The Demise of Your 401k/IRA
by Tina Triano,Esq, PhD

While I don’t generally comment on retirement investments, I do keep tabs on changes in laws that affect retirement accounts regarding taxes and estate planning. One issue that has been mentioned by a handful of my clients is the demise of their IRA funds. There has been significant discussion that the government is going to take all of the currently invested IRA and 401k funds and use them for other purposes. Many taxpayers are unaware that the government has the power to do this. Technically, they do. The funds invested in your 401k/IRA accounts are held in trust. Many IRA/401k accountholders are unaware that the trustee of these trust accounts, for all intents and purposes, is the U.S. government, which means that they have the power to redirect the investment of your IRA/ 401k funds whether or not you agree with the reinvestment. Before you say it isn’t so, consider that Argentina has already taken control of privately managed pension funds.

One of the ways that the U.S. government raises revenue is through the sale of U.S. Treasury Bonds. Typically, bond investors, including other countries, purchase these bonds at bond auctions held regularly by the Federal Reserve. As the value of the U.S. dollar continues to drop against other countries’ currencies (another major issue plaguing our economic recovery), there is growing concern among money managers that fewer countries will be interested in purchasing U.S. bonds.

One of the solutions to the lack of bond investors is to find more investors. With the recent disintegration of the value of IRA and 401k account values, accountholders are ripe for a “guaranteed” solution. BusinessWeek recently reported that both Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry indicate the U.S. Treasury and Labor Departments are requesting public comment on ways to encourage the exchange of 401k and IRA funds to other steady payment streams. For some IRA/401k accountholders, forced bond investment may be a welcome relief. However, for others, this solution will force IRA/401k accountholders to invest in bonds whether or not they want to and whether or not it is a good idea for their portfolio. Additionally, many IRA/401k accounts are positioned, at least in part, in the stock market. This also equates to an exodus of money out of the stock market that would likely cause many companies predicated on their stock values to fold.

Forced retirement planning is nothing new. Social Security was created to force taxpayers to save for retirement. All of the funds collected were placed into a trust account held and administered by the U.S Government. This plan worked fine until the U.S. accumulated so much debt that the U.S Government borrowed the money from Social Security leaving it with nothing more than an I.O.U. Sound familiar?

The question then remains: If the fox is guarding the hen house, again, how will you protect your IRA/401k funds from misappropriation by the U.S. government? There is still time to re-direct your IRA/401k funds into a self-directed plan where you can direct the funds into real estate and/or business ventures. Although real estate has taken a beating in recent years, prices are down and interest rates are low. This is an ideal buyer’s market. It is also well known that some business sectors are profiting significantly, specifically, any business related to green concepts.

~ Tina Triano Esq. is a California licensed  attorney with over 15 years of trust and tax planning experience and a California licensed real estate broker with over 20 years of real estate contract  experience. Tina is available for group lectures and private consultations. Our law practice provides free telephone evaluations to help you determine if you qualify for tax saving strategies. You can also call for a free report on tax saving solutions. Email jeffm@garlic.com or call 408-425-7953.