Confiscating Your 401k: Is Government Plan Friend or Foe?

This past week there have a number of articles and commentaries circulating on the internet about a proposal called "The Hamilton Project" put out by the Brookings Institution to convert money from your 401K plan into an annuity, and then parcel out what they call "guaranteed income" for the rest of your life. This is a big topic with many agendas, motivations and ramifications all rolled into one. I will discuss these in future commentaries but right now I want you to grasp the essence of this proposal and ask yourself: if putting what little remains of your retirement account in the hands of the government and having those funds administered by many of the same financial entities that caused this economic crisis, and subsequently profited from your pain and destruction over the past two years, if that's really in your best interest from here on out?

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The bottom line is a significant number of baby boomers, at least those who haven't been downsized, are going to start retiring in the next year. Even though their 401k's are now, in many instances, 201ks, there's still a lot of money in the system that is going to get rolled over from employer sponsored 401ks into self-directed retirement accounts. This is an important point. When you work for a company, your 401k investment options are often very limited. You must retire, resign or lose your job to unlock your 401k and roll it over into a self-directed account where you can invest in things that make sense to you, like gold.

Now that a significant number of people will be doing this, Washington is salivating over all these funds. Under the guise of "lifetime income", or "guaranteed income", they are proposing to allow people to "test drive" for 24 months, by rolling their 401ks into a government sponsored annuity to see how they like the benefits of guaranteed income. After the 24 months they could, if they didn't like the plan, roll their money into their own self-directed plan or, if they did like the concept, convert those monies into a permanent government sponsored annuity.

In the abstract for this proposal, they say, and I quote: "Our strategy addresses the role of ignorance and bias by giving retirees an opportunity to “test drive” a lifetime income product, which would help overcome existing biases, reframe their view of lifetime income products and improve their ability to evaluate their retirement distribution option."

The bottom line is the people within our government and the think tanks that attempt to guide our future, believe that the masses are too ignorant and bias about annuities so they must entice us with what will no doubt be a fabulous 24 month test drive. The goal of the test drive is to gain control of those lump sum distributions and tie them up forever. No doubt, if they can persuade you to give away future control of what little retirement you may still have, you will, in effect, have turned over your future to the very people who destroyed it in the first place.