Social Security Trust Fund II

[seanm123]

Bye Bye IRA and 401k, say hello to shiny new T-Notes?




Americans Oppose Initiatives Limiting 401(k) Choices, ICI Says


Jan. 8 (Bloomberg) -- U.S. investors oppose federal initiatives that would force them to give up control over their 401(k) accounts, the Investment Company Institute said.
Seven in 10 U.S. households object to the idea of the government requiring retirees to convert part of their savings into annuities guaranteeing a steady payment for life, according to an institute-funded report today.
“Households’ views on policy changes revealed a preference to preserve retirement account features and flexibility,” the institute, which represents the mutual-fund industry, said in the report.
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.
The institute’s member companies manage $11.6 trillion of assets in mutual funds, including employer-sponsored 401(k) accounts. Some lawmakers have questioned the public-policy value of the tax benefits for people investing in retirement accounts, the ICI said in a report today.
The average 401(k) fund balance dropped 31 percent to $47,500 at the end of March 2009 from $69,200 at the end of 2007, according to a Fidelity Investments review of 11 million accounts it manages. The Standard & Poor’s 500 Index tumbled 46 percent in that period. The average balance of the Fidelity accounts recovered to $60,700 as of last Sept. 30 as the stock market rebounded.
Senator Herb Kohl, chairman of the Senate Special Committee on Aging, proposed legislation on Dec. 16 to require fund companies to do more to ensure 401(k) options are appropriate for workers. The Wisconsin Democrat cited reports that target- date funds designed for people retiring in 2010 invested in high-yield, high-risk corporate bonds.
Representative George Miller, a California Democrat, is advocating legislation to require more disclosure about 401(k) fees paid by investors. The Education and Labor Committee, which Miller leads, approved a bill requiring more disclosure about fees in June.
The ICI survey was based on a telephone survey of 3,000 households from Nov. 20 to Dec. 20 and had a sampling error of plus or minus 1.8 percent.


http://www.businessweek.com/news/201...-ici-says.html

[doom&gloom]

Re: Social Security Trust Fund II

Heeeyyyyy, if it is good enough for Argentina, it's good enough for us!

[thriftyandboringinohio]

Re: Social Security Trust Fund II

Bye Bye IRA and 401k, say hello to shiny new T-Notes?

The retirement contributions of 300 million Americans is such a big chunk of meat it's attracting sharks. First assault was privatize-social-security to funnel payroll taxes through Wall Street. Now you show us required-by-law to run 401K through a desk on Wall street to the treasury. Where did I put my pitchfork and torches.....?

[ASH]

Re: Social Security Trust Fund II

Bye Bye IRA and 401k, say hello to shiny new T-Notes?

I can think of few government initiatives more likely to radicalize me. However, my sense is that taking control of retirement accounts away from individuals would be politically difficult to do.

[audrey_girl]

Re: Social Security Trust Fund II

Heeeyyyyy, if it is good enough for Argentina, it's good enough for us!

and things are going really great there too!

http://www.latimes.com/news/nation-a...,2744612.story

Reporting from Bogota, Colombia, and Buenos Aires - Argentina's president, Cristina Fernandez de Kirchner, fired the nation's central bank chief Thursday after he refused to release $6.6 billion in foreign reserves to service the nation's mounting foreign debt...

[audrey_girl]

Re: Social Security Trust Fund II

what you have to realize, is that to keep Social Security scheme going - you are always on the look-out for new funds to feed it; always have to find new ways to feed it - and right now there is really only one source of funds large enough to feed the scheme

[jtabeb]

Re: Social Security Trust Fund II

I can think of few government initiatives more likely to radicalize me. However, my sense is that taking control of retirement accounts away from individuals would be politically difficult to do.

I think it will happen, DEFINATELY! Just look at how things progressed in Argentina, the crisis of collapse allowed EVERTHING that was previously impossible politically to suddenly "happen" under the guise of saving the system, fixing the problem, etc. etc, etc.

I've said it BEFORE, and I'm Saying it AGAIN, Get you money OUT of your IRA and 401K and Into Pysical Precious Metals while you are STILL ABLE TO DO SO!

Ash, you counter argument to me for doing so was that you thought you could generate decent returns if you managed your own account. Well, how's that gonna happen when they take away your ability to manage your OWN ASSET ALLOCATION!

Disclaimer: I already have emptied MY ENTIRE IRA, 401K and put them, well, in HARDER assets So to speak. (And Yes the taxes were a bitch, but do you guys think that tax situation will improve or get worse, Hmmm?) See, your funds really are CAPTIVE, you just didn't realize it, YET. You realize this now, SOoooo... take actions to protect you finances, before you are locked out!

If you lose executive control over your IRA/401K and you are FORCED into government paper yeilding say 2-5% for decades while real world inflation is bad and getting worse, did you really GAIN anything by not selling it off, paying the taxes and putting it into say PM's for the same time period?


Most Dangerous thing I've ever heard in my life (in the financial sphere) is "That will NEVER HAPPEN!"

[ASH]

Re: Social Security Trust Fund II

Just look at how things progressed in Argentina, the crisis of collapse allowed EVERTHING that was previously impossible politically to suddenly "happen" under the guise of saving the system, fixing the problem, etc. etc, etc.

My read is that until/unless we get an Argentina-type sovereign debt crisis, this won't be politically possible because of the potential for this to turn into a cause celebre of the populist right. I agree that in the event of an American sovereign debt crisis, a lot more will become politically possible. However, I believe there are exit points and red flags prior to that eventuality such that now is not our last chance to exit from retirement accounts. In short, I think you are erring on the side of caution by being early. You may not be wrong; you are not yet proven right.

[jtabeb]

Re: Social Security Trust Fund II

You may not be wrong; you are not yet proven right.

Have you every read about managing catestrophic risk? (Likelyhood of event occurance, Loss associated with catastrophy, and time to onset of the event). I do this everyday, I fly airplanes.

The catastrophic risk is one you CANNOT HEDGE, you can only AVOID EXPOSURE. You CANNOT afford ANY EXPOSURE to catastrophic risk, therefore it must be avoided entirely.


Seriously, can you afford to get the timing WRONG? Do you think you can afford exposure to catastrophic risk. I know guys who thought they could. They are dead now (Pilots).

[jpatter666]

Re: Social Security Trust Fund II

Have you every read about managing catestrophic risk? (Likelyhood of event occurance, Loss associated with catastrophy, and time to onset of the event). I do this everyday, I fly airplanes.

The catastrophic risk is one you CANNOT HEDGE, you can only AVOID EXPOSURE. You CANNOT afford ANY EXPOSURE to catastrophic risk, therefore it must be avoided entirely.


Seriously, can you afford to get the timing WRONG? Do you think you can afford exposure to catastrophic risk. I know guys who thought they could. They are dead now (Pilots).

Statistically speaking, isn't flying the safest way to travel? ;) I know, I think you fly fighter jets -- right? My dad flew naval copters -- crashed twice -- but continued to fly.

But there's always risk -- driving your car, living in earthquake, hurricane, tornado zones. Eating that second slice of carb-laden pizza....

It's basically how much hedging are you comfortable with and what do you think the odds are of the risk. Obviously you view them as so high as to be nigh certainty.

[ASH]

Re: Social Security Trust Fund II

Have you every read about managing catestrophic risk? (Likelyhood of event occurance, Loss associated with catastrophy, and time to onset of the event). I do this everyday, I fly airplanes.

The catastrophic risk is one you CANNOT HEDGE, you can only AVOID EXPOSURE. You CANNOT afford ANY EXPOSURE to catastrophic risk, therefore it must be avoided entirely.


Seriously, can you afford to get the timing WRONG? Do you think you can afford exposure to catastrophic risk. I know guys who thought they could. They are dead now (Pilots).

This isn't an airplane-flying problem where all my eggs are in one basket. This is an asset allocation problem in which some of my eggs are in retirement accounts and some are held elsewhere. Why do you say we can't hedge this risk? Doesn't holding some assets in retirement accounts and some assets outside of retirement accounts hedge the risk of the government seizing retirement accounts?

How is this catastrophic risk? We're about the same age, right? Do you have enough saved up to live out the rest of your days? Are you depending upon your current savings to survive today? I don't, and I'm not. Right now, I rely upon my ability to earn income to survive, and I will have to rely upon that for several decades more, most likely. A catastrophic risk is losing your life's savings when you cannot work; the government seizing my retirement accounts when I'm in my mid-30's doesn't qualify as a catastrophe.

If the analogy to flying into a mountain were correct, then I'd be approaching this differently, but the risk we're talking about is hedgeable (by not holding the entirety of one's net worth in retirement accounts), and is not catastrophic by any stretch of the imagination, for someone in their mid-30's.

[jpatter666]

Re: Social Security Trust Fund II

Actually, thinking about this some more, aren't *you* the one taking excessive risk putting all your eggs in a PM basket?

You've got your guns hedge (I guess) but that won't do much good against a crack Anti-PM SWAT team (or likely even a highly motivated and well-armed gang). Your PMs could be seized, stolen -- or unlikely as it is, PMs could fall to the old lows.

[jtabeb]

Re: Social Security Trust Fund II

How is this catastrophic risk?

For you IRA or 401K funds, this is catastrophic risk. For the rest of your assets that are held in other vehicles/forms, they ARE NOT EXPOSED, therefore not subject to catastrophic risk.


What I am saying IS the captive assets you hold in your IRA and 401K are subject to this risk (Which is classified as catastrophic due to SEVERITY and LIKELYHOOD of occurance).

If there is a 50/50 chance of being killed (catastrophic risk, severity and likelyhood once again) on the way to work today, the only effective strategy to combat this risk is avoidance UNLESS the OBJECTIVE IS IMPORTANT ENOUGH to take this risk. (In the flying world, the analogy would by "it's worth flying over that SA-10 site on the way in and the way out, EVEN if it means we lose 5/6 aircraft, to ensure that we take out that nuclear facility of some country that will remain nameless".)

Are you ready to risk the complete loss of these funds (IRA/401K ), which is essentially what happened in the Argentina example, for a certain level of gain? What level of gain would be an adequate tradeoff vs the risk of a total loss?

(If you had a risk-reward scenario that you could benefit from, then I wouldn't be so persistent. It is my contention that there is not one.)

[jtabeb]

Re: Social Security Trust Fund II

Actually, thinking about this some more, aren't *you* the one taking excessive risk putting all your eggs in a PM basket?

You've got your guns hedge (I guess) but that won't do much good against a crack Anti-PM SWAT team (or likely even a highly motivated and well-armed gang). Your PMs could be seized, stolen -- or unlikely as it is, PMs could fall to the old lows.

I can HEDGE these risks, I have NEIGHBORS that take some of the advice that I offer from time to time. (except for the PM's falling to new lows, but as you said HOW LIKELY is that to occur? Me thinks, not very)

[unlucky]

Re: Social Security Trust Fund II

It seems at least plausible that some move in this direction could happen this year. We know the govt needs to find buyers for $2T of debt in 2010, versus $200B in 2009... it's hard to identify who those buyers will be..