This news is so new that I haven’t yet seen any analyst or pundit commenting on it. The Obama administration now wants to convert our 401(k)s and IRAs into annuities.
My gut reaction is that (a) I don’t trust this administration; (b) Since when has this administration been competent in any thing it does?; and (c) I object in principle to the government telling me what I can or cannot do with my own money!
Here’s the news:
Bloomberg’s Business Week reports today that the Obama administration wants to convert all 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams. U.S. Treasury and Labor Departments will ask for public comment as soon as next week.
According to a report by the Investment Company Institute, however, U.S. investors oppose federal initiatives that would force them to give up control over their 401(k) accounts. Seven in 10 U.S. households prefer to preserve their present retirement account features and flexibility, and object to the idea of the government requiring retirees to convert part of their savings into annuities guaranteeing a steady payment for life.
The Investment Company Institute represents the mutual-fund industry.
To read the whole article on this, CLICK HERE.
UPDATE (1/10/2010): Chatter on the Web has begun about this move by the Obama administration to force us to convert our 401(k) and IRAs into annuities. Here’s what the Market Ticker thinks:
Now this is a guaranteed rape job.
In a short conversation this noontime that CNBC apparently has omitted from their archives (Why’s that folks?) Rick Santelli was talking about a potential to effectively force money into the Treasury market.
Where would they get this?
From your 401k and IRA accounts!
Let me tell you what this is – it is an attempt to prevent the collapse of the Treasury market!
Forcing people into Treasuries as an “annuity” is exactly what Social Security allegedly is. Except that Treasury stole the money that was collected in FICA taxes and spent it!
Guess what? They’ll do that here too – you’re going to “invest” in Treasuries which of course are effectively a CALL option on the future taxing ability of the government.
The problem is that with an aging population and the immigrant problem (illegal immigrants that is), along with offshoring, the aggregate wage base will drop and thus this is the most dangerous investment of all!
What’s even worse is that the government has intentionally suppressed Treasury yields during this crisis (and will keep doing so by various means, including manipulating the CPI – the “inflation index” – as they have for the last 30 years) so as to guarantee that you lose over time compared to actual purchasing power.
I have no quarrel with the government mandating that you have a choice in your IRA or 401k account to buy short-duration Treasuries – much like the “G” fund that government and civil-service workers have.
But – “choices” have a funny way of turning into mandates, and this looks to me like a raw admission that Treasury knows it will not be able to sell its debt in the open market – so they will effectively tax you by forcing your “retirement” money to buy them!
This may be the only way for Treasury to hold down interest rates to something reasonable in the intermediate term, but doing so will instantaneously remove a major source of funding for the stock market – that is, the monthly and quarterly inflows from retirement accounts.
You can bet this won’t be good for you, the ordinary American.
You can also bet that once such an “option” is made available there is a very high probability of the government doing things that either promote or simply don’t stand in the way of another stock market crash as a means of “herding” your money into Treasuries – so they can blow it – all under the guise of being allegedly “safe”.
Of course this begs the question – what if the government can’t pay down the road when you retire, just as they can’t pay on a forward basis with Social Security and Medicare?
This “proposal” can only mean one thing – Treasury smells smoke. Maybe you should pay attention to what they’re huffing!
And before you say “oh they’d never do that” I want you to read this:
Here is a warning to us all. The Argentine state is taking control of the country’s privately-managed pension funds in a drastic move to raise cash.