More On "Obama, Hands Off My Retirement $"

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On January 9, I posted “Obama, Hands Off My Retirement $” on this Fellowship blog, about the Obama administration wanting to convert our 401(k)s and IRAs into annuities or other steady payment streams. That post, understandably, generated quite a bit of interest.
Here’s one analyst’s views on this.
~Eowyn

Obama Administration Wants to Annuitize 401k’s and IRA’s – Mandatory “R Bonds”

Jesse’s Café Américain – Jan. 8, 2010
As a rule of thumb, the worst possible time to convert lump sum savings into a fixed income annuity would be when interest rates are historically low. Although products may vary, this is roughly equivalent to buying long term bonds at a time when interest rates are likely to increase, substantially reducing your principal in real terms, and eroding your fixed returns through inflation.

For some reason the Obama Administration is promoting the idea now that there should be some encouragement for Americans to start converting their 401K’s and IRA’s into annuities, to provide themselves with lifetime income. The effort is being spear-headed by Mark Iwry of the Treasury and Phyllis Borzi of the Department of Labor. Here is a paper written on the subject by Mark Iwry when he was at the Brookings Institution.
The essence of this paper is that distributions from IRA’s and 401K’s would automatically be rolled into an annuity providing a monthly income by default. This concept is known on the Street as the handling fees for meager returns pork barrel pigfest. The Fed likes it because they will undoubtedly get a two year rolling chunk of the people’s retirement cash to play with.
the government wishes to appropriate your savings for a 2.0% return, ex fees and mispriced risk and inflation, as a source of funding for the bailouts of an oversized and insolvent FIRE sector (like AIG) and the imploding pretensions of a global financial elite.

“Officials in the Obama administration are moving quickly to develop the investment infrastructure behind the president’s proposal for mandatory automatic enrollment in individual retirement accounts, which could be supported by the creation of Treasury-issued retirement bonds
J. Mark Iwry, deputy assistant secretary for retirement and health policy at the Department of the Treasury, said that administration officials are exploring some “conservative” options for investing the assets of 78 million Americans that he estimates could be automatically enrolled in this “universal” workplace retirement system.
He said that officials have discussed the possibility of making a low-risk life-cycle or target date fund the default investment option for these auto-IRAs, which would be mandatory for employers if they don’t offer a retirement plan to their workers.
But there is also a chance that they could rely on a new form of bond — an “R bond” — as the basic building block for the auto-IRA, Mr. Iwry said in addressing reporters at the Treasury Department in Washington last week.
Administration officials are discussing the exact details of these R bonds, such as their interest rates, maturities and minimums, he noted. These bonds ideally would provide individuals with a source of secure, steady returns that would protect their initial investments.”
Administration Explores R Bond For Retirement Accounts – Investment News 7 June 2009

Why have a separate “R Bond” instead of those government bonds they have now called ‘Treasuries?’ And why have a mandatory universal retirement system when you have this thing called ‘Social Security?‘ Think about it. Sounds like the kind of preparations governments make for things like ‘new dollars’ after a selective default.
Instead of “Yes We Can” the slogan for the Obama Administration should be “Over One Million Fat Cats Served.” And the only difference in the Republicans is the breed of the fat cats whose desires they seek to fulfill. The public has lost its advocacy in Washington, and therefore the integrity of the democratic republic is in peril….

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