Wednesday, November 17, 2010

Speaking of Protecting Us – Uncle Sam Wants to Manage Your Retirement Account

Friend of many years Rick Rule sent along a link from a statist-leaning organization that attempts to debunk the idea that the government is planning to seize your IRA.
Rumors of such a grab are nonsense, says the Annenberg Foundation. They go on to explain that the government isn’t planning on seizing your IRA or 401(k) – instead, they have only been pondering a proposal recently floated whereby the government would compete with private financial institutions by offering a new account with the following features…
[The government would] force all workers to save 5 percent of their annual income in a new type of retirement vehicle… a Guaranteed Retirement Account. These savings could not be controlled by workers like IRAs and 401(k) assets, but would instead be deposited with the government. Workers could not touch the money until retirement… and even then the savings could not be drawn out any way workers might desire, but would be converted to an annuity – a guaranteed stream of income for life. Ghilarducci [the plan’s author] argues that these new accounts would avoid stock market risks; the government would guarantee that the savings earn a 3 percent annual return on top of inflation. The government would also pay each worker $600 a year in the form of a tax credit, which would help workers who now earn too little to take advantage of a tax deduction because they owe little or no federal income tax anyway.
So, the same people who mismanaged the government into bankruptcy – running up debts and obligations on the order of $70 trillion – want to force you to invest 5% of your annual income in a government-managed account that ultimately rolls into annuity that only they control, and which over time will earn you a 3% annual rate?
Of course, when (not if) the big inflation comes, it’s a certainty that the government’s CPI calculations will fall well short of reality – meaning your annuities will be a sure loser.
While I have been skeptical about any real changes emanating from the new Congress, if the Republicans and Tea Partiers can make sure that this idea – which a representative of one senior Democrat congressman called “intriguing” – can be turned back at the door, then it’s all to the good.
Meanwhile, here’s the article. It’s worth reading, if only to marvel at the sheer audacity of these miscreants in even thinking about such things.

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