Wednesday, February 6, 2013

The Water Is Getting Warmer

I'm a fan of Ann Barnhardt. She's undeniably courageous and properly morally centered. She founds her arguments on objective evidence: events that have taken place in plain sight. She minces no words about her views, with the consequence that there can never be any doubt about where she stands or how she got there. All the same, some of her recommendations have been hard for me to follow, possibly because they've involved learning to distrust institutions I've trusted for decades.

One of those recommendations, perhaps the most difficult of all for anyone to follow, is to get completely out of dollar-denominated investment vehicles, including any in a tax-deferred account such as an IRA or a 401(k). The difficulties are twofold:

  1. Many 401(k) plans involve a matching contribution by one's employer, which employees are understandably reluctant to surrender.
  2. The tax bite on a significant withdrawal from an IRA or 401(k) account can be quite severe, especially if one is under the age limit and/or is still earning a significant income.

The latter consideration has paralyzed a lot of us who see things as Miss Barnhardt does. Consider: If you have $500,000 in a 401(k) account and are currently in the 35% federal tax bracket, you're guaranteed to lose more than $175,000 if you pull it all out at once. More, because there's now another, higher tax bracket above 35% -- thanks, gutless GOP Congressvermin -- and because of state and municipal income taxes, for those unlucky enough to be subject to them. $325,000 might be the actual, realizable value of that half-million in the account, but it looks like a lot less. That's enough to bring many of us to a screeching halt.

Well, courtesy of the invaluable Charles Hill, we have this compendious article from Maggie's Notebook:

Trying to find sound information on whether or not the U.S. Government wants to manage your private 401(k) and IRA accounts has not been easy to verify. I heard Eric Bolling and Gerri Willis talking about it today with Bolling sitting in for Neal Cavuto – so decided to see what’s new in the Cold War between the U.S. Private Sector and Union Pensions. The government’s story is that they want retirees better protected. Those paying attention see the 401(k) and IRA grab as a way to bail out public sector union pensions.

I find not much is new but am reminded of several startling past events, and warnings to be ready for an assault because it is coming. Note comments by Newt Gingrich below saying Treasury and Labor have already asked for public comment on ‘the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams,” and Obama’s Latina double, Cristina Fernandez de Kirchner, president of Argentina.

The article provides several linked citations about probes at the IRA / 401(k) system. Consider, as an example of the worst of them, this article about a hearing about the IRA / 401(k) accounts' "unfairness to poor people:"

The hearing, held in the Labor Department’s main auditorium, was monitored by [National Seniors Council] staff and featured a line up of left-wing activists including one representative of the AFL-CIO who advocated for more government regulation over private retirement accounts and even the establishment of government-sponsored annuities that would take the place of 401k plans.

"This hearing was set up to explore why Americans are not saving as much for their retirement as they could," explains National Seniors Council National Director Robert Crone, "However, it is clear that this is the first step towards a government takeover. It feels just like the beginning of the debate over health care and we all know how that ended up."

A representative of the liberal Pension Rights Center, Rebecca Davis, testified that the government needs to get involved because 401k plans and IRAs are unfair to poor people. She demanded the Obama administration set up a "government-sponsored program administered by the PBGC (the governments’ Pension Benefit Guarantee Corporation)." She proclaimed that even "private annuities are problematic."...

Deputy Treasury Secretary J. Mark Iwry, who presided over the hearing, is a long-time critic of 401k plans because he believes they benefit the rich. He also appears to be one of the Administration’s point man on this issue....

[National Seniors Council National Director Robert Crone:] "This effort ultimately is designed to grab the retirement nest eggs of America’s senior citizens. This new government annuity scheme, even if it is at first optional, will turn into a giant effort to redistribute the wealth of America’s older citizens," explains Crone. "This scheme mirrors what I expect the President will try to do with Social Security. He wants to turn that program into a welfare program, too."

This isn't just scare-mongering, according to Human Events:

In February [2010], the White House released its “Annual Report on the Middle Class” containing new regulations favored by Big Labor including a bailout of critically underfunded union pension plans through “retirement security” options.

The radical solution most favored by Big Labor is the seizure of private 401(k) plans for government disbursement — which lets them off the hook for their collapsing retirement scheme. And, of course, the Obama administration is eager to accommodate their buddies.

Vice President Joe Biden floated the idea, called “Guaranteed Retirement Accounts” (GRAs), in the February “Middle Class” report.

In conjunction with the report’s release, the Obama administration jointly issued through the Departments of Labor and Treasury a “Request for Information” regarding the “annuitization” of 401(k) plans through “Lifetime Income Options” in the form of a notice to the public of proposed issuance of rules and regulations.

In pondering the threat level posed by such thrusts, please bear in mind, that the Supreme Court has already ruled that though your payroll taxes into the Social Security and Medicare systems are obligatory under the law, the federal government has no obligation to pay you one damned cent, nor to make any particular level of treatment available to you.

Then ponder the trial balloon floated by New York Times columnist Paul Krugman just a few days ago:

Eventually we do have a problem. That the population is getting older, health care costs are rising…there is this question of how we’re going to pay for the programs. The year 2025, the year 2030, something is going to have to give…. …. We’re going to need more revenue…Surely it will require some sort of middle class taxes as well.. We won’t be able to pay for the kind of government the society will want without some increase in taxes… on the middle class, maybe a value added tax…And we’re also going to have to make decisions about health care, doc pay for health care that has no demonstrated medical benefits . So the snarky version…which I shouldn’t even say because it will get me in trouble is death panels and sales taxes is how we do this.

Consider how the Obamunists have flouted Constitutional restraints and legislative rules. Consider how bills hundreds of pages long are being passed by legislators who admit to not having read them, in some cases mere minutes after the bill has been printed and distributed. Consider how federal court decisions have either acquiesced to federal usurpations of power, especially by the executive branch, or have failed to inhibit them. And consider how little any of us can do about it, short of an armed revolt.

It's all too easy to say "Oh, they're not serious."
It's all too easy to say "It's just loose talk."
It's all too easy to say "Not in America!"

A lot of the Jews in Weimar Germany said the same things.


Anonymous said...

"Yes, the Obama Regime does mean to destroy freedom; it's not just loose talk; and it is HAPPENING in America even as we speak."

Alas! Some Americans won't believe it until they are on the train to the concentration camp.

KG said...

"And consider how little any of us can do about it, short of an armed revolt."
Palatable or not, likely or not...the choice becomes plain.

pdxr13 said...

If a person has a half-million in a 401K, wouldn't it be better to get the $375K in-hand, than to have access restricted (until age 65, then trickled out in inflated fiat Dollars for the purpose of "stabilizing the market") for the benefit of persons who DID NOT EARN THAT?

After deciding to make the move a restricted tax-"advantaged" asset like a 401K/IRA, a person has to make choices about how to best use the proceeds. Would buying a self-sufficient property be useful for you and your family? How about a stock of necessities? Vehicles, training, surveying services, personal weapons, special clothing, extra good boots, tools, building insulation, stored fuels, or other practical items of long-term utility might be wanted/needed.

"Personal Financial Advisors" seem to mostly advise to buy more paper financial products with the proceeds of a financial product like a 401K. The rules that allow them to operate fall under "fiduciary responsibility" which is to say that they are nearly required to push paper-assets and almost are prohibited from recommending PM's as a "suitable investment".

Having decided that 61% of something is better than something-close-to-nothing, a person must act. Once you are issued a check from your account, it WILL take weeks to clear, even if the check is "on them" (BofA 401K to a BofA checking account). The law allows this, and they will hold your money the maximum time allowed by law because lobbyists for banksters wrote the law.

$375K in cash (paper money) buys quite a lot of silver (pre-1965 US 90% coins) and a hefty sack of fractional-Oz Gold American Eagles. A 50/50 division of the money in metals gets you 52X the weight of gold in silver. 1oz AGE's are selling around $1850 each recently, with more premium and less availability for fractional oz coins (which are more desirable by being nearer to a transactional amount for groceries/fuel/skilled labor. How often do you drop $1800 at CostCo? 1/10th oz is very useful at ~$200). This gets you about 101 Oz Troy AGE's , weighing 3141 Grams (3.1KG =6.9 pounds), and 163KG (359 pounds) of silver in coins that weigh 395 pounds. All this based on low-$30's silver/$1700 COMEX gold, and ymwv.

Precious metals are surprisingly compact for the value and weight. Gold coins have about the same density to my hand as a bulk-box of 500 bullets for reloading. A file cabinet drawer can hold millions of current dollars in value of gold coins. Silver coins are a little bit less dense, exactly the same weight of the base-metal roll of dimes/quarters that you can get from the bank today.

It will take some time to accumulate the metal safely. This is not terrible, because you will increase in skill/knowledge/associations while buying at a time-averaged price.

Gold and silver are money. If they happen to go up in value-vs-whatever, it's because pretend-money is going down in "value". You still have the ounces. If PM's go down and stay down in value vs. paper money, this is a sign that things are going pretty well, and you (and your society) are lucky.

I see gold as a way to get medical treatment privately when it's illegal for a Doctor/RN/Dentist to do so. That's coming.

There's cost and risk in everything, but trusting a corrupt gov't with a lifetime of wealth accessible by a line of legislation/rule-making or few keystrokes seems insane.

Francis W. Porretto said...

Your arithmetic is off, pdx. 61% of $500,000 is $302,000, not $375,000.

Francis W. Porretto said...

Whoops! My arithmetic is off. That should be $305,000.

Anonymous said...

Just get out. I was in the same situation and did it gradually with different accounts over two years. It's bittersweet. Believe me, though, your mind will be at rest in many ways after all is done.


pdxr13 said...

accuracy in calculation is a good thing. Thanks.

61% proceeds is actually generous. If you have a post-adjustment gross income that puts you in the highest bracket/AMT it's unlikely that payout from a 401K will net so much into your account after Fed + State taxes. Perhaps as bad as 48% in some densely populated high-tax low-freedom places that people should flee from.

This strategy could work okay for a person "between gigs" who isn't making hardly any money for a few years and can get themselves "residing" in one of the no-income-tax States like Washington while they make the withdrawals over several tax filing seasons. Time is getting short, but the difference in proceeds could be worth it on a large account.

The reality for many Americans is that they are emptying their retirement accounts to keep living a lifestyle that they can't afford after losing a decent middle-income job 10 years earlier than they had planned.