Confiscation Possibilities: 401ks vs. Pensions

Using my blog stats, I can see what people are searching for on the internet.  A popular search is for “401k confiscation”.  I have written about it before.  I think it will be tried by politicians in the U.S.  I am less sure that it will be successful.  In fact, I see a shifting of public opinion in the U.S.  I see more people leaning towards freedom in almost all areas.  This includes foreign policy, civil liberties, and economics.

There was recently news that the government in Poland is trying to reduce the government debt by seizing private pension funds.  Many see this as a preview of what is going to happen in the U.S.

I think the federal budget is going to become more and more of an issue.  It is going to get difficult to handle.  The federal government will not be able to continually run the massive deficits that we have seen over the last few years.  The American people will not tolerate a significant increase in taxes.  And I think the Fed will eventually be more limited in its power, as it seeks to avoid massive price inflation.  Eventually, the government is going to have to actually cut spending.

But the politicians are going to try every trick in their playbook.  I assume this will include retirement account confiscation.

I can’t be sure, but I have a prediction of what will happen.  It will be the people with government pensions who will take the hit.  This is how it should happen.  It is not as if there has been money set aside for government employee pensions.  It is just like Social Security.  It is full of IOUs.  So the only way to pay out government pensions in the future is by taxing people or borrowing even more.

If you are planning your retirement in the distant future based on a government pension, I would be careful.  This is not guaranteed, as many would have you believe.  The government has broken many promises before and it will happen again.  This includes federal, state, and local government pensions.  State and local pensions will probably depend a little more on the specific fiscal situation of that government.  There is little doubt that the federal government is the worst off.  The federal government has just been able to kick the can further down the road because of its digital printing press (the Fed).

On the other hand, I don’t think the government will be successful in confiscating 401k accounts.  Some politicians will try, but I believe there will be too much backlash.  That is at least what I hope for anyway.  Each 401k has a specific name on it.  It is tagged.  People will view this as outright theft, which they should.  The only 401k confiscation I see happening is what we see right now with the Fed devaluing your dollars.

Private pensions through companies will be a little trickier.  I don’t think the government will be successful in confiscating them in the U.S.  On the other hand, if they are not properly funded and there are defaults, we might not see a government bailout due to insufficient funds.  So there are no guarantees with anything, but I think private pensions will be safe from government hands.  I am just not sure how well funded they are.  It can be tricky, actuarially speaking.  What if people live a lot longer than was expected?

In conclusion, I am hoping that public opinion keeps retirement accounts safe from the government.  This, of course, would not include government pensions where taxes have to be collected in order to pay them out.  If you have a government pension that you are depending on, I would have a back up plan.  If you have a large 401k, you have a better chance of escaping the theft of the U.S. government.  However, even here, I would not put all of your eggs in your 401k basket.  Desperate politicians can do crazy things, even against a massive public outcry.