Thursday, November 5, 2009

The Coming Decimation of Your Retirement Plan

Are you planning to retire soon?  Are you already retired?  Wherever you are in your retirement planning, if you only have money in dollar denominated assets like 401k/IRA or receive a pension/SSI check, you need to understand the danger you're in by putting all your faith in Federal Reserve Notes and politicians who collect votes by promising benefits that can't be paid for.
Our government has been playing kick the can down the road for decades.  The time is coming soon, perhaps in the next decade, when the dollar will collapse and those planning to retire with 401k/IRA's will be wiped out.  Those on fixed pension and Social Security incomes will be wiped out, too, as the value of their monthly paychecks become marginalized thanks to unchecked printing of money by the Federal Reserve, increasing budget deficits, and as more people start collecting money from social welfare programs rather contributing to them.
The interest payout of the national debt ($11 trillion as of this writing) and the payments of future unfunded liabilities promised to you by Congress is unsustainable. To see our current debt status and unfunded liabilities go to USDebtClock.Org
The truth is the facts presented by David Walker, former GAO chief (the nations accountant) are accurate, frightening and a call to action. If you have never heard of David Walker I strongly urge you to Google "David Walker, 60 minutes" and listen to his message.
The facts are, in spite of what you hear from our legislators, our current retirement programs including Social Security, Medicaid, Medicare parts A, B and D cannot continue in their current forms. There is not enough money to sustain them and the amount of tax increases and borrowing it would take to continue them would not only bankrupt the country but eliminate America’s the preeminent financial center of the world. Raising the taxes of the top 5% of the highest income earners to 100% and taking 100% of the profits of America’s top Corporation for the next 10 years would not even come close to solving the problem. In fact, it has recently been published that if 100% of every American’s wealth was confiscated and used towards these programs there would still be a huge deficit and need for more borrowing.
The current annual interest due on our current national debt alone is $800,000,000,000. You don't need a Wharton business degree to know we cannot continue down the current path. The only two ways to solve the problem is to cut benefits or reduce the number of people receiving those benefits. Since cutting benefits would be political suicide, reducing the numbers receiving full benefits is the probable path. Reducing the number of beneficiaries receiving full Social Security and Medicare payments can be done in a way that politicians can say that they are living up to the promises made in the past.
Here's how we believe these programs will work in the future. Social Security benefits and Medicare subsidies will become needs based. What that means is only those who truly need them will get them. It will be based on your ability to pay your own way. By making the programs need based, the masses (those that didn't save for their retirement) will be taken care of and will still vote for their local politicians. As for you, the members of the "collective wealthy" (you didn't know you were called that did you?) will get just enough from the government for politicians to say that they're taking good care of you. The fact is that Social Security is already there by taxing your benefits according to your income. If your Social Security benefits are being taxed, you are not receiving the benefits you were promised but your neighbor who did nothing about planning for his future retirement receives the full benefit promised because his benefits are not taxed.
You are part of the "collective wealthy." You are part of the group of citizens who saved and invested for your future and that of your family. You have accumulated over $17 trillion dollars in IRA, 401(k), 403(b) and 457 plans (called personal retirement plans). The government already forces you to take withdrawals from these accounts when you reach 70½ and it is our belief they will lower the age and increase the amounts you must withdraw in the future. These payments will be counted against you for purposes of calculating your Social Security benefits and Medicare premiums in the future. This will bring the overall cost of the programs way down and the politicians cannot say they reneged on their promises. It's called spin, win and get re-elected. The politicians know that this $17 trillion is available and they are coming after it. Many see it as the solution to an unsolvable problem.
All the income from personal retirement plans is reported on your tax return when you make withdrawals and the total amount in your plan is reported to the IRS each year whether you are retired, taking withdrawals or not. They know you have the money and they know how much! Congress already proposed a special tax on plans that had $250,000 or more in them but fortunately it was defeated — we might not be so lucky next time. Now add higher income tax rates to this mess and what you have is the decimation of the personal retirement plan. The money you saved for you, your spouse and your children and grandchildren will be used up before they ever see it.
This will happen to you because you followed the crowd and listened to traditional financial advice. The answers are out there. Watch the video at