muses of the moment

January 11, 2010

401k changes proposed

A very interesting article…….this is the beginning. Right now they are asking, soon, they will just change it. Study Argentina. It will be framed as “for your own good, protecting your money”‘

Click here for link to the BusinessWeek article by Jeff Plungis.

A snippet from the article:

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.

Trace from has more thoughts on this disastrous plan. Click here. The middle class is doomed.

Update: January 13, 2010 (this news is rolling around the websphere, so groovygirl wanted to issue additional comment):

And The first comment, below the main post, from RobotTrader is very interesting.

Groovygirl believes that this will be an option for now, some will go for it. As Jesse says in the post, it is the worst possible time to convert to long-term fixed anything (unless it is debt), even if you are looking for “safety”. Groovygirl would rather convert all of a 401k to GLD (and you know how she feels about precious metals ETFs) then long-term fixed anything at this time. The proposed annuity would have to be at 20% (less fees, always look for the fees) for groovygirl to even acknowledge its existence.

When the FED can’t print any more money, there is a high probability that your 401k will just be converted by your fund management company (for your own good). This is one of the problems of having someone between you and your money within the 401k structure. A change in the rules, changes an investment risk. And many rules, that we have taken for granted, are changing right now.

This discussion got groovygirl thinking about the underlying problem that no one is acknowledging……..

The American retiree (or retiree to be) is conditioned to get a monthly/quarterly check from social security, pension plan, 401k or IRA, or stock dividend. They believe this is the only way to do things. The safest and better long-term return may have a different structure. As just one example….live off saved cash (yes, this will mean a downsized lifestyle for a time), while you put money in physical gold and silver, oil, commodities for 3-5 years, then sell part and take the profits to live another 3-5 years. This plan requires planning, saving, budgeting, and investment knowledge. These are the skills that the West is lacking. It is time to think outside the box and run the numbers to figure out what is the best way for you to plan the future. Take responsibility for your future. If you rely on other entities, like the government and Wall Street, you will be at their mercy.

Side musings: Bill Moyers was very good this week.

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