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.

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We are barreling toward socialism at an alarming rate, and every day I become more and more afraid for the future of our country.  Teresa Ghilarducci is an economist at the New School for Social Research in New York who wrote a policy paper on the subject of retirement account, and followed that up with a book entitled, When I’m Sixty-Four: The Plot Against Pensions and the Plan to Save Them.  She was called to testify before Congress on her harebrained scheme to have the federal government take over all our private 401K plans (which have historically realized at least 10% annually, on average) and “guarantee” a rate of return of 3% over inflation. From ABC News:

Here are the basics of her proposed Guaranteed Retirement Accounts:

• Employees would make mandatory contributions equal to at least 5 percent of the earnings. Workers could contribute higher amounts if they wish.
• Those contributions would be offset by a $600 federal tax credit each participant would receive.
• As with a 401(k) plan, workers would have individual accounts they could track. The balance of each account would depend on each worker’s contributions and income level.
• The Social Security Administration would handle account management, and the Thrift Savings Plan — a well-regarded retirement plan for federal employees — would manage the money.
• Participants would be guaranteed a fixed rate of return that exceeds inflation by 3 percent. For instance, if inflation stood at 2 percent, the worker would earn 5 percent; if inflation reached 3.5 percent, the worker would earn 6.5 percent. Participants could receive an inflation-beating return above 3 percent if the government’s investment returns were high enough.
• At retirement, participants’ account balances would be converted into a lifetime stream of income that adjusts for inflation. There would be options to take partial lump sum payments, opt for lower payments in return for survivor benefits and, upon death, leave a portion of a financial account balance.

The intent of the plan is not to replace Social Security. Rather, Guaranteed Savings Accounts would supplement Social Security, Ghilarducci said.

Given the government’s horrendous track record (i.e. Social Security, Fannie/Freddie, Medicare, Medicaid, etc.) it’s preposterous to think the government would handle your 401K money wisely.

And then there’s this little nugget:

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