Democrats’ Plan to Confiscate Retirement Accounts Sends Panic Throughout Early Retirement Community

A news report about a Democratic plan to eliminate deductibility for retirement accounts and convert them to a new mandatory government retirement system has stirred panic among some early retirees.

The government already has rules in place to FORCE investors to disgorge their wealth. The required minimum distribution, or RMD, rules force tens of millions of retirees to take money out of their tax-deferred retirement accounts each year.

The reason for the forced disbursement is simple: The government figures it’s waited long enough for the taxes on all that sheltered cash and it wants its money, NOW! The rule to force withdrawals, developed more than 20 years ago, make it more difficult for retirees to pass their savings along to their heirs.

Many older investors, unaware of the sneaky rules, end up paying a hefty penalty of 50% or more of the amount that the government says should be withdrawn for failing to comply.

But now Democrats in Congress want to go a step further. They actually have plans to literally CONFISCATE workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts “managed” by the Social Security Administration.

Doing this would solve two problems:

(1) It would temporarily fix the MASSIVE unfunded liabilities that Social Security and Medicare already face (an estimated $56 trillion) without huge payroll tax increases of up to 40% just for Social Security; and

(2) It would allow Barack Obama to use the new cash to fund his Universal Health Care and other redistributionist programs under the cover of “saving” people’s pension plans.

Sound incredible? Democrats in Congress have ALREADY held hearings on the plan.

On October 7, the House Committee on Education and Labor held hearings on a proposal to eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and “convert” them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.

According to a proposal by the leftwing Economic Policy Institute, the new GRA accounts…

… would be MANDATORY…

… would increase payroll taxes on workers by an ADDITIONAL 5% on top of the 7.5% in Social Security and Medicare taxes they pay and the 7.5% their employers pay…

… would be “pooled” into a gigantic fund administered by the Social Security Administration….

… would LIMIT participants’ maximum gains to 3% annually over and above inflation (a rate of return which would eventually be lowered to LESS than 3%); and

… would limit transfer of assets to heirs after death to just 50% of the account less money already collected.

The chairman of the House Committee, Rep. George Miller (D-Calif.), said that the government is being “forced” to confiscate the retirement accounts to “strengthen and protect” Americans’ pensions. He added that the “Democratic Congress will continue to conduct this much-needed oversight on behalf of the American people.”

Under current law, Americans can contribute pretax money to retirement plans, such as 401(k)s, and their employers match up to a defined percentage. These accounts not only increase workers’ retirement savings but also reduce their annual income tax.

But all tax-deferred retirement plans come with a catch: They MUST remain within the United States, under the direct control of the Federal government.

That’s because the government has always secretly known that, in a worst-case depression scenario, it could confiscate these funds outright – so long as they remain under U.S. jurisdiction. Argentina did precisely that a few years back, throwing the entire country into an even worse depression as capital poured out of the country. Money held in offshore bank accounts, or stuffed in mattresses, would be much more difficult for the Feds to steal.

In other words: Your retirement accounts constitute a gigantic piggy bank that the Feds have had their eyes on for years!

Now is the perfect moment for the Feds to pull off this mass-confiscation of American wealth.

Barack Obama has been elected with a mandate to save the U.S. economy and “spread the wealth around.” Investors (and particularly retirees) have watched as their investment accounts have lost 40%… 50%… even 60% of their value in the past 12 months. And Democrats, who now control BOTH houses of Congress, will insist that they have a plan to “save” Americans’ retirements.

Of course, they won’t call it “confiscation.” Like the “bailout” of Wall Street investment banks, they’ll call it “guaranteeing retirement for all Americans.” But in both cases, it will mean an unprecedented loss of freedom — and ceding control of YOUR money to the Federal government.

At first, the program may even be voluntary. Investors will be told that, in exchange for transferring their IRAs or 401(k) funds to a Federal “Guaranteed Retirement Account” (GRA), they will be able to make up for their recent losses and “lock in” a retirement benefit of a certain amount – just like Social Security.

But very quickly, the voluntary program will be made mandatory. Congress will quickly pass a law making contributions to IRAs and pension funds no longer deductible – which will remove their reason for being. The only way to save for retirement will be the government’s new GRA accounts – under the direct control of the Social Security Administration.

The new payroll taxes for GRAs – on top of Obama’s proposed increases in Federal income taxes and payroll taxes… increases in state income taxes… and massive recent increases in sales taxes (to as high as 10.25% in places like California) – mean that the USA will soon have the highest taxes of any nation on earth!