Agreed...in fact we should’ve done that THIRTY YEARS AGO.
Well, if I remember correctly somebody proposed something pretty similar to that 8 years ago and was pilloried for it in the media.
you may wish to learn more about it first...
“The 401(k) will turn out to be the greatest systemic financial hoax ever perpetrated on an unsuspecting public.”
- William Wollman, The Great 401(k) Hoax
http://www.bitsofnews.com/content/view/7938/
http://market-ticker.org/archives/1830-401kIRA-Screw-Job-Coming.html
http://www.businessweek.com/news/201...et-losses.html
One proposal raised by Iwry as co-author of a paper while at the Retirement Security Project, before joining the administration, has reached Congress. A bill requiring employers to report 401(k) savings both as an account balance and as a stream of income based on an annuity was introduced on Dec. 3 by Senators Jeff Bingaman, a New Mexico Democrat, Johnny Isakson, a Georgia Republican, and Herb Kohl, a Wisconsin Democrat.
Promoting annuities may benefit companies that provide them through employers, or sell them directly to individuals, such as AIG-American International Group Inc., the insurer that has received $182.3 billion in government aid.
If It’s Just a Matter Of Requiring an Additional Choice, That’s OK, But REQUIRING IT is unconstitutional. Without a signature from the owner, I don’t believe they could legally TAKE the money and convert it into anything without violating the constitution. Therefore, before anything would actually happen, a lot of legal hurdles would have to be overcome.
I’m trying to visualize how this government seizure might take place:
Obviously, these are just my thoughts:
1. Employers would be required to offer annuity conversion of all 401k balances.
2. The govt would only allow tax deduction on contributions converted to an annuity. All contributions made to any 401k account, (not set up as an annuity status), would not be tax deductable and would not qualify as contributions that could be matched by an employer.
3. In the event that the indiviual didn’t want to convert to annuity status, he would not be able to receive any distributions as lump-sum payments and limits would be placed on the size of any distribution. (this would cover people who are just about to take distributions at age 59-1/2). It would also prevent anyone from rolling over their 401k before age 59-1/2.
4. Once the indiviual reached a certain age, (say, 70-1/2), he would be required to set up the 401k as an annuity. (this would cover people who are already taking distributions at age 70-1/2). This is the part I would think would be extremely difficult to implement unless the constitution were modified. They can’t simply make you sign your own property away unless there is some kind of imminent domain precedent, but that only relates to property such as land or buildings. I can’t see how you could be forced to hand over your cash unless it fell under some kind of confiscation law already on the books.
I suppose, some of all 401k balances is legally OWNED by the Federal Government as taxes have not yet been paid. It seems to me the only legal right they have would be to require an immediate payment of all taxes owed. This would be an accounting nightmare, as in each tax year the balance was under a status of “401k funds”, varying taxes and capital gains were not paid. Also, loans and money removed for education etc. would add to the impossible tax calculations.
Of course, the reason for this is inheritance. The govt. wants the principal when you die. The annuity would cover a spouce, but I’m sure it could not be passed on to a son or daughter or any living relative named in a will.
Retirement plans, including 401(k) accounts, held $3.6 trillion in assets at the end of the second quarter of 2009, while annuity investments of all kinds totaled about $2.3 trillion, according to figures from the Washington-based Investment Company Institute, a trade association for asset managers.
This is going to be one of the most contested battles to ever take place in US history if this becomes reality. Afterall, the net worth of the nation is at stake.