Forced Retirement Account Confiscation

[moda0306]

Luckily, the Federal Government moves slower than a beached whale on taxes.  You could have all of your basis out in a couple days.

I'd "hedge your bets" by being ready, at a moments notice, to take an early distribution of your basis.  I'd imagine Gold will be exploding with government confiscation at this level, so having some of that in physical form is, as always, a must.

[MachineGhost]

Given your prediction, what's your chosen course of action? The tax benefits of a Roth are ridiculous, but only if this doesn't happen.

Aways vote Republican forever and ever?

[Gabe]

Luckily, the Federal Government moves slower than a beached whale on taxes.  You could have all of your basis out in a couple days.

Really? If they moved slowly on this wouldn't everyone just pull their basis out, rendering their looting machinations largely ineffective?

[moda0306]

Everyone should do it, though I don't know who would have the foresight to... do you really think the government could keep talks of retirement account confiscation under wraps until one day they just grab them all?

I don't there's a feasable way for the government to just pounce on trillions of retirement accounts without some media coverage before hand.

Maybe I'm naive.

[Xan]

The law could simply adjust the penalty for early withdrawal to 100%.  Then when you filed your taxes for the year, you'd find that you owed exactly the amount you had taken out, even if you took it out before the law passed.

Recent Supreme Court rulings have demonstrated that the feds have absolutely no limits on their power if the issue in some way slightly resembles a tax.

[moda0306]

Xan,

Good point. 

That's all I have for you right now... 

[clacy]

Thanks for the depressing scenario...... Now my paranoid bells are going off 

Truthfully there are those in the government that would be for such confiscation.  I believe about half of the current Democratic party could be swayed to back such legislation.  I doubt seriously that you would get ANY bi-partisan agreement though, as 99 out of 100 Republicans would be against such actions.

At least in the current political climate, I believe you would have a civil war before something like this.

If the Dems ever pull the trifecta (POTUS, Senate, Congress) again now that health care reform has happened, I wouldn't put it out of question.

[Bean]

My theory is less sinister, but still accomplishes the "confiscation" need the government may have very soon.

Require X% of everyone's 401k (and other retirement vehicles) to buy Treasuries.

It will float the national debt longer, reduce the market interest rate on the debt, and may even stabilize short term retirement fund fluctuation.

[TripleB]

My theory is less sinister, but still accomplishes the "confiscation" need the government may have very soon.

Require X% of everyone's 401k (and other retirement vehicles) to buy Treasuries.

It will float the national debt longer, reduce the market interest rate on the debt, and may even stabilize short term retirement fund fluctuation.

Hopefully it's 50% of the 401k that is forced to buy treasuries - 25% into 30 years and 25% into T-Bills and they offer auto-rebalancing for our PPs

[Early Cuyler]

I really don't see the need for account seizing when they can just print more money which has the effect of reducing what you have saved is worth in real terms.

Exactly.  There are a lot "softer" ways for the government to coerce us than by doing drastic and unpopular things.  For instance, the government doesn't really "means test" social security, except they do, because they tax $40k of social security somewhere between $0 and $15,000, depending on your "means." 

It'd be a lot easier, someday, for the government to simply count Roth IRA distributions against this calculation, rather than means testing SS or taxing Roth distributions.  I mean at some point we have to realize that the government "could" nuke every large city in America if it wanted to... and maybe it pays a lot more to focus on the back-door ways the government might screw up our lives rather than the front-door ones... or maybe (gasp) that we're remarkably free and live in a wonderful country with a ton of opportunity in which we are probably doing our one-and-only lives a disservice by worrying about every bad thing that might be done to us, and over-exaggerate the injustices we're already living through.  That seems to me to be the Harry Browne way of handling this.

Sorry for the soap-box.  Rant: complete.

Damn fine rant.

[AgAuMoney]

I don't there's a feasable way for the government to just pounce on trillions of retirement accounts without some media coverage before hand.

The way FDR did similar things in the 1930's was by declaring a bank holiday, sealing all safe deposit boxes, and requiring witnesses as they were opened.  This was initiated by executive order with no advance notice.

In more recent times the stock market has been closed, again by executive order.

The way tax advantaged accounts are titled today, you do not own your account.  You are merely the "beneficial owner" or in other words, you own the benefit.  The firm with which you have the account is known as the custodian, and the assets are all in their name.  It seems a simple matter for an executive order to transfer all those assets to the SSA while keeping you as the beneficial owner just like you are the owner of your current SSA account/benefit.

However I do not expect this to happen.  I think it more likely that valid investments will be limited to treasury bonds or that you will be required to annuitize the account instead of withdrawing.  I think it even more likely that they just instantiate a consumption tax (like a VAT or national sales tax).  Probably just like they recently instantiated an expatriation tax.