Federal government looks to private IRAs and 401(k)s to fund deficit

This week, the U.S. Treasury will ask for comments on the conversion of private IRA and 401(k) funds into government annuities backed by Treasury bills. You’ve been doing a good job saving for retirement, and President Obama’s administration sees your investments as a solution to their problem.

It would never happen.

That’s what you’re probably thinking and to a certain extent I think you may be correct, but that does not mean the federal government would not put out a trial balloon. Theo Francis wrote a piece in early January regarding the Treasury Department’s interest in your private retirement dollars.

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

Annuities generally guarantee income until the retiree’s death, and often that of a surviving spouse as well. They are designed to protect against the risk that retirees outlive their savings, a danger made clear by market losses suffered by older Americans over the last year, David Certner, legislative counsel for AARP, said in an interview.

What you’ve just read is the possible creation of another Social Security system since the current system is underfunded and broke. Everyone knows the current system will soon collapse, but it actually gets worse. Although no action happened last year, the subject has come up again at Treasury. In an Investor’s Business Daily editorial this week, Newt Gingrich and Peter Ferrara write…

BusinessWeek [link added] reports that the Treasury and Labor departments are asking for public comment on “the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams.”

In plain English, the idea is for the government to take your retirement savings in return for a promise to pay you some monthly benefit in your retirement years.

They will tell you that you are “investing” your money in U.S. Treasury bonds. But they will use your money immediately to pay for their unprecedented trillion-dollar budget deficits, leaving nothing to back up their political promises, just as they have raided the Social Security trust funds.

Nothing to back up their political promises.

The federal government is totally out of money. They recently increased the federal debt ceiling by 15 percent from $12.4 trillion to $14.3 trillion dollars. It’s out of control.

Did you get that? Many in federal government seriously think your personal, private retirement funds do not belong to you. You should not have to “risk” your own money.

Look at what happened to your retirement funds in 2008 and 2009 – you were devastated and that should never happen. Hogwash.

Some say that the federal government will simply encourage investors to move their IRA and 401(k) dollars into T-bills, but we can already do that now if we wanted to, and Americans think they can get a better return on their investment in the private market – and they have done better. Some think the government will mandate the change – offering guaranteed crappy returns on your investment.

The other problem with this scheme is the federal government would have a vested interest in your early death. Think I’m kidding? Social Security is set up in such a way that you – and your spouse – only get benefits until death. After death, payments stop. Remember, it’s not your money.

With an IRA or 401(k) the surviving spouse can roll over the full value of the investment account into their own, or an other benificiary will get the full amount, although heavily taxed, but at least some of the funds are transferred to your estate.

It happened in Argentina, and their stock market took a serious hit just at the suggestion of a similar program in 2008.

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Steve McGough

Steve's a part-time conservative blogger. Steve grew up in Connecticut and has lived in Washington, D.C. and the Bahamas. He resides in Connecticut, where he’s comfortable six months of the year.


  1. Dimsdale on February 21, 2010 at 8:14 pm

    Great.? Anther Ponzi scheme.? Are our legislators that lame?? (that was a rhetorical question…)
    This is happening in a small scale in Massachusetts (we are a regular Petri dish for crackpot liberal ideas, apparently!): they are working a bill through the state legislature (S.1173) which will allow teachers not in the state retirement system to “buy into” the state retirement system so they can get a cash infusion to pay current retirees.
    Madoff was a piker…

  2. gardeningasylum on February 22, 2010 at 2:26 am

    Why is this not being covered everywhere? They want everything! What a disincentive to keep anything in an IRA.

  3. Sal C on February 22, 2010 at 3:09 am

    WOW I guess they really think" it's not your money " We have to shout back "it is our money leave it alone".

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