Will the United States Government Seize Your Retirement Accounts?

There is growing buzz on the internet and around office water coolers all over the country regarding the subject of the government confiscating the retirement account of its American citizens for the purpose of satisfying our national debts. One of my clients sent me an email from a gold broker who even went as far as recommending that he liquidate all of his retirement assets and put the money into physical non confiscatable gold, better known as pre-33 coins and this way his money will both increase in value and be safe from all government confiscation.

While I do believe that gold is a good investment right now, due to the fact that the stock market is so weak and volatile, I would not suggest liquidating your retirement accounts to purchase gold, I would simply recommend setting up self directed retirement account, strictly for the purpose of holding physical gold (not gold stocks). This would avoid the tax penalties of withdrawal, because you are basically rolling over your money from your existing retirement accounts, into what is known as a gold IRA or precious metals IRA. The IRS basically says that as long as the gold is stored with a third party storage facility then you are ok to invest in gold and other precious metals and hold them within your self directed IRA.

There is no grand government scheme or plot to seize your retirement accounts. These rumors all stem from a committee hearing held on October 7th 2008, at this meeting One house member suggested that it may be a good idea to create a new type of retirement account, called a guaranteed retirement account (GRA), this “GRA” would perhaps allow individuals to rollover their existing 401k’s or IRA’s into a “GRA” and receive a secure-government guaranteed return of 3%. After this meeting the conservative John Locke Fountain, of Raleigh, N.C., released a publication with the following headline, "Dems Target Private Retirement Accounts: Democratic leaders in the U.S. House discuss confiscating 401(k)s, IRAs." The report is wrong. There's been no such suggestion by the government.

The House Education and Labor Committee held hearings On October 7th 2008 where Teresa Ghilarducci a professor at the New School for Social Research in New York City, suggested the following:

Ghilarducci, Oct. 7: I propose ... that the Congress allow workers to swap out their 401k assets, perhaps at August levels, for a Guaranteed Retirement Account. Just a one-time swap, trading your 401(k) for a Guaranteed Retirement Account that will be composed of the equivalent of government bonds that pay a 3% real return.

Ghilarducci went further to suggest that a $600 tax credit should be given to those who make contributions into these government retirement accounts. These proposals are very big ideas and very controversial, but they in no way suggest any seizure of American citizens retirement accounts.

While we are on the subject of big ideas, I have one of my own for the members of congress to consider, maybe the government should give bigger tax breaks for those who use their self directed retirement account to purchase real estate, particularly bank owned real estate that the bank has seized through foreclosure. This would immediately have a positive impact on the economy. In a recession, real estate has historically been a leading indicator as to the direction of the major markets. When the real estate market falls, stocks follow, when real estate rises stock do the same. This seems to be the traditional ebb and flow of our markets. If more Americans knew that they could use their existing retirement account to buy property instead of stocks, then we could be on our way to economic recover very quickly. What better way to enlighten Americans than to offer a tax incentive for making such purchases.

Currently there are 2 trillion dollars sitting in American retirement accounts and only 2% of them are “self directed retirement accounts” – which simply allow you to use your IRA, 401k and various other retirement accounts to purchase real estate, businesses and other no traditional investments.

American citizens could individually leverage their retirement accounts and purchase ALL the foreclosed real estate in our country. Everybody would win. The banks would get these none performing assets off their books and start loaning out money again, this would stimulate the economy, the retirement account holders would own the best asset that the country has to offer (land) and the rents would build the retirement accounts month after month. The real estate market would rebound and stocks would follow suit. It may sound nuts, but it’s better than another trillion dollar bail out. The “Bail Out” days are over. Americans need to wake up and begin anew; think smartly and act more boldly than we have in the past.