This Requires Serious Discussion

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SamLinder's picture
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This Requires Serious Discussion

DrKrbyLuv

DrKrbyLuv posted this yesterday (post #27) in the "Anyone taking the 10% penalty and cashing out 401k or ..." thread.

http://market-ticker.denninger.net/archives/852-Whats-Dead-Short-Answer-...

It quickly appears to have gotten lost in the shuffle, but I think it needs to have its own thread since what Denninger says is extremely serious!

  • All pension funds, private and public, are done.
  • This will require a complete repudiation of Social Security, Medicare and Medicaid...
  • Tax-deferred accounts will be seized to fund rollovers of Treasury debt
    at essentially zero coupon (interest).  If you have a 401k, or what's
    left of it, or an IRA, consider it locked up in Treasuries; it's not
    yours any more.  Count on this happening - it is essentially a
    certainty.

If he's anyway near the truth, I'm screwed as we depend on all of the above for our retirement.

There's a lot of brain power out there - what do you think I/we should do about this?

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Re: This Requires Serious Discussion

Thanks, Sam.

The article is quite dramatic, and dare I say "doom and gloomish" but that doesn't mean that what it discusses as certainties are not serious possibilities as we move forward.

For me, a few things are clear, at least over the longer haul:

1) Tax deferred accounts will be attacked in one way or another. Outright confiscation sounds unlikely, but some weird tax law that prevents you from truly keeping what you think you have sounds more like it. I've pulled my money. Exponential, "sustainable" growth is an illusion and I don't want to do much long haul investing until I have faith in the system.

2) Social Security and Medicare/caid will be hit hard. But I doubt they will be attacked directly. I think taxes, laws, and inflation will effectively allow a significant default on these entitlements without being extremely overt.

The real challenge in all of this is a cultural / political one. It has been a LONG time since our nation has been so ideologically divided politically. At the same time, the pressure on our entire nation's finances is going to create a generational divide in which the retired demand the retirement they thought was theirs and the younger generation becomes unsettled at the prospect of paying for something they will never enjoy.

The "solution," if it can even be called that, will be a compromise of sorts. The real uncertainty will be who, if any, benefits the most, and how our government accomplishes this compromise. There is outright default (extremely unlikely), pure inflation, or legal and regulatory changes that effectively limit your ability to retain what you thought you had.

I'm no financial adviser, and I'm far from being retired myself, so based on that, one might think I'd have more of an appetite for risk. I don't. I want a sizable chunk of my hard earned savings completely removed from the corrupt system we have. It is mathematically inevitable that it will fail, so protect yourself!

Thanks for the article!

Mike

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Re: This Requires Serious Discussion

Mike,

Thanks for your thoughtful response.

I've pulled my money.

I'm curious as to what you mean by this. Are you still keeping it in a financial institution or is it buried in your backyard? If it's still in a bank, how do you protect it from the rapacious paws of our government?

My retirement money is currently tied up in IRA CD's.I could convert it all to regular CD's and take a severe tax hit in the process. Unfortunately, this would significantly impact my future plans. Then, short of taking it all out and putting it in a mattress, how do I protect those funds?

I can't believe the US gov't would seriously consider taking over everyone's retirement funds - the reaction would be overwhelming. I believe a revolt would definitely be in the cards at that point.

I'm normally not a doom and gloom type but, watching the situation deteriorate around me, Denninger's prognostications don't seem to be too far off the mark!

I am curious as to what other people are doing to protect themselves in this ever collapsing environment.

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Re: This Requires Serious Discussion

I don't want to disclose too much, but I've personally got my savings in a pretty liquid form right now in the types of areas that I think would be the last to be confiscated or attacked. I think CDs are a reasonable bet, though you do know the risks associated. I would just say stay flexible enough that you're willing to pull from the IRA if and when Uncle Sam tries to intervene.

Outright confiscation is highly unlikely, but the fact remains that our government is insolvent. In one way or another they will default. Either by confiscating or by inflating. Either way will require action from every person that wishes to preserve their wealth.

It's easy for me. I've got 35+ years to retirement, if I even do "retire" in the typical sense. I have no faith that the dollar will hold its value over that time, so investing for me is a little simpler I suppose. Shorter time frames make things more challenging to navigate.

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Re: This Requires Serious Discussion

No disrespect to anyone here including Denninger himself, but the reason this may have gotten "lost in the shuffle" is because Denninger says this every week.

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Re: This Requires Serious Discussion

HI Sam,

 

I know the feeliing of apprenhension well. After many years of deposting money in my retirement plan I sure would not like it if the gov. were to decide to take it either directly or indirectly. In fact, I started another thread looking for ideas  on how I might protect my 403B plan given the lack of ability to outright liquidate it.

 Even if I were to liquidate the tax consequences would be enormous. Not only would I get hit with Fed. Tax but also State Income tax and Calif has one of the highest tax rates. Not a pretty picture no matter how you look at it.

I wanted to save that money in a tax free account and not start taking it out until I had to at 70 1/2 so that I would have something to live on when I am 80. It is hard now to plan on maybe a few months ahead.

 I would like to retire in a few years but retirement may look like just more work. ???

 

I wish I could tell the future.

 

ken

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Re: This Requires Serious Discussion

What Denninger describes seems possible and there is certainly the need for policy changes, but I would like to see the data and analysis and timelines to back up his conclusions.  One thing he's right on thought - my 401K is already pretty much locked up in Treasuries!  No safer options within my plan right now, and the rules prevent me from getting out unless I leave my job.  So the government already has effectively taken my retirement in return for an IOU with near 0% interest.   Howver, I've taken significant actions with my non 401K savings though to cover myself for different future outcomes in the long term.  And I think that's the answer to your question, Sam - do things to hdege for different potential outcomes not just the traditional assumption of holding long for growth over the long term.

The governments own financial reports here: 

http://www.fms.treas.gov/fr/index.html

show on Chart B of Page 9 of the Management's Discussion and Analysis that "Current Trends are Unsustainable".  The chart gives you an idea how Social Security will be impacted (current officaly repors say revenues fall short in 2017).    But  I agree with Denninger that revenues will decline and debt costs will ramp  - certainlymore than accounted for in that chart. 

For now,  I think your take on it Mike that there will be a big "compromise" is likely.

Tom

 

 

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Re: This Requires Serious Discussion
Mike Pilat wrote:

I don't want to disclose too much, but I've personally got my savings in a pretty liquid form right now in the types of areas that I think would be the last to be confiscated or attacked. I think CDs are a reasonable bet, though you do know the risks associated. I would just say stay flexible enough that you're willing to pull from the IRA if and when Uncle Sam tries to intervene.

Outright confiscation is highly unlikely, but the fact remains that our government is insolvent. In one way or another they will default. Either by confiscating or by inflating. Either way will require action from every person that wishes to preserve their wealth.

It's easy for me. I've got 35+ years to retirement, if I even do "retire" in the typical sense. I have no faith that the dollar will hold its value over that time, so investing for me is a little simpler I suppose. Shorter time frames make things more challenging to navigate.

Mike - Thanks for your perspective. It's true that having a long time to retirement gives you more time to prepare.

Those of us who are already here are having more difficulty. We followed all the financial advice (save for long term, have pension, savings, social security, etc.) and played by the rules of the time - now we find our government is going to shaft us. Sigh............

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Re: This Requires Serious Discussion

I don't mean for this to sound pointed, but don't worry too much Sam we're all getting shafted. I work each day knowing that the SS and Medicare pot I'm paying into already has a negative net present value and there is no way I'll collect it. Still, having time to prepare makes it easier for me, but it doesn't reduce the sense of anger I feel at the injustice of having a government make promises it can't keep. When this happens, everyone gets hurt and we're seeing that now.

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Re: This Requires Serious Discussion
mainecooncat wrote:

No disrespect to anyone here including Denninger himself, but the reason this may have gotten "lost in the shuffle" is because Denninger says this every week.

mainecooncat,

Hmmmm - in that case, maybe I can calm down just a tad. Thanks for throwing a little reality my way. Embarassed

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Re: This Requires Serious Discussion

Sam,

Thanks for making this a special thread as I agree it is a very serious matter.  I don't want to over-react but I am taking these warnings seriously.  Denninger can get a little emotional - but I have also read similar things elsewhere - and we know congress has been discussing possibilities.

Obama is spending money like a drunken sailor - money that we don't have - on everything from pork to war.  Add a $2 trillion dollar deficit to dwindling tax revenues and unrealistically high expectations for economic growth and you know something has to give, or more accurately, they will need to steal more from somewhere.

The Government Accounting Office Report GAO-08-590 in 2004:

- IRAs held about $3.5 trillion in assets
- Defined contribution plans held about $2.6 trillion, including 401(ks)
- Defined benefit plans held about $1.9 trillion (pension plans)

I'm still early in my research and hope maybe others here will have something to add.

Larry

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Re: This Requires Serious Discussion

John Michael Greer has an excellent blog entry this week in which he adresses the end of retirment: http://thearchdruidreport.blogspot.com/2009/03/end-of-retirement.html

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Re: This Requires Serious Discussion

Hi Sam,

Well, I wouldn't calm down in general, but I'd perhaps calm down as pertains to this specific Denninger post. As DrK says above he is an emotional fellow. I think it was last week or the week before that he had some kind of red alert post that ended with a youtube clip of ceaseless atomic detonations. I've no doubt that much of what he warns of will come to pass, but he often attaches highly specific dates (like today!) to such events, which are usually the result of some kind of personal affront he is feeling with regard to something political. That's where I either stop reading him or take him with a massive grain of salt.

In general, I think Denninger misses the bigger picture and actually has a philosophy that runs counter to much of the spirit of this site. Obviously, he's a financial/investment/economics wonk, so I can't hold too much against him for never including the other two E's, but in the end such an exclusion weakens the breadth and insight of his analysis. After all, reality includes and is greatly influenced by the other two E's. A lot of wonks forget what Taleb frequently points out, that economics is part of something called life and not that life is part of something called economics.

Where he potentially runs counter to the spirit of this site is the feeling I get from him that he thinks that there are just small problems in need of tweaking, and then everything can go back to normal. In a fundamentalist way, he thinks government is the only source of the world's problems. And overall he seems quite content with what I would call a hyper-financialized world filled with investment exotica. Clearly this isn't the world most people on this site envision and, by all measures today, isn't the world that will exist in the future. That's where I think he's behind the times.

As far as pensions, various retirement funds, and social security goes. We don't need Denninger to tell us they're toast. Ask yourself this question, how could they not be toast? They're all ponzi schemes essentially. I don't think it's crazy to think that social security pay-outs by the gov may cease to exist within five years time. There's simply no money anywhere anymore because it was all electronic and paper wealth to begin with. Years ago I wanted to stop paying my FICA because I knew I was never going to see any of that money.

Retirement and investment have to be seriously reevaluated right now and actually require the creation of a new lexicon.

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Re: This Requires Serious Discussion

i dont have the time but if someone would like to look it up the feds back up the pension funds like the fdic backs up banks.

 

my guess is that fund is close to being wiped out and when companies like gm go belly up the claims could be more than massive. oh yeah and the airlines too

about a month ago schiff said in 4 - 5 years only the extremely wealthy would be retired. i looked for it on youtube but there is so much on schiff i could not find it.

in any event i never planned on retiring so no big deal but i did plan on there being jobs....oops.

so my  fall back is to buy lottery tickets (arkansas just passed the initiative) then if i win i can be extremely wealthy which in arkansas does not take too much...........a mule some goats a good garden, a little still and a weed patch ought to cover it.

oh and a few guns for varmints

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Re: This Requires Serious Discussion

Hi Sam,

I've been reading Denninger for about 5 months now and have gone back in his archives and read much of what he wrote for the past two years... my assessment is that he has been mostly right in his predictions, perhaps a bit in ahead of events; kind of like the canary in the coal mine.

If you haven't read his predictions of 2009 (which includes a recap of his 2008 predictions) please do, its a sobering read!

Denninger is one of my (many) trusted sources for information. He is pretty brash, but I like that... doesn't pull his punches.

Anyway, I am taking his warning seriously and today divested a 401k roll over, and willingly took the hits. I'm rationalizing the loss (the tax & penalty) as the price to secure what I have in the fund. My intent is to increase my bullion holdings. Since I expect a crash of some kind, I also expect PM values to rise as well, hopefully gains in PM will offset the loss in liquidating... you could call it a hedge.

Perhaps you could redeem some of your Cd's as a hedge as well... convert those funds to some bullion and maybe even make the tax/ penalty money back in the event of a collapse. At least you would be in control of your own money, not at the bankster/ political cartel's mercy.

P.S. They took the retirement funds in Argentina... it definately could happen here. And yes, I think it would cause a revolt. But once the confiscate/ appropriate your funds... you ain't gettin 'em back!

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Re: This Requires Serious Discussion
Woodman wrote:

What Denninger describes seems possible and there is certainly the need for policy changes, but I would like to see the data and analysis and timelines to back up his conclusions.  One thing he's right on thought - my 401K is already pretty much locked up in Treasuries!  No safer options within my plan right now, and the rules prevent me from getting out unless I leave my job. 

 

 

 

This is 100% true from what I have seen as well. I have been doing my best to assist my mother in the same matter, and when I looked up where she 'had to' move her funds it was all bonds and treasuries, and GNMA bonds, which is not very reassuring. She has already lost tens of thousands (as many have) and  now ccan't pull this money until she quits. It is a scary thought.

In the same note, I agree with Mike that it helps having a little time to adjust, and prepair, on social security, medcair and madicaid I can see the same thing happening refering to taxes and inflation, but from the numbers we have all seen it would be severe tax jumps and severe inflationo to say the least. 78nillion (83million when immigration is included) is a huge number to support. Politicly speaking, they will most likely inflate and inflate and tax and inflate, until they admit they simply have no more room (or the people speak whichever happens first)

 

Mike

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Re: This Requires Serious Discussion
joe2baba wrote:

....a mule some goats a good garden, a little still and a weed patch ought to cover it.

oh and a few guns for varmints

... and some loose-fittin' shoes, and a tight-fittin' ... well, you know the rest. Cool

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Re: This Requires Serious Discussion
joe2baba wrote:

so my  fall back is to buy lottery tickets (arkansas just passed the initiative) then if i win i can be extremely wealthy which in arkansas does not take too much...........a mule some goats a good garden, a little still and a weed patch ought to cover it.

oh and a few guns for varmints

ROFLMAO

Thank you Joe, you gave me my first serious laugh for the day (and my wife just told me this morning how good it is for heart health, so you helped keep me alive for another day!).

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Re: This Requires Serious Discussion

Hey Sam

You might want to check out this thread on ETFs.

http://www.peakprosperity.com/forum/investing-inverse-bond-etfs-versus-g...

Or look at this article on the Central Fund of Canada.

http://www.goldstockbull.com/articles/central-fund-of-canada-cef-safest-...

Gold ETFs were a big discussion topic in my living room last night among folks in a similar age bracket as yourself. Good little savers all around who've seen our "plan" for the next few years evaporate, at least in terms of how we were planning to fund those years.

Personally, I find I've shifted focus from the future, and whether I've enough saved, back to the present. Not to say I'm not actively working what money I still can - thus back to the begining of this post. Just passing on some emotional fallout that has taken me by surprise. A good thing. Remember that old toast to "health, wealth, and happiness"? Wealth is only one of many. Or another old saying "A bird in the hand is worth two in the bush". Especially if that bush is on fire.

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Re: This Requires Serious Discussion

let me guess........tight fitting dentures?

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Re: This Requires Serious Discussion
SamLinder wrote:

I can't believe the US gov't would seriously consider taking over everyone's retirement funds - the reaction would be overwhelming. I believe a revolt would definitely be in the cards at that point.

 

 

Think again...check this out. There was talk of doing just that recently. After all, "it's good to spread the wealth around"

 


Carolina Journal Exclusives
Dems Target Private Retirement Accounts

Democratic leaders in the U.S. House discuss confiscating 401(k)s, IRAs

By Karen McMahan

November 04, 2008

RALEIGH — Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration.

Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.

The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.

Rep. George Miller, D-Calif., chairman of the House Committee on Education and Labor, in prepared remarks for the hearing on “The Impact of the Financial Crisis on Workers’ Retirement Security,” blamed Wall Street for the financial crisis and said his committee will “strengthen and protect Americans’ 401(k)s, pensions, and other retirement plans” and the “Democratic Congress will continue to conduct this much-needed oversight on behalf of the American people.”

Currently, 401(k) plans allow Americans to invest pretax money and their employers match up to a defined percentage, which not only increases workers’ retirement savings but also reduces their annual income tax. The balances are fully inheritable, subject to income tax, meaning workers pass on their wealth to their heirs, unlike Social Security. Even when they leave an employer and go to one that doesn’t offer a 401(k) or pension, workers can transfer their balances to a qualified IRA.

Mandating Equality

Ghilarducci’s plan first appeared in a paper for the Economic Policy Institute: Agenda for Shared Prosperity on Nov. 20, 2007, in which she said GRAs will rescue the flawed American retirement income system (www.sharedprosperity.org/bp204/bp204.pdf).

The current retirement system, Ghilarducci said, “exacerbates income and wealth inequalities” because tax breaks for voluntary retirement accounts are “skewed to the wealthy because it is easier for them to save, and because they receive bigger tax breaks when they do.”

Lauding GRAs as a way to effectively increase retirement savings, Ghilarducci wrote that savings incentives are unequal for rich and poor families because tax deferrals “provide a much larger ‘carrot’ to wealthy families than to middle-class families — and none whatsoever for families too poor to owe taxes.”

GRAs would guarantee a fixed 3 percent annual rate of return, although later in her article Ghilarducci explained that participants would not “earn a 3% real return in perpetuity.” In place of tax breaks workers now receive for contributions and thus a lower tax rate, workers would receive $600 annually from the government, inflation-adjusted. For low-income workers whose annual contributions are less than $600, the government would deposit whatever amount it would take to equal the minimum $600 for all participants.

In a radio interview with Kirby Wilbur in Seattle on Oct. 27, 2008, Ghilarducci explained that her proposal doesn’t eliminate the tax breaks, rather, “I’m just rearranging the tax breaks that are available now for 401(k)s and spreading — spreading the wealth.”

All workers would have 5 percent of their annual pay deducted from their paychecks and deposited to the GRA. They would still be paying Social Security and Medicare taxes, as would the employers. The GRA contribution would be shared equally by the worker and the employee. Employers no longer would be able to write off their contributions. Any capital gains would be taxable year-on-year.

Analysts point to another disturbing part of the plan. With a GRA, workers could bequeath only half of their account balances to their heirs, unlike full balances from existing 401(k) and IRA accounts. For workers who die after retiring, they could bequeath just their own contributions plus the interest but minus any benefits received and minus the employer contributions.

Another justification for Ghilarducci’s plan is to eliminate investment risk. In her testimony, Ghilarducci said, “humans often lack the foresight, discipline, and investing skills required to sustain a savings plan.” She cited the 2004 HSBC global survey on the Future of Retirement, in which she claimed that “a third of Americans wanted the government to force them to save more for retirement.”

What the survey actually reported was that 33 percent of Americans wanted the government to “enforce additional private savings,” a vastly different meaning than mandatory government-run savings. Of the four potential sources of retirement support, which were government, employer, family, and self, the majority of Americans said “self” was the most important contributor, followed by “government.” When broken out by family income, low-income U.S. households said the “government” was the most important retirement support, whereas high-income families ranked “government” last and “self” first (www.hsbc.com/retirement).

On Oct. 22, The Wall Street Journal reported that the Argentinean government had seized all private pension and retirement accounts to fund government programs and to address a ballooning deficit. Fearing an economic collapse, foreign investors quickly pulled out, forcing the Argentinean stock market to shut down several times. More than 10 years ago, nationalization of private savings sent Argentina’s economy into a long-term downward spiral.

Income and Wealth Redistribution

The majority of witness testimony during recent hearings before the House Committee on Education and Labor showed that congressional Democrats intend to address income and wealth inequality through redistribution.

On July 31, 2008, Robert Greenstein, executive director of the Center on Budget and Policy Priorities, testified before the subcommittee on workforce protections that “from the standpoint of equal treatment of people with different incomes, there is a fundamental flaw” in tax code incentives because they are “provided in the form of deductions, exemptions, and exclusions rather than in the form of refundable tax credits.”

Even people who don’t pay taxes should get money from the government, paid for by higher-income Americans, he said. “There is no obvious reason why lower-income taxpayers or people who do not file income taxes should get smaller incentives (or no tax incentives at all),” Greenstein said.

“Moving to refundable tax credits for promoting socially worthwhile activities would be an important step toward enhancing progressivity in the tax code in a way that would improve economic efficiency and performance at the same time,” Greenstein said, and “reducing barriers to labor organizing, preserving the real value of the minimum wage, and the other workforce security concerns . . . would contribute to an economy with less glaring and sharply widening inequality.”

When asked whether committee members seriously were considering Ghilarducci’s proposal for GSAs, Aaron Albright, press secretary for the Committee on Education and Labor, said Miller and other members were listening to all ideas.

Miller’s biggest priority has been on legislation aimed at greater transparency in 401(k)s and other retirement plan administration, specifically regarding fees, Albright said, and he sent a link to a Fox News interview of Miller on Oct. 24, 2008, to show that the congressman had not made a decision.

After repeated questions asked by Neil Cavuto of Fox News, Miller said he would not be in favor of “killing the 401(k)” or of “killing the tax advantages for 401(k)s.”

Arguing against liberal prescriptions, William Beach, director of the Center for Data Analysis at the Heritage Foundation, testified on Oct. 24 that the “roots of the current crisis are firmly planted in public policy mistakes” by the Federal Reserve and Congress. He cautioned Congress against raising taxes, increasing burdensome regulations, or withdrawing from international product or capital markets. “Congress can ill afford to repeat the awesome errors of its predecessor in the early days of the Great Depression,” Beach said.

Instead, Beach said, Congress could best address the financial crisis by making the tax reductions of 2001 and 2003 permanent, stopping dependence on demand-side stimulus, lowering the corporate profits tax, and reducing or eliminating taxes on capital gains and dividends.

Testifying before the same committee in early October, Jerry Bramlett, president and CEO of BenefitStreet, Inc., an independent 401(k) plan administrator, said one of the best ways to ensure retirement security would be to have the U.S. Department of Labor develop educational materials for workers so they could make better investment decisions, not exchange equity investments in retirement accounts for Treasury bills, as proposed in the GSAs.

Should Sen. Barack Obama win the presidency, congressional Democrats might have stronger support for their “spreading the wealth” agenda. On Oct. 27, the American Thinker posted a video of an interview with Obama on public radio station WBEZ-FM from 2001.

In the interview, Obama said, “The Supreme Court never ventured into the issues of redistribution of wealth, and of more basic issues such as political and economic justice in society.” The Constitution says only what “the states can’t do to you. Says what the Federal government can’t do to you,” and Obama added that the Warren Court wasn’t that radical.

Although in 2001 Obama said he was not “optimistic about bringing major redistributive change through the courts,” as president, he would likely have the opportunity to appoint one or more Supreme Court justices.

“The real tragedy of the civil rights movement was, um, because the civil rights movement became so court focused that I think there was a tendency to lose track of the political and community organizing and activities on the ground that are able to put together the actual coalition of powers through which you bring about redistributive change,” Obama said.

Karen McMahan is a contributing editor of Carolina Journal.

 

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SamLinder
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Re: This Requires Serious Discussion
Linda K wrote:

Hey Sam

You might want to check out this thread on ETFs.

http://www.peakprosperity.com/forum/investing-inverse-bond-etfs-versus-g...

Or look at this article on the Central Fund of Canada.

http://www.goldstockbull.com/articles/central-fund-of-canada-cef-safest-...

Gold ETFs were a big discussion topic in my living room last night among folks in a similar age bracket as yourself. Good little savers all around who've seen our "plan" for the next few years evaporate, at least in terms of how we were planning to fund those years.

Personally, I find I've shifted focus from the future, and whether I've enough saved, back to the present. Not to say I'm not actively working what money I still can - thus back to the begining of this post. Just passing on some emotional fallout that has taken me by surprise. A good thing. Remember that old toast to "health, wealth, and happiness"? Wealth is only one of many. Or another old saying "A bird in the hand is worth two in the bush". Especially if that bush is on fire.

Mike P., Larry, Alex, mainecooncat, Pat, that1guy, Linda K -

Thanks to all of you for your advice and thoughts. At the end of the day, I'm about where I started. The consensus seems to be that virtually everything I counted on to support us down the road will soon be toast. Which now brings up another interesting question.

Some say you should pay off all your debt asap. Others say absolutely not because hyper-inflation will let you pay it back with cheaper dollars.

The question is: do I take my IRA CD's, cash them in and pay off my house now while they still have some value (and take a severe tax hit in the process)? Or do I leave them alone and wait for hyper-inflation to come along and risk that my IRA's may be gone by then and I'll have nothing left except debt?

As the king of Siam said in "The King and I", "'Tis a puzzlement!"

Linda K - thank you for those links - very interesting. However, I'm of the school that I would take the PM and keep it in my hot little hands. Frankly, with what I've seen lately, I don't trust any financial institution of any kind anywhere!

SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: This Requires Serious Discussion
poisonivy113 wrote:
SamLinder wrote:

I can't believe the US gov't would seriously consider taking over everyone's retirement funds - the reaction would be overwhelming. I believe a revolt would definitely be in the cards at that point.

 

 

Think again...check this out. There was talk of doing just that recently. After all, "it's good to spread the wealth around"

Carolina Journal Exclusives
Dems Target Private Retirement Accounts

Democratic leaders in the U.S. House discuss confiscating 401(k)s, IRAs

By Karen McMahan

November 04, 2008

 

poisonivy113,

Well - I think you just made my day! Excuse me a moment while I go out back and hang myself from the nearest tree!  Foot in mouth

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TimesAwasting
Status: Silver Member (Offline)
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Posts: 100
Re: This Requires Serious Discussion

Hey Sam,

Good thread... interesting stuff!

My take, cash in, convert to PM and sit on it... if hyper inflation kicks in, cash in the inflated PM and take out the mortgage... that is if you're comfortable where you are and see it as a place you'd like to stay, and, make your stand. Don't be in such a hurry to whack all the debt (at the expense of cash/ PM as those give you flexibility and mobility) just yet... keep making the payments and see what the next 6 to 12 months brings.

Once you've liberated your savings from the grid and preserved your life savings you can relax and let events unfold knowing that you can pay all the remaining debt at one shot if you decide it's wise.

DrKrbyLuv's picture
DrKrbyLuv
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 1995
Re: This Requires Serious Discussion

SamLinder said:

Mike P., Larry, Alex, mainecooncat, Pat, that1guy, Linda K -

Thanks to all of you for your advice and thoughts. At the end of the
day, I'm about where I started. The consensus seems to be that
virtually everything I counted on to support us down the road will soon
be toast. Which now brings up another interesting question.

Some say you should pay off all your debt asap. Others say
absolutely not because hyper-inflation will let you pay it back with
cheaper dollars.

The question is: do I take my IRA CD's, cash them in and pay off my
house now while they still have some value (and take a severe tax hit
in the process)? Or do I leave them alone and wait for hyper-inflation
to come along and risk that my IRA's may be gone by then and I'll have
nothing left except debt?

Sam - I am with you in mind, heart and worry.  We have some time to analyze things more carefully - we're asking the right questions and will find the right answers.  One thing that I want to share is that most people are sitting on their hands wondering what's going to happen to them next.  We're ahead of the pack and there is great value in timing.

Please don't rush or feel that a decision must be made right away.  Let's all stick together and share our experiences and solutions - this strategy is working.     

Larry

SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: This Requires Serious Discussion
DrKrbyLuv wrote:

SamLinder said:

Mike P., Larry, Alex, mainecooncat, Pat, that1guy, Linda K -

Thanks to all of you for your advice and thoughts. At the end of the
day, I'm about where I started. The consensus seems to be that
virtually everything I counted on to support us down the road will soon
be toast. Which now brings up another interesting question.

Some say you should pay off all your debt asap. Others say
absolutely not because hyper-inflation will let you pay it back with
cheaper dollars.

The question is: do I take my IRA CD's, cash them in and pay off my
house now while they still have some value (and take a severe tax hit
in the process)? Or do I leave them alone and wait for hyper-inflation
to come along and risk that my IRA's may be gone by then and I'll have
nothing left except debt?

Sam - I am with you in mind, heart and worry.  We have some time to analyze things more carefully - we're asking the right questions and will find the right answers.  One thing that I want to share is that most people are sitting on their hands wondering what's going to happen to them next.  We're ahead of the pack and there is great value in timing.

Please don't rush or feel that a decision must be made right away.  Let's all stick together and share our experiences and solutions - this strategy is working.     

Larry

Thanks, Larry. I appreciate your comments. That's why I posted here -  I know there are a lot of good people with a lot of good ideas and I sure don't have all the answers. My 65 years of experience was helpful as long as the world stayed upright. Now that it's turned upside down, I'm really at a loss as to how to safely protect my family.

I think you are wise in suggesting not to rush out and do anything. Like others, I see what's happening as a slow-motion crash. I just hope I don't wind up deciding to do a something one day after it's too late!  Surprised

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Mike Pilat
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 929
Re: This Requires Serious Discussion

I've found that it's been very important to balance plans and thinking with actions and execution. If you can achieve the perfect balance between researching options and considering possibilities and then actually doing them, let me know. But the key point is that there has to be some sense of balance. Pure thought or pure senseless action are each destructive in their own way.

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JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2492
Re: This Requires Serious Discussion

Hi Sam,

Thank you for your post. It has led to a fascinating discussion. While I agree with nearly every comment on this post, I wanted to offer a different perspective on this situation. I believe that Denninger's post is a great example of the excessive negativity that is associated with market bottoms. By no means do I feel that the stock market has reached a long term bottom, but I do believe that we are going to see a very strong bear market rally in the next couple weeks. Perhaps you should sit on your decision for a couple weeks and see if you can make this decision with a better frame of mind. By no means do I want you to feel that I am making light of your situation. I just feel that if I was in your situation this is the advice that would do me the most good. 

Jeff 

SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: This Requires Serious Discussion
Mike Pilat wrote:

I've found that it's been very important to balance plans and thinking with actions and execution. If you can achieve the perfect balance between researching options and considering possibilities and then actually doing them, let me know. But the key point is that there has to be some sense of balance. Pure thought or pure senseless action are each destructive in their own way.

Wait a minute - let me check my crystal ball and see what it has to say.

Hmmmm - snow and rain mix this coming Sunday. Dang, wish I could get it to show something else beside the weather!

Tell you what, Mike - if I were a betting man, I would put money on the odds that I'll do something senseless before I do something intelligent!  Wink

 

SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: This Requires Serious Discussion
jageanangel wrote:

Hi Sam,

Thank you for your post. It has led to a fascinating discussion. While I agree with nearly every comment on this post, I wanted to offer a different perspective on this situation. I believe that Denninger's post is a great example of the excessive negativity that is associated with market bottoms. By no means do I feel that the stock market has reached a long term bottom, but I do believe that we are going to see a very strong bear market rally in the next couple weeks. Perhaps you should sit on your decision for a couple weeks and see if you can make this decision with a better frame of mind. By no means do I want you to feel that I am making light of your situation. I just feel that if I was in your situation this is the advice that would do me the most good. 

Jeff 

jageanangel,

Thanks for your comments. Actually, I don't much care which way the market moves as I'm in pure cash IRA's. I'm primarily concerned about the "gummint keeping their dirty, picking paws offen ma money!" Yell

SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: This Requires Serious Discussion
Pat Carney wrote:

Hey Sam,

Good thread... interesting stuff!

My take, cash in, convert to PM and sit on it... if hyper inflation kicks in, cash in the inflated PM and take out the mortgage... that is if you're comfortable where you are and see it as a place you'd like to stay, and, make your stand. Don't be in such a hurry to whack all the debt (at the expense of cash/ PM as those give you flexibility and mobility) just yet... keep making the payments and see what the next 6 to 12 months brings.

Once you've liberated your savings from the grid and preserved your life savings you can relax and let events unfold knowing that you can pay all the remaining debt at one shot if you decide it's wise.

Hiya Pat,

If I cash in my IRA's today, I would probably eat about a 30% - 35% loss in taxes. That's a huge hit to my retirement account. While your advice has merit, I think I'll monitor things for a bit longer before I take such a drastic step.

If I make a mistake with this one, I'll be up a creek without a paddle - because my wife will be beating me over the head with it!  Yell (ouch! ouch! ouch! ouch!)

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