Tag Archives: annuities

Obama takes first shot at retirement IRAs

It’s long been speculated, at least since 2010, that Obama will go after our pensions and other retirement monies such as Individual Retirement Accounts (IRA). (See my post of Jan. 9, 2010, on Obama’s trial balloon to convert 401(k)s and IRAs into annuities, “Obama, Hands Off My Retirement $.”)

Now that the Eurozone Powers That Be have succeeded in looting up to 80% of “large” bank deposits in Cyprus, the POS is firing his first post-Cyprus shot aimed at our retirement funds. (See also my posts: “U.S. fed-state govts eliminating private pensions & retirement accounts,” Nov. 27, 2012; and “Obama administration taps into federal retirement funds,” May 24, 2011.)

Typical of his and the Left’s modus operandi, the shot is aimed at “wealthy” IRAs, defined as IRAs worth $3 million or more. This, of course, ensures that most Americans — who don’t have large sums of money in IRAs or even have IRAs at all — will just yawn “Ho hum, who cares?” and sink back into their complacency, thinking Obama’s proposal to limit how much we can sock away in IRAs doesn’t really concern them.

Just wait till he comes after you — as he certainly will. Remember this warning by Thomas Jefferson:

big-government

Bernie Becker reports for The Hill that Obama is expected to release a proposed budget this Wednesday that will limit how much Americans can save in IRAs and other retirement accounts.

An unnamed “senior administration official” claims the proposal would save around $9 billion over a decade, while also bringing more “fairness” to the tax code because “the wealthy” can currently “accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving.”

Under Obama’s proposed plan, a taxpayer’s tax-deferred retirement account, like an IRA, could not finance more than $205,000 per year of retirement – or right around $3 million, in today’s dollars.

The interest generated in IRAs are not taxable, but when the account owner begins withdrawing from his/her IRA, those withdrawals are taxed as income.

~Eowyn

U.S. fed-state govts eliminating private pensions & retirement accounts

In a post nearly a year ago, I sounded this warning:

The governments of five European countries — Hungary, Poland, Bulgaria, Ireland and France – have taken over their citizens’ private pension money to make up deficits and budget shortfalls. Given the American Left’s oft-stated admiration for Europeans, who are further down the ruinous road of socialism than the United States, this should sound the alarm for all Americans who want to hang onto our private pensions and savings.

That was not paranoia speaking because a year before, in January 2010, Bloomberg’s Business Week had reported that the Obama administration wanted to convert all 401(k) savings and Individual Retirement Accounts (IRAs) into annuities or other steady payment streams.

Business Week also reported that the Treasury and Labor Departments was planning to solicit the public’s reaction, although a report by the Investment Company Institute had already found that Americans oppose any government initiatives that would force us to give up control over our 401(k) accounts. Seven in 10 U.S. households indicated they wanted to preserve their present retirement account features and flexibility, and objected to the idea of the government requiring retirees to convert part of their savings into annuities that supposedly guarantee a steady payment for life.

Now, it appears the Obama administration and state governments indeed are moving to get rid of private pensions and retirement plans.

Linda Stern reports for Reuters, Feb. 29, 2012, that baby boomers may be the last generation to retire with 401(k) plans. A week before, a hearing on the future of pensions and retirement was held in the U.S. Senate, attended by representatives of unions, employers, financial services providers, government agencies and consumer groups. The only thing they all seemed to agree on was that the 401(k) plan has been sort of a failure, which is a most curious consensus, given the fact that current and future retirees have successfully amassed some $4.3 trillion in 401(k) and other defined contribution accounts.

Stern reports that “policymakers are now looking beyond the once-vaunted 401(k) because it has two significant shortcomings: (1) It’s not powerful enough to secure the retirements of low-income workers who can’t afford to stash away enough money; and (2) It leaves each accountholder alone to manage risks.” Without being able to pool risk, participants have to settle for lower returns and lower withdrawals. That, in turn, reduces the amount that they can spend in retirement, and reduces the likelihood that their money will last until they die.

Blah, blah, blah.

In other words, there is a rising crescendo of voices calling for the conversion of privately-managed 401(k) and IRAs in favor of Government Retirement Accounts (GRAs) — government-managed retirement instruments like annuities that “promise” to “guarantee” retirees a “steady stream of retirement income” that’ll last until they die.

Sounds just like Social Security, doesn’t it? The government takes money out of our monthly paychecks and puts it into our separate Social Security accounts. In return, when we retire, we’ll get a Social Security check every month until we die.

And we all know how well that turns out.

Stern concludes her report for Reuters by warning that policy changes down the road could change the shape of our retirement savings significantly because “everything from a curtailing of 401(k) tax breaks to new state-run programs is under consideration somewhere, by somebody.”

A NewsMax report describes the latest move towards replacing private pensions and retirement plans with Government-run Retirement Accounts (GRAs):

The Latest move can be found in the Obama Administration`s, 256 page- FY 2013 Budget Proposal.  The revival of his 2008 presidential run, the “Automatic IRA” which has now “Evolved” into two proposals:

Secure Choice Pension & Government Retirement Accounts (GRA’s), both of which automatically “Mandate” 5%-6% contributions into Government Run Pension funds.

One feature of GRAs  is once a participant dies, the uncollected equity belongs to the government.  It’s no wonder the Retirement age for GRAs will be 67, and one proposal calls for 69 years of age.  They’re “off the hook” as soon as you’re dead.

Another change to the retirement account laws, the Tax Benefit.  The current Tax Deduction will be replaced with a “Credit”, which is only redeemable after retirement. To be Eligible for the Tax Credit, you will be given the “Option” to place Your Equity into Annuities composed of U.S Treasury Bonds, that will payout an estimated 3% annually.

Yes, you`ll be Investing/Buying what China No longer wants, U.S. Debt (Treasury-Bonds). [...]

No matter who wins [the 2012 presidential eleciton], our government is Neck-Deep in Debt. When faced with the Reality of a Complete government Collapse… a Politician will do, what a Politician, needs to do!   The $4.6 Trillion in IRA’s and the $4.3 Trillion in 401(k)s … are all too tempting!

Some legislators already have introduced bills toward transforming Americans’ private pensions and retirement accounts into Government Retirement Accounts (GRAs):

  • S. 1020: Saving Enhancement by Alleviating Leakage in 401k Savings Act of 2011A U.S. Senate bill introduced on May 18, 2011, by senators Herb Kohl (D-WI) and Mike Enzi (R-WY). If approved, S. 1020 would “amend the Internal Revenue Code of 1986 to modify the rules relating to loans made from a qualified employer plan, and for other purposes.” In other words, S. 1020 (or the federal government) would impose restrictions on how 401(k) owners can access the money accumulated in their accounts. You wouldn’t even be able to borrow from your own 401(k) account!
  • California state bill, SB 1234: Golden State Retirement Trust – A bill introduced on February 23, 2012, by California congressman Kevin De Leon, to replace private pensions and retirement accounts with GRAs. Here’s a quote from SB 1234: “Existing federal law provides for tax-qualified retirement plans and individual retirement accounts or individual retirement annuities by which private citizens may save money for retirement. This bill would establish the Golden State Retirement Savings Trust Act, which would create the Golden State Retirement Savings Trust that would be administered by the Golden State Retirement Savings Investment Board, which would also be established by the bill. The bill would require eligible employers, as defined, and would authorize other employers to enroll eligible employees, as defined, into an employer-sponsored retirement plan or pension plan, as specified, offered by the trust, or a personal pension in the case of a nonparticipating employer, as specified. The bill would require a specified percentage of the annual salary of an eligible employee participating in the retirement or pension plan to be deposited in the Golden State Retirement Savings Trust, which would be segregated into a program fund and an administrative fund, both of which would be continuously appropriated to the board for purposes of the act. The bill would limit expenditures from the administrative fund, as specified.”
  • Connecticut state bill HB 5337: An act “to create a task force to study the need for a public retirement plan,” introduced on May 6, 2012, by Lauren Schmitz, a research analyst at the Bernard L Schwartz Center for Economic Analysis, the very same institution that had originated the GRA concept.
  • Other states such as, Massachusetts, Florida and Ohio have made or are actively conducting moves such as GRAs.

And what will happen to all those Government Retirement Accounts? Why, like that mythic Social Security “trust fund,” the money in those GRAs will simply be dumped into the government’s ever-dwindling general funds to pay for the government’s ever-increasing expenses, of course!

Don’t believe me?

In May 2011, with little media publicity, the Obama administration began dipping “temporarily” into raiding the pensions of federal government employees to keep funding government operations. (Read more, here.)

~Eowyn

Obama Administration Taps Into Federal Retirement Funds

Obama is playing a game of chicken with Congressional Republicans over the debt ceiling.

Last Monday, the U.S. government lost its ability to borrow more money because we maxed our debt limit. The Obama administration and the Dems want to raise that limit. House Republicans say “no way” — cut spending and reduce our $14+ trillion national debt first!

So tax cheat Treasury Secretary Timothy Geithner is dipping into federal retirement funds to keep funding government operations.

While this dipping is a temporary measure and, presumably, the borrowed money will be returned to the retirement programs, this may also be the Obama administration’s first move toward its plan to convert our 401(k)s and IRAs into annuities. That plan was floated as a trial balloon in January 2010. See my post “Obama, Hands Off My Retirement $.”

That is not far-fetched. Like hungry lions prowling for prey, the governments of five European countries — Hungary, Poland, Bulgaria, Ireland and France – have taken over their citizens’ private pension money to make up deficits and budget shortfalls. See my post on this here.

Most recently on May 10, 2011, the Irish government announced its plan for a 0.6% tax on private pensions to drive jobs growth. (H/t beloved fellow Joseph)

~Eowyn

Zachary A. Goldfarb reports for the Washington Post, May 16, 2011:

The Obama administration will begin to tap federal retiree programs to help fund operations after the government lost its ability Monday to borrow more money from the public, adding urgency to efforts in Washington to fashion a compromise over the debt.

Treasury Secretary Timothy F. Geithner has warned for months that the government would soon hit the $14.3 trillion debt ceiling — a legal limit on how much it can borrow. With that limit reached Monday, Geithner is undertaking special measures in an effort to postpone the day when he will no longer have enough funds to pay all of the government’s bills.

Geithner, who has already suspended a program that helps state and local government manage their finances, will begin to borrow from retirement funds for federal workers. The measure won’t have an impact on retirees because the Treasury is legally required to reimburse the program.

The maneuver buys Geithner only a few months of time. If Congress does not vote by Aug. 2 to raise the debt limit, Geithner says the government is likely to default on some of its obligations, which he says would cause enormous economic harm and the suspension of government services, including the disbursal of Social Security funds.

Many congressional Republicans, however, have been skeptical that breaching the Aug. 2 deadline would be as catastrophic as Geithner suggests. What’s more, Republican leaders are insisting that Congress cut spending by as much as the Obama administration wants to raise the debt limit, without any new taxes. Obama is proposing spending cuts and tax increases to rein in the debt.

“Everything should be on the table, except raising taxes,” House Speaker John Boehner (R-Ohio) said on CBS’s “Face the Nation.” “Because raising taxes will hurt our economy and hurt our ability to create jobs in our country.”

The Obama administration has warned that it is dangerous to make a vote on raising the debt limit contingent on other proposals. But Boehner is demanding that Congress use the debt vote as a way to bring down government spending.

“I’m ready to cut the deal today,” Boehner said. “We don’t have to wait until the 11th hour. But I am not going to walk away from this moment. We have a moment, a window of opportunity to act, because if we don’t act, the markets are going to act for us.”

Geithner’s plan to tap federal retiree programs as a temporary means to avoid a government default comes as the Obama administration has shown growing interest in altering those programs to curb the debt in the long run.

Administration officials have expressed interest in raising the amount that federal employees contribute to their pensions, sources told The Washington Post.

The Republicans have suggested that the civilian workforce contribute more to its retirement in the future, effectively trimming 5 percent from salaries. The administration has not been willing to go that far in talks being led by Vice President Biden.

Treasury secretaries have tapped special programs to avoid default six times since 1985. The most protracted delay in raising the debt limit came in 1995 after congressional Republicans swept to power during the Clinton administration.

But today, the government needs far more money to cover its obligations than in the past, making the special measures less effective than they used to be. The government needs about $125 billion more a month than it takes in each month.

Read the rest of the WaPo article here.