This morning I read a very disturbing news item by Theo Francis in Bloomberg. The essence of the article is that the Obama Administration is proposing to force retirees to purchase annuities via conversion of their 401(k) accounts. Now, the article does not fully define what “annuity” would qualify, but my guess is that federal debt securities will be at the top of the list. The federal government has already been monetizing the debt with the Federal Reserve printing money and then buying federal debt. So why not a little wealth confiscation on top of that?
In fact, its already happened in other countries. Most recently Argentina nationalized their 401(k) equivalent and forced their owners to buy–you guessed it, government debt.
Overall, I find none of this surprising. 401(k) have been under assault for years by forces that believe that Americans should not be trusted with their own money. Now they are using the financial crisis as “proof” that 401(k)s are failing Americans. Never mind that the financial crisis was “made in D.C.”
So how do you protect yourself from this looming de facto nationalization of your 401(k)–one way is to cash-out and pay down debt. I mean ALL debt including your mortgage. I know, you are saying to yourself: “but I can deduct my mortgage interest!” Keep in mind, like your 401(k), the mortgage interest deduction is part of the U.S. tax code. And like these proposed changes to the 401(k), you can’t rely on anything that is in the tax code as it can be changed on the whims of Congress and President. Pay off your debt! No one, not even the government, can take that away from you.
If you don’t agree with me, check out this guy’s blog which also has some other interesting reasons to worry about the safety of your 401(k).
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