Mandated Savings: Why the Government wants your retirement

Currently many American’s have money in a retirement fund whether that is an IRA, 401l, etc.  and these retirement funds add up to 19.4 Trillion dollars…a very juicy chunk of change, and one that that U.S. Government is casting its lustful eye upon.

401(k)

401(k)’s are the largest and most “popular” of retirement accounts, basically its a company managed retirement plan that you put money into and are not taxed for, the company might also “match” your savings, but every company different variations.  The main point is that you are not taxed on that money you stick away now, you are taxed when you pull it out, allowing more money to be put in and grow.

401(k)’s Benefits/Drawbacks

• 15,000 annual limit
• Money isn’t taxed until it is taken out
• Money can be matched by companies, which “supercharge” the growth of the account.
• Only pay ordinary income tax if you wait until 59.5 years old
• Charged 10% penalty if you withdraw before 59.5 years old on top of it being taxed as income, so unless you want to take that hit, that money is untouchable until you are that age.

Roth IRA’s

Roth IRA’s run a bit differently, instead of you taking some of your money and putting it into a 401(k) and it is tax free until you pull it out, Roth IRA’s have you pay the taxes on that income now, so when you pull it out at 59.5 you get it ALL and are not taxed a dime on it.

ROTH IRA Benefits/Drawbacks

• You don’t pay taxes on it when you pull it out, so you keep all your investment
• You can pull out the PRINCIPAL at any time without penalty or fee, so if you invested $100 and that turned into $200 you can pull out the original $100 without a penalty or tax, because it already has been taxed.
• Pulling out Principal before 59.5 incurs a penalty,however there are exceptions for things like buying a home, etc.
• There are limits on personal income as well, if you make over a certain amount 110k for single and 173k for married.

The Issue at hand

This isn’t meant to be a financial/retirement planning post, so i don’t have a lot of the other information on these plans up here, this is just to give you an overview of the main systems of retirement.  There are also pension systems but those are already mostly state/federal controlled already.

Most IRA’s and 401(k)’s in the past have had “cash options” that being mainly in Money Market accounts, which are safer options than bonds and funds, that offer low but slightly higher returns than standard savings accounts.  Now Money Market funds have come under scrutiny since 2008 when many were facing insolvency and would have lost their investors money.  The Fed has eyed these as being “dangerous” however it is ludicrous to eye the account itself as dangerous for a few reasons

• Yes some money market funds lost money in 2008, which many investors thought was “impossible” since they viewed them as “like” savings accounts.  They are not
• The losses on these accounts in 2008 was FAR less than what was seen in standard retirement, mutual fund and bond accounts.
• The reason many of these accounts lost money was that they were managed by the same companies that screwed the pooch on Mortgage backed securities.
• So in truth yes they are not 100% safe in every circumstance, but neither is a savings account or cash in the mattress.  These accounts lost money because the people who ran them lost a crap ton in the MBS crisis, it was an external reason, not a internal issue within the account itself.  The foundation is solid but it was rocked because of the companies bad dealings outside of the accounts.

The reasons the government and FED don’t like Money Markets are that they are in direct competition with government bonds.  With the FED keeping interest rates and abysmally low levels, standard savings accounts are actually losing you money when compared with inflation.  Government bonds, the so called “safest” option, offers small returns, but larger than standard savings accounts, however money markets have been eating into this monopoly on mid level investments.  People would rather have their money in a money market fund making low returns when compared with 5,10,30 year Treasury bonds, which they can easily move around and withdraw from at a moments notice.  Currently over 3 Trillion dollars are being held in Money Market accounts, much of that is also held within retirement accounts in lieu of or conjoined with Government Bonds.

Now the U.S. Government is ALWAYS searching for new sources of cash to finance the swelling budget and interest payments on debt.  However the Federal Reserve has been purchasing more and more of our own debt through treasuries as other buyers have slinked off.  As of December 2012 the Fed bought 90% of New U.S. Treasury Bonds, thats right 90% from money that didnt exist, however i wont go into how money is created, etc.

The question is once more and more countries stop buying our debt, or decrease drastically their purchases (as they have been, China is a net seller now of US treasury bonds), where do we get the money to keep the Titanic afloat just a little longer?  Well the Fed can and will continue to buy A LOT of Treasury bonds, but continued money “printing” to finance our own debt is the proverbial Snake eating its tail.  The Financial End game and the explosion of the largest bubble in the history of mankind, the Debt Bubble, will come even sooner if we continue to buy our own debt.  So stop gaps need to be made, so those in power can continue to prepare more for what is coming and a devaluation and eventual replacement of our currency and financial system, along with all the “problems” (i.e. civil unrest, etc) that go along with that.

So how do they do that?

Well taxes are one way, but that’s a small measure, even if they jacked up taxes 10% on every person, or even more than that, the government just doesnt really see the big jump in “revenue” like they want.  People stop paying taxes, go underground with their finances, etc.  It is proven that you consistently get less and less revenue as you increase taxes, it doesnt make sense on its face, but its true, because when people find it “reasonable” in the amounts they pay, they pay them to avoid trouble, but as you increase it, people start to weigh the cost/benefit of not being entirely truthful, and “returns” on taxes continually go down.

The more attractive option is retirement accounts.  Now the Government wont overtly declare like some tin pot third world dictator a full out NATIONALIZATION of retirement accounts, even our liberty retarded society at large wouldn’t stand for that.  The largest voting segment in the country are those close to retirement or those who have already reached retirement.  It would be political suicide for any president/senator/congressman to do so and there would be a wave of more conservative small government candidates swept into office.  Thats not what the government wants, so they do what they do best.  Implement small changes over time to help “protect” us, to increase the “safety” of our investments.

So how will this happen?  Well it already is starting to.  Many large retirement funds from large companies, ones closely linked to support for our government and in return are protected from competition through regulation have already started to switch their cash options to Government bonds, quietly.  This has yet to be confirmed, but looking at GE’s 401k plans they currently are holding around 10% in TIPS and other US govt Bonds as of 12/31/12.

Since 2010 the U.S. Treasury Dept and Dept. of Labor have been holding hearings on different plans for your retirement portfolio.  These being an introduction of government mandated retirement plans (yes just like healthcare, now you maybe FORCED to save for retirement for you own good!) as well as forced options for investors such as government annuities invested primarily in US Treasury Bonds, TIPS, etc.

The reasons for these hearings?

(From a WND article)

“This hearing was set up to explore why Americans are not saving as much for their retirement as they could,” explained National Seniors Council National Director Robert Crone, describing a recent Treasury-Labor hearing held in the Labor Department’s main auditorium.

“However it is clear that his is just the first step toward a government takeover. It feels like the beginning of the debate over health care and we all know how that ended up.”

The issue is now that there is judicial precedent for Government mandates to purchase things.  As long as the mandate is considered a tax (or alluded to be one as in the Health Care Bill), the government can basically do anything.  They can mandate you buy only 1 ply toilet paper, a gun, a electric car, etc. just as long as they call it a tax and penalize you if you don’t.

AUTOMATIC IRA?

The 2013 Budget from the White House endorsed the “Automatic IRA’s”, a plan introduced by Sen. John Kerry and Jeff Bingham in 2010.  This would make Private Companies automatically enrolled in government-mandated IRA’s which forces those business to contribute on behalf of their employees a “default amount” equal to 3% of their pay, UNLESS the employee specifically opts out of the plan.  However if this camels nose got in the tent you can be assured that soon after that “opt out” would soon be stricken from the bill and it would be “automatic” as Social Security now is.

WHAT DOES THIS ALL MEAN?

You can take this to the bank.  One of these plans or a hybrid of different ones will be implemented in the next 3 years, perhaps 5 at most, but that is really pushing it.  I think the next stock market dip, which may be coming soon will cause a decent amount of losses in Americans Retirement accounts.  I dont want to get into WHY the stock market is going to take a dip, but basically it is propped up by Fed injections and false recovery.  Take a look at the data,

• We have higher unemployment, every quarter they release the data, a month later an “issue is found” and the number is ticked up higher, but THAT gets lost in the drone of mass media.
• More people going on unemployment and disability.  What you need to look at is a combination of disability and unemployment.  Unemployment has a expiration date, once you go past that you no longer collect, disability however can last a lifetime and you can consistently see higher disability claims, mostly coincided with groups of individuals who were coming to the end of the “extended” unemployment benefits we have seen since 08′ (8.7 million people in June compared to 7.4 million in 2009, and combined with spouses/workers of disabled people that number is at 10.7 million)
• Unchecked inflation that is hidden by slight of hand CPI indexes, read this article at Business Insider and another from Bloomberg.  The Consumer Price Index (CPI) is how the government officially monitors the level of inflation, however the CPI often ignores numbers that they dont like, certain food prices, cars, energy, etc.  Its supposed to measure the level of inflation based on what the average consumers buy. however when prices for some things go up, they switch to those items that have gone down or stayed stable to help make things seem lower than they are.  This is how they are saying that inflation only went up 3.2% last year.
• The Federal Reserve now accounts for roughly 19% of the US GDP, that is of the whole economy of the United States the Federal Reserve went from 10% in 2005 to 19% in 2012, nearly 1/5 of our economy is the Federal Reserve.

Once this next big dip occurs and those losses to retirement add up YOU CAN BE SURE there will be cries on the Hill to put into place a Bailiout and protection of US citizens retirement accounts.  This will be carted out as some sort of Citizens Retirement and Protection Act (yes i know that spells CRAP, thats what it will be).  This bill will include some or all of these provision.

• A FDIC sort of “guarantee” to a certain extent of private Retirement accounts
• A government mandated Retirement program, with the option to “roll over” into it, but you cannot “roll over” your government retirement into a private account at a later date
• Extremely high penalties to take out your money early from these accounts.  Ostensibly to “prevent” you from hurting yourself and taking your money before THEY deem you should have it.
• Mandate for more regulation and oversight into individuals accounts
• Mandate for a % of retirement account be in “Safe” and “Secure” US Treasury Bonds
• Mandate for ALL companies, big and small to opt into Government program or purchase private retirement accounts for all employees

What this will do is slowly choke off private retirement accounts, and force employers to opt into government run retirement accounts with the baited hook (like healthcare) or lower cost to them to shovel them onto the government program vs private.  Other than extremely large and competitive business who need any edge to get the best employees this is what the majority of Americans will have.

CONCLUSION

The big picture is not the battle over personal choice and your own money, its using your finger to plug their dike from the holes they are chipping in it.  The Government knows that the ship is sinking, BUT BUT BUT they want to keep it floating for as long as possible, to prepare (Yes they are preppers, the biggest group of preppers in the world!) for this collapse, and to ensure their political and economic domination of it after it collapses, to impose THEIR new system on us whatever that may look like.  With this knowledge that the ship is sinking they need to prop it up, to do that they constantly need more money to shovel into that every enlarging furnace.  So far they have been able to get away with it by “printing” the money at the Federal Reserve and buying their own debt, and sending money to the big banks and corporation who in turn buy bonds, which makes that old bait and switch paint the picture of various business investing in US bonds.

THEY WANT YOUR RETIREMENT! Those Trillions of dollars can buy them years of protection against the coming economic flood.  I have listened to Jack Spirko on The Survival Podcast for awhile now, and my ‘awareness’ of this was his doing.  Someone wrote in and mentioned the “cash option” in their retirement being turned into government bonds, which led to more research by him, and sent me on a months long look at all these different factors.  Hat tip to Jack and the Podcast, without which I would have been caught unaware as well.

I agree with his opinion as well, that you should move your retirement into positions where you can liquidate them quickly, that is PULL IT OUT. Not now, but just in a position where you CAN do it in a relatively quick manner.  I moved most of my money in my retirement accounts into money market accounts in 2007 so i didnt get hit that hard, and have made decent returns since then by holding my money in a mix of bonds and biomedical/overseas funds.  Yes i just railed against bonds, HOWEVER they have had decent returns in recent years, i cashed in and have now cashed out, and am sitting in money market funds again.  I also increased my Silver holdings to be about 20% of my total retirement/net worth (actually its more like 24%).

I dont necessarily recommend you do the same in relation to Silver, IT IS A VERY VIOLATILE METAL, and if you are looking for a “buy low sell high” get rich quick scheme, PLEASE DONT!  I have made some money buying quantities when the prices dip and then jump back up (like recently when the price hit $28 and back up to $32, however it wasnt a fortune) HOWEVER AGAIN, you can lose your pants as well, so do your research or better yet look at your silver in a different way.  I look at it as a LONG TERM investment, one that will over time go up, but only in the way that it will buy the same value 20 years in the future as it did 20 years ago.  In relation to your preps i look at it as a vehicle to help my family thrive AFTER the collapse, and hold onto some of my net worth.  Keep cash on hand as well, you need cash to buy food, clothing, gas etc.  You cannot go to costco with 20 ounces of silver and get your necessities.

Sorry for the last paragraph that was more of a disclaimer than anything.  I am not a guru who’s advice is sacrosanct.