Liberty Maven

It seems the new Obama administration along with a Democratic majority in Congress will try to one up the Bush adminstration’s effort at socializing the United States financial sector. We reported earlier of the testimony in Congress from Theresa Ghilarducci who is advocating confiscating 401K’s and Individual Retirement Accounts and turning the management of them over to the Social Security Administration. I have to believe most Americans would not approve of such an action, but then again, most Americans didn’t approve of the recent bailout bill either.

Just about any new regulatory law comes with unintended consequences. Even though this “confiscation” will be painted with a positive brush by those in government when/if it shows up within a bill being debated in Congress, one has to wonder if it will “scare” those of us who lack any trust in the government into taking early IRA distributions where possible. I would guess there may be a run on such distributions even with the high penalty imposed on early withdrawals. It is unclear if such withdrawals would be widespread enough to constitute a “run” on them, but the potential is certainly there.

I would seriously consider such a thing for my own retirement accounts if this new idea were to come to fruition. Would it be overly stupid to take an early withdrawal penalty, pay taxes on the distribution, then begin investing what is left in areas where you see the best opportunity for return rather than relying on the government to invest it for you (even with their so called guarantees)? Gold and silver come to mind as a target for a portion of such investments, assuming the government doesn’t try to confiscate Gold again as Roosevelt did in the 30’s.

The decision will become, do you trust the government more than you trust yourself? Of course, if this should come to pass will there be enough investment freedom to manage your own money effectively? That may be the more pertinent question in the long run.

As of right now we don’t have to make this decision (necessarily), but the writing on the wall is suggesting we may have to consider such options in the not too distant future.