Thursday, November 5, 2009

The Coming Decimation of Your Retirement Plan

(updated October 6, 2020)

Are you planning to retire soon?  Are you already retired?  Perhaps you're a millenial with decades to go before you can even think about retiring.  No matter whereyou are in your retirement planning, I'd like you to consider for strongly the choices you have to either safeguard what you've currently accumulated for retirement or plan to accumulate.

If you only have money in retirement assets like a 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 from programs that are underfunded and bound to go bankrupt in their current setup.

This should come as no surprise.  Our government has been playing kick the can down the road for decades.  The time is coming soon though, perhaps in the next decade, when the dollar will be further devalued and those planning to retire with 401k/IRA's will be wiped out by the combination of dollar devaluation and rising taxes.

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.  On this last point, this is already the case.

The interest payout of the national debt ($27 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.

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 (these are Qualified Retirement Plans). 

The government already forces you to take withdrawals from these accounts when you reach 72½. These payments will be counted against you for purposes of calculating your Social Security benefits and Medicare premiums in the future. This helps to bring the overall cost of the programs down and the politicians cannot say they reneged on their promises. It's called "spin, win and get re-elected". The politicians know that trillions are available and they are coming after it. Many see it as the solution to an unsolvable problem.

All the income from Qualified Retirement Plans are reported on your tax return when you take withdrawals and the total amount in your plan is reported to the IRS each year whether you are retired, taking withdrawals or not. The IRS knows you have the money and they know how much! Congress has the ability to keep increasing tax rates as a way to help address a problem Congress created in the first place.  

This will happen to you because you followed the crowd and listened to traditional financial advice telling you how you should be maxing out your 401k and IRA plans. 

In episode 20 (to be released October 7, 2020) of my podcast, www.TheFifthEdition, my colleague and I touch on the concerns many of you have about hyperinflation, pandemics, and the economy.  

One of things that you need to be doing is creating a financial bunker for your wealth.  401k and IRA plans are the not the best answer.  Remember, these are Qualified Plans created by Congress... the same people who created the mess.  When the people in charge are proposing a solution to a problem they created, you should think twice about following the crowd.

If you'd like to find out how me and my clients are taking action to secure our financial futures, schedule time in my calendar here:

Thank you,

John Montoya

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