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Is Your IRA/401k About To Go To Jail?

If you’re not already aware of it, you might benefit from knowing about this conversation that has been occurring – actually, for more than a year now:

401k/IRA Screw Job Coming?

Many thanks are due to Karl Denninger for keeping this important topic alive. It’s one that’s not always easy to track due to the sensitivity of the subject. It holds real potential for, shall I say, powerfully “motivating” and agitating the masses who are diligently participating in these plans (mainly because they focus on the perceived income tax benefit and don’t know any better options exist). The outcome of such a powerful agitation might not be pretty.

As if lack of access to money “saved” inside qualified plans (think: forced use of credit cards), frequently oppressive commission and fee structures, market losses, stiff penalties, missed opportunities, lack of any additional benefits and uses for the money, legitimate concerns about higher future taxation, and a boatload of other uncertainty weren’t already enough, this potential development just gives us one more reason to legitimately fear the restrictions and dictates of government-controlled “qualified” plans.

Such fears may ultimately become justified if government feels cornered (due to over-commitment, ongoing fiscal mismanagement, exponentially-increasing public debt, unaffordable entitlement programs, falling tax revenues, depression, etc.) and decides to play its trump card – suddenly changing the rules about whose money a qualified plan really is. Will we live to see this day? Personally, I think the odds overwhelmingly favor the house.

Maybe the real agenda is (has always been?) to have qualified plans morph into “self-funded” Social Security “benefits” – since SS appears to be (my opinion again) actuarially inaccurate, unfunded, and fiscally reeling? This plan would certainly do it. Scrap the old SS program (but of course, not the FICA taxes) and begin anew with the trillions that are conveniently waiting, trapped inside QP’s.

“To each according to his contribution – minus the considerable cost of government redistribution and waste.”

– David

All the rest of the money contributed to SS by the millions of workers in previous generations (ours included)? Long gone. Nothing but a sticky drawer full of IOU’s left in its place. My understanding of it is that it’s a “pay-as-you-go program”. Do the math and I think you’ll agree that this cannot end well for our country. That’s why this conversation is being had now and it’s obvious why any debate must be held “in committee” – far removed from the light of day.

My advice? Save generously for your future but DO IT IN THINGS YOU CAN CONTROL TO THE GREATEST DEGREE POSSIBLE. In this crazy day and age, a little well-reasoned paranoia is actually a sign of enhanced mental health. The crazy are held out as the sane and the sane are held out as the deranged. It’s all gone topsy-turvy.

As I’ve written before, when it comes to money, control is 99% of everything. If I were to have complete control of every aspect of your money, who really owns it? Think about that the next time you look at your 401k statement and prepare to make another contribution. Think long and hard. Is a present tax-deduction really worth a complete and potentially permanent loss of control?

And since many of you will be seeing your accountant soon, ask if – in light of all that’s happening in the world around us – he/she thinks there’s a good chance taxes will go up in the future. Depending upon their answer (and your well-reasoned judgment) you may determine that a tax paid now may be the least costly tax you’ll ever pay again. Food for thought, at a bare minimum.

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