Retirement plan seizure risks

[ns3]

Anybody else read Craig's post on the subject?

http://www.crawlingroad.com/blog/2014/0 ... le-wealth/

Craig thinks there is a "decent chance" that this will happen some time in the future though he is not predicting when. My own thinking on the subject is that if we continue moving in the same leftward direction we have been since the election of Obama it is almost a certainty. I think all you have to do is listen to the rhetoric of income inequality (the most important challenge of our generation) and observe what the democrats did in the brief period that they had full control of the government (Obamacare) to come to this conclusion. As far as the constitutionality of it, I don't doubt for one minute that the SOTU would find a way to dance around the issue and find a justification for it. They are very good at that.

To me, the big question is whether or not we are going to continue in this direction. In the past, sharp turns to the left have always resulted in a prolonged backlash on the right lasting for many years. Demographics are changing however (see California). The next election could be a big turning point. If Hillary wins I think all bets are off and we all better start taking Craig's advice.

[MachineGhost]

There's logistical and legal issues to coercing people to buy Treasury Bonds in IRA's.

Otherwise its just the usual wingnuttism.  If it happens, it'll happen.  Not much you can do about it.  You don't own the IRA, the government does.  Trustees administer it.

And BTW, Obamacare is a conservative principled, market-oriented solution.  Look behind the wingnuttism paranoia at the facts.

[craigr]

There's logistical and legal issues to coercing people to buy Treasury Bonds in IRA's.

Hmmm...

Otherwise its just the usual wingnuttism.  If it happens, it'll happen.  Not much you can do about it.  You don't own the IRA, the government does.  Trustees administer it.

You can't have it both ways. You can't say there are legal issues with them forcing you to do anything, and then saying there's not much you can do about it because you don't own the assets.

And the truth is, there is something you can do about it. That is to not put all your retirement savings in tax-deferred plans, especially if you are young. I would just expect that some kind of shell game is going to happen with these plans eventually and prepare for it.

This is the point of the article. Don't put 100% of your savings in tax-deferred plans. They are likely to go missing in the future. I say this mainly to young savers looking decades out to access those funds. I don't suggest people near retirement go liquidating their retirement savings plans.

But if I were in my 20s and starting to save again, I'd think long and hard about building up a nest egg alongside only tax-deferred savings.

And BTW, Obamacare is a conservative principled, market-oriented solution.  Look behind the wingnuttism paranoia at the facts.

As someone who had their plan cancelled and replaced with the identical plan that cost 50% almost 100% more than the previous version, I disagree. Obamacare is a huge giveaway to Obama's constituency at the expense of those who always played by the rules and took care to make sure they weren't a burden on others.

There are ways to fix the idea of health care being attached to your employment in much smarter ways. What we ended up with was a plan to appease everyone and that means that nobody will be happy with the results.

[moda0306]

Between physical gold, Roth IRA basis liquidity, savings bonds, and the fact that 50% of our portfolio is government securities anyway helps us get around most of this. 

[ns3]

There's logistical and legal issues to coercing people to buy Treasury Bonds in IRA's.

Otherwise its just the usual wingnuttism.  If it happens, it'll happen.  Not much you can do about it.  You don't own the IRA, the government does.  Trustees administer it.

And BTW, Obamacare is a conservative principled, market-oriented solution.  Look behind the wingnuttism paranoia at the facts.

I'm not so much thinking about coercing people to convert their assets to Treasury Bonds though I have heard that proposal. I'm thinking more along the lines of say, just for starters, a tax levied on all 401k balances over a certain amount for some purpose like bailing out public pension funds. Didn't the supremes just say with Obamacare that as long as it's called a tax they can do pretty much whatever the hell they want?

I remember when 401k's first came out in 1978 when I was 29 years old I was very reluctant to start contributing for the very reasons that Craig has stated. It sounded like a great deal at the time but who was to say they wouldn't change the rules of the game once you had put away your nest egg in a nice little account for them?

Today I'm in my peak earning years and nearing retirement so it makes sense to me to take maximum advantage of the tax deferment but I don't think I would be doing that if I also didn't have savings left over to also put into taxable accounts.

As for Obamacare, I did come out of my wingnutt cave long enough to read an interesting thread over on Bogleheads where people were asked to share their real experiences with Obamacare as opposed to political rants. I was surprised to see that the majority who posted were pleased with the system but there was one thing I couldn't help but notice most of them had in common. They all got subsidies. So I was left wondering who is actually paying for this "conservative market-oriented solution". I'm sure somebody is. I just haven't met them yet.  (And one poster who was definitely NOT pleased was an MD who was going to be forced to actually provide some services below his own cost. If true, what kind of "market based" solution is that?)

[craigr]

I was surprised to see that the majority who posted were pleased with the system but there was one thing I couldn't help but notice most of them had in common. They all got subsidies.

Yep. They get subsidies from people like me that had monthly rates radically increased.

Several years back a friend of mine sat on a hospital board. He stated to me about the costs when I complained about my rates going up 20+% a year:

25% of the people coming to the hospital paid zero. They are uninsured/illegals/etc.
50% of the people coming in are medicaid/medicare. They paid the hospital about 50% of the actual costs they incur.
25% are people like me that are privately insured. We are charged what the other 75% are not paying.

They charge where the money is and that's people like me that are self-employed/privately insured. ObamaCare is a huge payoff to his constituents at the expense of people that always acted responsibly by being insured.

And I'm quite certain we'll see in the future another payoff at the expense of people that saved too much in retirement plans. I don't know when it will happen, but on a long enough timeline I'm sure it will. I think all it needs to happen is the right kind of emergency.

[MachineGhost]

As for Obamacare, I did come out of my wingnutt cave long enough to read an interesting thread over on Bogleheads where people were asked to share their real experiences with Obamacare as opposed to political rants. I was surprised to see that the majority who posted were pleased with the system but there was one thing I couldn't help but notice most of them had in common. They all got subsidies. So I was left wondering who is actually paying for this "conservative market-oriented solution". I'm sure somebody is. I just haven't met them yet.  (And one poster who was definitely NOT pleased was an MD who was going to be forced to actually provide some services below his own cost. If true, what kind of "market based" solution is that?)

All insurance is risk pooling.  The difference with Obamacare is it is the taxpayer paying in, rather than voluntary insurance participants (if you can call even call group co-op, insurance).  It all has to do with minimizing the adverse selection problem.  It's all doomed to eventual failure anyway, government or maket-based, without true cost containment.  There is none because we have no real free-market in healthcare because Congress is neutered to constrain costs when controlled and influenced by Big Pharama lobbyists.  Big Pharma simply DOES NOT CARE about your health, only making endless profits fleecing the public and especially the sick (the more sick, the more they charge).  They have decades upon decades of refinding crony corruption into an art form under their belt.  Obamacare is like putting a bandaid on a gunshot wound.  So besides Medicare price controls, we need true and fundamental reform.  It's not going to happen until the general public wakes up to the stark reality of how hopelessly corrupt the whole system is.  I'm not holding my breath.  You've got to cut Democrats a bit of slack for trying to impose statist constraints on bad actor, malevolent industries; whereas Republicans just look the other way while taking their kickbacks under the table.  Always hypocrites, they are.

Anyway, Obamacare is 100% identical to its origins from the conservative Heritage Foundation except that huge medical losses are not recouped when filing taxes.  The decision was made to place an out of pocket maximum instead.  That may have been the critical mistake in preventing consumer-directed, pricing competition.  So calling Obamacare Democrat or whatever is just ideological wingnuttism.  Look at how ignorant the Republicans are about their own principles made flesh and blood; its really all about the political game and winning points against the other side with marketing fiction, not advancing the public welfare AT ALL.  So just ignore the wingnuttism; especially anyone that conflates their ideology with the negative effects or unintended consequences of statism.

[ns3]

Anyway, Obamacare ....

Didn't mean to debate the merits of Obamacare. With the original subject in mind, I only mentioned it as an example of how something drastic like this can happen quickly when progressives/liberals/leftists, whatever you want to call them, get full control of the government, even if for only a brief period.

[MachineGhost]

Anyway, Obamacare ....

Didn't mean to debate the merits of Obamacare. With the original subject in mind, I only mentioned it as an example of how something drastic like this can happen quickly when progressives/liberals/leftists, whatever you want to call them, get full control of the government, even if for only a brief period.

Well historically, the Democrats have been more sucessful in terms of passing actual free-market oriented legislation than Republicans.  I don't know if thats because voters are wise enough to maintain Congressional grid-lock or Democrats are just much more amenable to free-market concepts when one of their own is in power.  It's very surprising.  Heck, Bush Jr. damned us all passing the Medicare Modernization Act which forced the government to pay FULL RETAIL PRICE for all drugs.  Naturally, Big Pharma took advantage of it and jacked up drug prices that continues to this day.  It will literally bankrupt the government and of course, Big Pharma and their overpaid K Street lobbyists don'tt give two shits while the getting's good.  So its not about which party is in power, its the whole corrupt system itself.

[ns3]

So its not about which party is in power, its the whole corrupt system itself.

I would agree that we can get screwed equally by either party but I think the worse situation of all is when one party has complete control of the government. This doesn't usually last long but they can do a lot of damage in the meantime. I might be mistaken but I think your example of the prescription drug plan was just such a case, not to mention No Child Left Behind.

[Mountaineer]

So its not about which party is in power, its the whole corrupt system itself.

I would agree that we can get screwed equally by either party but I think the worse situation of all is when one party has complete control of the government. This doesn't usually last long but they can do a lot of damage in the meantime. I might be mistaken but I think your example of the prescription drug plan was just such a case, not to mention No Child Left Behind.

Yes indeed!  The real question for us to ponder:  Do we, citizens of the US, receive more "good" from our corrupt government than other reasonable and practical alternatives?

... Mountaineer

[MediumTex]

As long as Wall Street is able to continue its mastery of getting politicians to make sure nothing bad happens to any of the major financial institutions, the current retirement plan regime won't change much.

Wall Street views retirement plan sponsors as the big game version of dumb money.  They absolutely love it.  To them, it's like hijacking a truckload of candy before it even gets to the babies.

Any nationalization-like action by the government would be met with fierce resistance from Wall Street because they would perceive it as basically the nationalization of some of their easiest money.

And remember, too, that the government doesn't need any of the money that is currently in private sector retirement plans.  If the government needed money it could just go sell some more treasuries, and it would be a heck of a lot easier than wrestling away trillions of dollars that Wall Street currently has under management.

Ironically, the proposal that gets lost in a lot of the retirement plan seizure talk is actually a really good one, and it involves the federal government offering a type of retirement bond on an optional basis that would allow people who are retiring to convert a 401(k) lump sum amount into what would basically be an annuity backed by the federal government.  What are the chances that this will actually happen?  About zero, since it would basically involve siphoning annuity business away from the insurance industry, and the insurance industry is just as good as Wall Street at lobbying Congress to get sweet deals for itself.

The IRS also has a tangle of rules related to retirement plan contributions, distributions, funding, plan design, etc. with tentacles that reach into an amazing number of areas.  Undoing all of that would be difficult, and the IRS would be lobbying against it the whole way.

I have thought about retirement plan confiscation scenarios from many angles, and I don't see it being a significant risk in the U.S.  It is certainly a risk in many other countries where the government does actually need the money held by its citizens, but the U.S. is in that enviable position of being able to issue an almost unlimited amount of debt with almost no effect on the interest rates it pays on that debt.  If anything, as the U.S. debt has increased dramatically over the past 30 years, the interest rates that the U.S. must pay to borrow new money or roll over the maturing debt have declined dramatically. 

I know who would be against retirement asset confiscation: everyone who has a retirement account, everyone who provides services related to retirement accounts (i.e., the plan administration service providers, the accounting firms, the law firms, the actuarial firms, etc.), and everyone who relies on the management of assets in retirement accounts as part of their business model (JP Morgan Chase, Wells Fargo, Fidelity, Vanguard, Charles Schwab, Goldman Sachs, Morgan Stanley, just to name a few huge ones).

Who would be for retirement plan asset confiscation?  Probably a few pinheads at the Department of Labor, a few Obama groupies in Congress, and a few academics in left wing think tanks, and that would be about it.

What Congressman in his right mind would vote to seize the retirement accounts of his constituents?  This is an action that would hit the group that votes in the highest numbers the hardest (i.e., the people who are retired and nearing retirement).

I'm not saying that it can't happen; I'm just saying that I don't know why it would happen if it basically benefits no one but pisses a LOT of people off.

[murphy_p_t]

MT...very well constructed argument as the devils advocate.

I have thought about retirement plan confiscation scenarios from many angles, and I don't see it being a significant risk in the U.S.  It is certainly a risk in many other countries where the government does actually need the money held by its citizens, but the U.S. is in that enviable position of being able to issue an almost unlimited amount of debt with almost no effect on the interest rates it pays on that debt.  If anything, as the U.S. debt has increased dramatically over the past 30 years, the interest rates that the U.S. must pay to borrow new money or roll over the maturing debt have declined dramatically. 

I find this to be a truly interesting situation, however perverse it may be. It will be true right up until the point it not longer is, in my view.....Perhaps when the US no longer is the global reserve currency.

Who would be for retirement plan asset confiscation?  Probably a few pinheads at the Department of Labor, a few Obama groupies in Congress, and a few academics in left wing think tanks, and that would be about it.

What Congressman in his right mind would vote to seize the retirement accounts of his constituents?  This is an action that would hit the group that votes in the highest numbers the hardest (i.e., the people who are retired and nearing retirement).

I'm not saying that it can't happen; I'm just saying that I don't know why it would happen if it basically benefits no one but pisses a LOT of people off.

One of the proposals out there is to take funds from the tax-advantaged accts to prop up union pensions, specifically for multi-employer union pensions (think construction unions who control the pension rather than the employers) Think GM union workers vs the GM exempts redux.

[murphy_p_t]

Thinking on this further, the parallel for the gov't might be Hillarycare (failed) vs. Obamacare (which passed). Wasn't one of the lessons to get the corporate interests on board, which is what Obamacare did to get wide support.

Basically, Washington would have to figure out how to buy off Wall Street to overcome the many opponents MT outlined above.

[craigr]

Currently yes I would agree with MT's points. The biggest problem with self-directed retirement savings is it is a huge cash cow for financial companies. It basically locks investor money into high-priced and under-performing plans for decades. It's an incredibly sweet deal for Wall St. and they don't want it touched. So yes, the political fight would be there for sure.

But, with the right financial emergency that puts a lot of brokerages/banks on the ropes, it is entirely possible that part of the bail-out would be they stand-down in opposing retirement plan nationalization. I suspect it would be some kind of inflation linked bonds or similar. Maybe credits against your Social Security that they'd promise to pay you out on later. It could be couched in patriotic terms to really lay the guilt on deep and thick.

Most likely though, it will be nothing that anyone expected or planned for. It will be some kind of emergency and in a moment of weakness it will be forced through under some guise.

I'd note that in all countries where retirement plans were seized it was unpopular for the people that had them, but that was still not enough to keep it from happening! It's easy to vilify savers when everyone around you is out of work and looking for a way to afford to eat.

I'm not suggesting this kind of thing will happen for certain, just that I think it is more likely to be an option as each year passes. As a young investor I'd want to make sure I had options outside of/along with retirement savings plans for my own wealth.

[MachineGhost]

At least with the insurance companies, they are required to keep reserves. And if they manage their business poorly, their ratings go down.

Yeah, it would be much more prudent to buy a discounted, private annuity with the government backstopping the FIRE sector.

Since I have no access to contributing to tax deferred retirement plans, I have yet to come across any kind of calculations showing when and where it is advantageous to buy a discounted annuity for tax deferral purposes.  A few are relatively cheap now, but I still want to see some hard numbers before I plunk down less than 1% a year just to have tax deferral.  Anyone know of any resources?

[rickb]

Basically, Washington would have to figure out how to buy off Wall Street to overcome the many opponents MT outlined above.

Per the oligarchy thread, Wall Street owns Washington (regardless of which party is in "power").  If retirement plans are ever nationalized it won't be to take from the rich and give to the poor - it will be to take from the moderately rich and give to the filthy rich.

[Mountaineer]

From MT in the Peak Oil thread:

"I used to follow the news very closely and I could give you a detailed description of almost every story unfolding at a given point in time, along with a well-reasoned perspective based upon my own observation and analysis.  At some point, though, I just stopped doing this because I realized what a colossal waste of time it was.  I finally came to see that "the news" is just a bunch of sad stories embellished and dramatized by cynical egomaniacs for the entertainment of people who they think are idiots. 

Once I saw behind the news media curtain, the spell was completely broken, and now I just can't bring myself to give a shit about things like a plane full of strangers that crashed on the other side of the world economic doom and gloomers or what is happening on the Ukraine border in the hallowed halls of DC."

Sounds like MT is a fan of Stephen Covey's "circle of concern/circle of influence" teachings. 

... Mountaineer

[ns3]

Currently yes I would agree with MT's points.

"Currently", me too but I think MT's view is somewhat myopic. He is only looking at the prevailing winds and not allowing for the possibility that the winds can change and sometimes they can change very fast.

Case in point - I was just reading this AM about the Benhams, the two brothers who had their show cancelled on HGTV because of their opposition to gay marriage. That was interesting enough but according to the article, their BANK also decided to end their relationship with them. That would be SunTrust bank of which there is a local branch at the end of my block down here in the good old Bible belt.

I'm not trying to hijack my own thread by starting a discussion about gay marriage but my point is that less than 20 years ago I would never have predicted that attitudes about gay marriage would change so rapidly (and so forcefully).

So I have to agree with Craig that we should take the words of politicians like Elizabeth Warren and Barack Obama seriously when they make statements like "you didn't build that, somebody else made that happen" and make sure at least some of our wealth is "nimble".

[TripleB]

Craig,

I believe in your theory in principle and I do think some form of retirement savings stealing is likely, although I don't believe it will be pure seizure. I think it will be something in the form you described such as a new 10% annual tax on all retirement accounts or reduced tax breaks for those with retirement accounts (perhaps you need to add back in all earnings form your tax-sheltered retirement accounts into your MAGI when calculating various things).

I do disagree with you on the liquidity of the accounts. If I needed to, I could call my IRA and 401k custodians and have a check for the full amount tomorrow. I could instruct them not to withhold any federal taxes, take the money and do whatever I want with it. Legally, I'd have to pay penalties and taxes but if what happens is a massive government seizure of private assets, then tax evasion is the least of any of our worries at that point.

I can't imagine things getting to the point overnight where the federal government instantly freezes all retirement accounts (How? an executive order can't do it. Congress can't vote on something so sweeping overnight, even if they wanted to...).

There would be a gradual erosion such as reducing the annual limits and adding a new excise tax on all accounts of 2%, then 3% then eventually 10% on wealthy people with $500k or more in retirement assets. And the $500k won't be pegged to inflation so every year it will hit more and more people.

The problem I have with Craig's advise to young people is that when you're young you barely can fill your annual retirement asset space and still have money left over to live. It's not until most people are in their 30s that they can really max out a 401k and an IRA and still have money left over to save additional investments. Maybe people who wind up making $100k per year in a low cost of living area in their mid-20s because they got a degree in engineering and work for Big Oil in Texas, but the average person who's making $40k per year throughout their 20s can barely save $17.5k in their 401k, $5.5k in their IRA, pay their taxes, and keep a roof over their head.

Thus, the decision for those young people might be to not max out their retirement shelter, based on Craig's advice, and instead buy gold coins or other tangible assets. Those people would be forgoing that tax-sheltered space for the rest of their life because of annual limits. I view that space as precious and have gone as far as to borrow money to make sure I can contribute in time for the deadline. Once you miss the deadline, you can never get it back.

It's not certain retirement accounts will get seized. What is certain, is taxes will be much higher in the future. That means building up your tax-sheltered space in your 20s will prove to be significantly beneficial in the future.

I do agree with Craig that it's wise to have money outside of retirement accounts for the reasons he stated, but not unless you're already maxing them out. From a risk mitigation calculation, I view the cost of Craig's strategy to be too high relative to the statistical likelihood multiplied by the threat of the potential risk.

With respect to gold coins, think about what will happen if the government gets so desperate as to seize retirement accounts. There will be a group of people who will liquidate and buy gold coins, pushing the price of gold through the roof. We saw something similar over the last few years. This will result in two things:

a) It means you didn't need to have as much gold coins in hand to protect yourself because the value of a handful of coins will be worth a lot

b) It means the government will now decide to target gold coin sales for taxes. Consider it's the left-wing government who would be seizing retirement accounts, and it's right-wing people who are gold bugs, the left-controlled future government who's seizing retirement accounts would love nothing more than to institute mandatory 1099 reporting on all gold coin purchases/sales from coin store, pawn stores, etc with mandatory withholding by the store on any purchases of coins they make from individuals. My point being that if the government gets so bad they are seizing retirement accounts, then gold coins won't be safe.

What should be relatively safe is home ownership because of the simple fact that home owners make up a large vocal majority of the voting population. Politicians don't like to piss off home owners for this reason. Thus, having your money as equity in your home might be safe, but consider what else would be happening in the world at the time of a retirement-account-seizing-US-government. State, County, and City governments would also be broke because they get a lot of money from the federal government, who would stop giving it out as freely. Thus, property taxes would rise to make up for the lost revenue from the federal government.

Suddenly your home is much more expensive from a tax standpoint and you're locked in and can't easily move, as you could if you rented an apartment or if you owned your home but with minimal equity and decided to walk away if the property taxes went up 10x. While federal government doesn't want to piss off homeowners, a local city government that can't afford to pay their mayor, police, firefighters, etc, doesn't care whether it's pissing you off by raising taxes 10x because the alternative for them is shutting down the whole city.

While a city raising property taxes by 10-fold seems ridiculous, so does the US government seizing retirement accounts... in current day 2014. Consider the huge shift that would have to occur to get to the US government to seize retirement accounts and in that future dystopia, a 10-fold property tax increase is plausible.

I do agree with Craig, in principle, however I disagree with making actionable changes to your portfolio, in 2014, based on our current situation, which is low-risk. I believe monitoring the situation and slowly shifting assets outside of retirement accounts as times change is prudent. With Roth IRAs, you can withdraw the principal, tax-free, any time, under current law. Over a 10 year period, the principal will likely be more than half of the total value. Thus, max out your Roth IRA, and after 10 years if the world changes, take half out, tax-free, penalty-free, and then consider taking the other half out if times get worse.

[Mountaineer]

Craig and TrippleB - interesting posts.

What do you suggest for those of us in the withdrawal stage instead of the contributory stage?

... Mountaineer

[craigr]

I do disagree with you on the liquidity of the accounts. If I needed to, I could call my IRA and 401k custodians and have a check for the full amount tomorrow. I could instruct them not to withhold any federal taxes, take the money and do whatever I want with it. Legally, I'd have to pay penalties and taxes but if what happens is a massive government seizure of private assets, then tax evasion is the least of any of our worries at that point.

Your points are all salient. I am not suggesting that young savers do not have any retirement plan savings. Nor that someone in retirement or near retirement liquidate their savings. I'm just suggesting that given the choice, I might want to make sure I had some wealth stored outside the plans in a non-trivial amount. The younger I was, the more I'd want to make sure I did not ignore taxable savings and put all my eggs into the tax-deferred retirement plan basket. I would not want to solely rely on being able to access my IRA/401(k) funds on short notice.

I can't imagine things getting to the point overnight where the federal government instantly freezes all retirement accounts (How? an executive order can't do it. Congress can't vote on something so sweeping overnight, even if they wanted to...).

I can't imagine a lot of things in the U.S. being done with executive order, but they get done all the time and it gets worse with each administration. Emergency legislation can be passed quickly, and applied retroactively. The Emergency Banking Relief Act of 1933 for instance gave the president wide ranging powers at the time.

Not sure how much of that would apply today or not. I think the issue is too complicated to untangle. It's just that in an emergency, all kinds of things can happen. And they can happen quickly for a government that is desperate.

I can't help but think that deep inside the Federal code is a vaguely written sentence that allows all sorts of emergency financial power. That sentence, placed there years ago and forgotten about, can do just about anything in terms of controlling financial assets for national emergency reasons. If that sentence does not exist, I'm willing to bet that an emergency judicial interpretation would be made to find it there if needed.

And with the number of executive orders, and endless new government rights being found in the U.S. Constitution on a seemingly weekly basis, why would anyone not want to believe the above?

So again I'm not saying have no retirement savings. I'm not saying liquidate savings. I'm probably being too subtle about this. I'm saying that if you are a young saver today a lot can happen over the next 40 years before you can access without penalty the fruits of your labor. So personally if I were in that situation, I'd think long and hard about saving what I can and being sure that not all of it is in a place where it can be easily snatched if the situation becomes desperate at home.

But again your points are all completely valid. It's just a balance between taxes vs. emergency preparations. I agree taxes are important to control, I'm just not convinced that tax-deferred vehicles are so sacrosanct that nothing would ever happen to them.

[craigr]

Craig and TrippleB - interesting posts.

What do you suggest for those of us in the withdrawal stage instead of the contributory stage?

... Mountaineer

Steady as she goes. I'm not suggesting anyone liquidate, sell, pawn, or otherwise molest their retirement plans. I simply think young savers especially should not 100% rely on tax-deferred savings.

[Mountaineer]

Craig and TrippleB - interesting posts.

What do you suggest for those of us in the withdrawal stage instead of the contributory stage?

... Mountaineer

Steady as she goes. I'm not suggesting anyone liquidate, sell, pawn, or otherwise molest their retirement plans. I simply think young savers especially should not 100% rely on tax-deferred savings.

That is great advice.  You got me just as I was negotiating in the pawn shop - they only wanted to give me 10 cents on the dollar for my Picasso, Rembrandt and IRA.  Now I can just take them back home and not worry.

... Mountaineer

[WiseOne]

All very interesting points to ponder...

I think if anything like this were to be passed, it would probably be a "wealth tax" on all assets including taxable savings and real estate, and not limited to retirement accounts.  This is a concept that's been floated around before.  Punishing savers has never been a concern in the federal government, unfortunately.  I imagine there would be an exclusion for the first, say, $500,000, so the majority of Americans would be unaffected and therefore the political costs would not be as severe as what MT envisioned.  The main reason why this hasn't yet been done is probably that it would be a bureaucratic nightmare to implement, but that won't be much of a barrier if there's a sufficiently grave emergency (e.g. debt rising and interest rates going through the roof).

If this were to happen, you'd actually be better off with most of your money in retirement accounts, since if the tax is applied equally to all accounts the relative impact on taxable assets would be higher.

The only protected corner you'd have is your physical gold holding.  Yet another reason why gold is best kept in physical form rather than in an ETF.