Get out of your 401k, now. Take a penalty.

An article Greg sent in on the 401k being the next target of the socialists. I mentioned this a few months ago, which I highlight, here, to demonstrate I am not crazy.  

 

When I report on the few things I see that are going on, they sound so bizarre to many as to violate the "normalcy bias,"  i.e. just more conspiracy worries from Gene.  Put a post-it on your refrigerator:  these are not normal times.

The ultimate plan is to FORCE you to invest 5% of your salary into a retirement fund.  Recall, the forcedsocial security confiscations were put into a "trust fund" for your protection.  The trust fund was pushed aside and money taken.  There is no trust fund.  

The administrator of the proposed national retirement plan is, you guessed it, the Social Security Adminsitration.  The illusion being, again, that some trust fund will be created for your benefit, whereas the money will be used to pay for the Marxist programs. You see, all these obligations are guaranteed by the U.S.  Sure. Your heart medicine is not guaranteed.

Percentage of personal income taken by Social Security (combined and self employed):   15.3%

Average tax burden, for now, state and federal:  30.6%

Proposed 5% for forced investment in T Bills:       5%

Loss of income, right off the top:                         51.9%

Add sales tax, mortgage, insurance and you are a serf enjoying indebted servitude. Oh, you want to eat, get medical and home insurance?  We have been suffering so long, we don't remember that people used to have money at the end of the month, that people started new businesses and, not that long ago, could afford domestic help if they were upper middle class.  Now, the high income earners show off their new stove.

Real estate was always thought of the great investment, where your money was safe and grew.  If you still think that, get out a piece of paper and a pencil.

Ohhmmmm.  Happy people live longer, so I am going off for a coffee whilst smiling and humming. ...

In July 2008 the Office of the Chief Actuary of the Social Security Administration calculated an unfunded obligation of $13.6 trillion for the Social Security program....(Wiki)

It is time to get out of any plan the government can grab. I would suggest taking your penalty, if any, and putting your assets in something that will not deteriorate if it is in dollars.  You will be better off even with the penalty.  You will get that back very quickly if you are out of dollars and free of the black hand of the Marx. If you think you should stay the course to be a good citizen, you are a chump.  Oohhmmmm.

The key is what to do with the money.  One apparently reasonable place to put cash is in TIPS which are supposed to be indexed to protect you against inflation, but you have to trust the government.  I will look into where to put money and report back.   

A better post-it:  DECOUPLE NOW.  It can be done, but it is like kicking a drug habit to get away from the pusher.  It won't be easy, but what it the alternative to dying a worker bee?

Class Warfare's Next Target: 401(k) Savings

By NEWT GINGRICH AND PETER FERRARA Posted 02/17/2010 06:52 PM ET

You did the responsible thing. You saved in your IRA or 401(k) to support your retirement, when you could have spent that money on another vacation, or an upscale car, or fancier clothes and jewelry. But now Washington is developing plans for your retirement savings.

BusinessWeek reports that the Treasury and Labor departments are asking for public comment on "the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams."

In plain English, the idea is for the government to take your retirement savings in return for a promise to pay you some monthly benefit in your retirement years.

They will tell you that you are "investing" your money in U.S. Treasury bonds. But they will use your money immediately to pay for their unprecedented trillion-dollar budget deficits, leaving nothing to back up their political promises, just as they have raided the Social Security trust funds.

As former British Prime Minister Margaret Thatcher said, "The trouble with socialism is you run out of other people's money to spend." 

This "conversion" may start out as an optional choice, though you are already free to buy Treasury bonds whenever you want. But as Karl Denninger of the Market Ticker Web site reports: "'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."

Moreover, benefits based on Treasury bond interest rates may be woefully inadequate compensation for your years of savings. As Denninger adds, "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 inflation index) so as to guarantee that you lose over time compared to actual purchasing power."

This proposal follows hearings held last fall by House Education and Labor Committee Chairman George Miller, D-Calif., and Rep. Jim McDermott, D-Wash., of the Ways and Means Committee focusing on "redirecting (IRA and 401k) tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute," as reported by InvestmentNews.com.

The hearings examined a proposal from professor Teresa Ghilarducci of the New School for Social Research in New York to give all workers "a $600 annual inflation-adjusted subsidy from the U.S. government" in return for requiring workers "to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration."

Argentina provided a precedent in 2008, taking over that country's private retirement accounts for forced investment in government bonds to cover spiraling deficits. Ambrose Evans-Pritchard editorialized at the time in Britain's Daily Telegraph that this may be "a foretaste of what may happen across the world as governments discover .. . that the bond markets are unwilling to plug the (deficit) gap. . .. My fear is that governments in the U.S., Britain and Europe will display similar reflexes."

This is just the latest chapter in what is developing into a war by the left on America's seniors. All that class-war rhetoric about "the rich" ends up targeting seniors, who tend to have accumulated the most in savings and investment on average because they have been around the longest.

President Obama, House Speaker Pelosi and Senate Majority Leader Reid targeted seniors for hundreds of billions in Medicare cuts to finance expanded Medicaid for the poor and other new entitlements in the ObamaCare health care takeover legislation. If you liked your health insurance, you were supposed to be able to keep it, except for the 25% of seniors who had chosen Medicare Advantage private health plans for their Medicare coverage.

Even the Medicare actuaries estimated that most of those seniors would lose their Medicare Advantage coverage because of all the ObamaCare cuts for those plans. Obama has even begun rationing for seniors under Medicare by slashing payments to heart and cancer specialists serving seniors under that program.

All of this reflects a fundamental problem underlying socialist economic policies. If the government keeps punishing responsibility and rewarding failure, society ends up with a lot less responsibility and a lot more failure, destroying prosperity in the process.

As former British Prime Minister Margaret Thatcher said, "The trouble with socialism is you run out of other people's money to spend." And now they want to spend our retirement savings.

Congressional Republicans should introduce legislation to block the government from ever proceeding with anything like this. Call it the "Keep Your Hands Off My 401(k) Act of 2010."

• Gingrich is former speaker of the House.

• Ferrara is director of entitlement and budget policy for the Institute for Policy Innovation.