Stephen A. McIntyre

About a year ago I saw an article about the Argentinean Government proposing a bill that would in effect nationalize all of their 401K/IRA type retirement accounts.

Well as of November, 2009 that has now become a reality, over $29 Billion in retirement accounts have now been seized by the Government and they will use that money to pay down debt.

As I remember the plan the poor owner of that account would get Government issued bonds that will pay between 2 and 3% to replace those monies the government takes. You can read this article from the London Telegraph here: http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/5504137/Argentina_seizes_pension_funds_to_pay_debts_Whos_next/

Now when I read that about a year ago I predicted then that it would only be a matter of time before some “bright” people on the Democratic Party’s Left would see this and think that would be a good idea here.

Well in Karl Denniger’s Market Ticker, dated 1/8/2010, there is such an article about plans being made in this country to do the same thing.

The following story is from Businessweek:

Americans Oppose Initiatives Limiting 401(k) Choices, ICI Says

By Jeff Plungis Jan. 8 (Bloomberg) — U.S. investors oppose federal initiatives that would force them to give up control over their 401(k) accounts, the Investment Company Institute said.

Seven in 10 U.S. households object to the idea of the government requiring retirees to convert part of their savings into annuities guaranteeing a steady payment for life, according to an institute-funded report today.

“Households’ views on policy changes revealed a preference to preserve retirement account features and flexibility,” the institute, which represents the mutual-fund industry, said in the report.

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

The institute’s member companies manage $11.6 trillion of assets in mutual funds, including employer-sponsored 401(k) accounts. Some lawmakers have questioned the public-policy value of the tax benefits for people investing in retirement accounts, the ICI said in a report today.

The average 401(k) fund balance dropped 31 percent to $47,500 at the end of March 2009 from $69,200 at the end of 2007, according to a Fidelity Investments review of 11 million accounts it manages. The Standard & Poor’s 500 Index tumbled 46 percent in that period. The average balance of the Fidelity accounts recovered to $60,700 as of last Sept. 30 as the stock market rebounded.

Senator Herb Kohl, chairman of the Senate Special Committee on Aging, proposed legislation on Dec. 16 to require fund companies to do more to ensure 401(k) options are appropriate for workers. The Wisconsin Democrat cited reports that target- date funds designed for people retiring in 2010 invested in high-yield, high-risk corporate bonds.

Representative George Miller, a California Democrat, is advocating legislation to require more disclosure about 401(k) fees paid by investors. The Education and Labor Committee, which Miller leads, approved a bill requiring more disclosure about fees in June.

The ICI survey was based on a telephone survey of 3,000 households from Nov. 20 to Dec. 20 and had a sampling error of plus or minus 1.8 percent.

–With assistance from Theo Francis in Washington. Editors: Tina Davis, Chris Thompson To contact the reporter on this story: Jeff Plungis in Washington at +1-202-624-1835 or jplungis@bloomberg.net. To contact the editor responsible for this story: Rick Levinson at +1-212-617-3377 or Rlevinson2@bloomberg.net.

Make no mistake this is a prelude to a takeover of U.S. 401K/IRA retirement funds. In return for this confiscation of your monies the Federal Government will give you a so called annuity, i.e. worthless bonds, paying you a paltry 2 to 3%. Not even market interest rates for the use of “YOUR” money.

The need for this is obvious for those following the Bond Market. We are deficit spending monies that can’t be sustainable, those countries that have been buying our debt are either drastically slowing their purchases or no longer buying at all. So it is time to tap another source of monies and that is our retirement accounts. The consequences of this are almost indescribable. The effect on the Financial Markets, etc. will be, in my opinion, catastrophic. Use you own imagination.

Those saving for retirement, those hoping to live a dream in the future, etc., will find those things harder to do and plan for with the kind of return being given. But then again with the state of this country’s finances you are basically seeing your hard earned money being thrown down a dark abyss, all for the sake of Government spending.

All told in Fiscal Year 2010 for the Federal Government the U.S. Treasury needs to finance approximately $3.5 Trillion of new spending, not to mention the fact the refinancing of older debt coming due, this will push borrowings to around $7 Trillion plus. With financing options becoming limited the Trillions in retirement accounts look very attractive.

Lets add to this another facet that I believe will emerge also, it won’t be enough that the Government will be confiscating retirement accounts, to keep the game going even further they will find at least one other way to get monies to finance the debt.

That way will be forcing us, the workers, to have a portion of our payroll checks deducted to buy Bonds. Once upon a time many years ago there used to be the payroll deduction program that many companies had in effect so that you could voluntarily have a portion of your payroll check deducted to buy U.S. Savings Bonds. Back then that was a good deal and a nice way to save for your children’s college, etc.. Well now it will be more insidious.

You will see your hard earned money taken and you will be given low interest bearing bonds that will be essentially worthless.

The future right now looks bleak and unless common sense, real Political Leadership emerges we as a country will find all of our savings and built up assets forfeited to the U.S. Government and we will all be wiped out with nothing to fall back on.