for now it looks to me like crazy spending and further confiscation of our incomes and property by the federal government is on hold.

But, and there is always a but, things are going to get worse.  On another thread tonight I read a post by VanityFox451 and she made some really good points.  The numbers are the numbers and it is difficult to escape them.  An entitlements mentality has taken hold in America.  A good sized chunk of the population honestly believes that the Federal government actually owes them substantial amounts of money in the form of cash and benefits.  The Fed can not just keep inventing billions of dollars a month in new money to finance the Federal government's spending.  At some point the Federal governments spending is going to have to be reduced - actually cut back to something close to revenue.  That is a massive cut.  You cut a third of the Federal government's spending and there is going to be big trouble with the class of dependency.  Health care, Social Security, the Military, you name it - it will all have to be cut by a large amount.  It will not happen all at once or there will be chaos - riots and looting.  But it will have to be cut or we will fail.  Of course, we may fail anyway.  At this point I have a slightly positive view of the republicans.  We will see how long they can keep it together in Washington.  Energy inflation is eating away at everything.  I am not convinced that the republicans or the democrats are up for what is necessary to control government spending on a serious basis.  We will see starting in 2012.

One metric I think it  is safe to assume is when the class of dependency is large enough and willing to go to the polls and vote in sufficient numbers that responsible people can no longer be elected, then all retirement savings in America will become subject to Federal government seizure and redistribution.

 

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Re: Confiscation of assets in IRA or 401k -- A false story ...
dshields wrote:

Up until recently the republicans have tended to go along to some degree with crazy federal government spending. 

Just when exactly did the republicans become responsible?   I must have missed it or you are mistaking rhetoric for actions.

dshields wrote:

On another thread tonight I read a post by VanityFox451 and she made some really good points. 

Are you for real?  Sometimes I hope that you are just messing with us....

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Re: Confiscation of assets in IRA or 401k -- A false story ...
dshields wrote:

As long as the republicans control at least one piece of the federal government our retirement savings are fairly safe.

(snip)

Up until recently the republicans have tended to go along to some degree with crazy federal government spending.

Bear in mind, I hold the Dems in the same regard as I do the Republicans...which is LOW.

And also bear in mind, the right vs. left debate is not only IMO a total canard, but also a waste of time.

Sure, the Dems never met a social spending program they didn't love (painting with a broad brush here, I know), but the Repubs have, in the last 10 years, given us 2 off-balance-sheet wars and a failed proposal to privatize Social Security -- which ain't far from privatizing the 401-k.

IME it has been a great boon to me -- both in time saved and clarity of vision -- to have come to the realization that Red or Blue, they don't see the actual issues we must constructively engage, or face collapse.  (No credit to those who see the issue but fail to act.)

One man's opinion...

Viva -- Sager

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To DShields: Truly A False Story - Who Benefits?

My comments are at the bottom, after the italics:

"On Thursday morning, Townhall, the conservative website that features the work of prominent rightwing commentators, sent out an email advertisement to its readers revealing the latest Obama conspiracy: he wants to steal your retirement account. Literally.

"The ad is adorned with an illustration of a smiling Obama holding a small person (a white male, if you're curious) in his hand and squeezing money out of the poor fellow. The headline in big and bold letters: "Your IRA'S and 401K's ARE STILL At RISK Of Government Confiscation." The claim:

The Labor and Treasury department, along with the Obama Administration ARE MOVING FORWARD with The Nationalization-Confiscate IRA's and 401K's.

Why do they Want Your Retirement Accounts?

The-YOUR equity will be used as collateral; in an attempt to balance the Trillion Dollar U.S. Deficit.

This will be done in an effort to once again make the United States credit worthy to China and other buyers of our debt.

"The proof: the Labor and Treasury Departments last September held a meeting with an agenda called 'Lifetime Income Options for Retirement Plans' - and somehow this means the US government intends to transform retirement plans into government property.

"Obama nationalizing everyone's IRAs and 401(K)s—it's kind of surprising that the entire media has missed that. Even Fox News. But a Department of Labor fact sheet describes what it is up to:

An ever increasing number of workers are looking to their defined contribution plans for their retirement security, but at the same time many workers are receiving their retirement benefits in lump sum distributions. This could increase their risk of not having an adequate income during retirement. Recent reports by the Government Accountability Office and the Department of Labor’s ERISA Advisory Council, a 15-member council representing employees, employers, the general public, and industry, have documented this risk.

[The Department is] exploring ways that the Agencies and the private sector can work together to ensure that workers have the tools they need to help ensure their retirement savings last a lifetime.

"Sounds perfectly innocent, right? But isn't such bland rhetoric what the Obama administration would disseminate were it scheming to nationalize retirement accounts?

"To understand what's behind this latest exposé of Obama misdeeds, a recipient of this email ad need only look toward the bottom and discover that it's a pitch for Goldworth Financial, a gold seller."

A New Obama Conspiracy: He's Confiscating Your IRAs
http://motherjones.com/mojo/2011/01/new-obama-conspiracy-confiscating-yo...
___________________

Yes, our government - whether controlled by Democrats or Republicans or a combination of both like it often is - may one day come to doing so. But right now these rumours are more about fearmongering and profiteering. Just like the media likes controversy and push-button issues to generate attention and ratings, so also do certain companies have an incentive to generate fears in people vulnerable to such fears. The day may yet come that something like this will happen - but a good question to always ask is: who stands to benefit from such advertising and false rumours?

Personally, DShields, I would remind you that the 401(k) plan came about with the Revenue Act of 1978 under a filibuster-proof Democratic majority in both houses of Congress, under Democratic President Jimmy Carter. Traditional IRAs came about from the Tax Reform Act of 1986, under Reagan with bipartisan support, as the Democrats under Tip O'Neil controlled the House. The act itself enjoyed official sponsorship by Democrats in the House and the Senate - it also reduced personal income taxes, while raising corporate ones.

At this time, 401(k) and IRA confiscation wouldn't pass muster with either Republican OR Democratic lawmakers. They and their immediate family and friends know this is one of the last refuges of the middle class and of retired seniors. Whichever party actually tried it would die politically. What is more likely to happen would be other back-door methods of making government ends meet, such as means-testing Social Security benefits, the printing of even more money, and continuing to suppress the "core" CPI numbers. If the government ever became that desperate to confiscate, then both parties would have to do it together because neither would do it alone.

But hey, someone who believes only Republicans could save something created by Democrats or with Democratic support... should feel completely safe in knowing the Republicans control the House and can filibuster the Senate. So why the fear on the right, right?

Poet

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Re: To DShields: Truly A False Story - Who Benefits?
Poet wrote:

My comments are at the bottom, after the italics:

"On Thursday morning, Townhall, the conservative website that features the work of prominent rightwing commentators, sent out an email advertisement to its readers revealing the latest Obama conspiracy: he wants to steal your retirement account. Literally.

"The ad is adorned with an illustration of a smiling Obama holding a small person (a white male, if you're curious) in his hand and squeezing money out of the poor fellow. The headline in big and bold letters: "Your IRA'S and 401K's ARE STILL At RISK Of Government Confiscation." The claim:

The Labor and Treasury department, along with the Obama Administration ARE MOVING FORWARD with The Nationalization-Confiscate IRA's and 401K's.

Why do they Want Your Retirement Accounts?

The-YOUR equity will be used as collateral; in an attempt to balance the Trillion Dollar U.S. Deficit.

This will be done in an effort to once again make the United States credit worthy to China and other buyers of our debt.

"The proof: the Labor and Treasury Departments last September held a meeting with an agenda called 'Lifetime Income Options for Retirement Plans' - and somehow this means the US government intends to transform retirement plans into government property.

"Obama nationalizing everyone's IRAs and 401(K)s—it's kind of surprising that the entire media has missed that. Even Fox News. But a Department of Labor fact sheet describes what it is up to:

An ever increasing number of workers are looking to their defined contribution plans for their retirement security, but at the same time many workers are receiving their retirement benefits in lump sum distributions. This could increase their risk of not having an adequate income during retirement. Recent reports by the Government Accountability Office and the Department of Labor’s ERISA Advisory Council, a 15-member council representing employees, employers, the general public, and industry, have documented this risk.

[The Department is] exploring ways that the Agencies and the private sector can work together to ensure that workers have the tools they need to help ensure their retirement savings last a lifetime.

"Sounds perfectly innocent, right? But isn't such bland rhetoric what the Obama administration would disseminate were it scheming to nationalize retirement accounts?

"To understand what's behind this latest exposé of Obama misdeeds, a recipient of this email ad need only look toward the bottom and discover that it's a pitch for Goldworth Financial, a gold seller."

A New Obama Conspiracy: He's Confiscating Your IRAs
http://motherjones.com/mojo/2011/01/new-obama-conspiracy-confiscating-yo...
___________________

Yes, our government - whether controlled by Democrats or Republicans or a combination of both like it often is - may one day come to doing so. But right now these rumours are more about fearmongering and profiteering. Just like the media likes controversy and push-button issues to generate attention and ratings, so also do certain companies have an incentive to generate fears in people vulnerable to such fears. The day may yet come that something like this will happen - but a good question to always ask is: who stands to benefit from such advertising and false rumours?

Personally, DShields, I would remind you that the 401(k) plan came about with the Revenue Act of 1978 under a filibuster-proof Democratic majority in both houses of Congress, under Democratic President Jimmy Carter. Traditional IRAs came about from the Tax Reform Act of 1986, under Reagan with bipartisan support, as the Democrats under Tip O'Neil controlled the House. The act itself enjoyed official sponsorship by Democrats in the House and the Senate - it also reduced personal income taxes, while raising corporate ones.

At this time, 401(k) and IRA confiscation wouldn't pass muster with either Republican OR Democratic lawmakers. They and their immediate family and friends know this is one of the last refuges of the middle class and of retired seniors. Whichever party actually tried it would die politically. What is more likely to happen would be other back-door methods of making government ends meet, such as means-testing Social Security benefits, the printing of even more money, and continuing to suppress the "core" CPI numbers. If the government ever became that desperate to confiscate, then both parties would have to do it together because neither would do it alone.

But hey, someone who believes only Republicans could save something created by Democrats or with Democratic support... should feel completely safe in knowing the Republicans control the House and can filibuster the Senate. So why the fear on the right, right?

Poet

The republican and democratic parties have changed substantially over the last 50 years.  JFK would be thrown out of the current democratic party.  I can say all kinds of things each of the parties have done, both good and bad, i.e. republicans were primarily responsible for freeing the slaves of America, or I can say Nixon took us off the gold standard and the result of that was spiraling into out of control spending and developing a large class of dependency - one good and one bad.

Fear of the right definition - I listen to the tea party folks and as far as I am concerned they tend to talk the right talk.  I have never been to a tea party but I know tea party people and I read a lot.   It is my hope and opinion that the people of America are going to elect more tea party types in 2012.  My fear is the repubs will screw up again.  Look what happened the last time the republicans were in power - not a pretty picture.  The new repubs talk a new talk - the constitution.  If we had followed the constitution more carefully, it does not have to be completely, but in the true spirit of the constitution combined with the wisdom of those who came before us, we would simply not be in the position we are in now.  If the repubs really do swing towards the constitution and responsible fiscal behavior, we will emerge from the problems that causes into a better position in the world.  On the other hand, if they screw up again then we are basically doomed.  We might be doomed anyway but if the new repubs fail it will seal our fate.  Then, even I will be transformed into a doom guy.

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Re: Confiscation of assets in IRA or 401k -- A false story ...

I like to dabble in future thought, sure, most of my thoughts lately have tended to be darkly speculating. With that typed, it is hard to imagine this government not diverting unencumbered retirement money to cover SS payments. Those on SS are probably now, or soon will be, the largest voting block on the planet. They will get their money!

Also, it is interesting to compare a door to door campaign of jack-booted thugs confiscating noble metals - and lead - versus a few strokes on the keyboard diverting trillions to fulfill a campaign promise. When the time comes, they won't have enough money to pay the jack-booted thugs!

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