A reader asks; Are retirement plans safe from confiscation?

Hello, Chris.

Continuing to enjoy your content. Couple of questions for you.

Would you recommend those already contributing to their 401K-iRAs (U.S.)/ RRSPs (Canada) continue to do so or should they pocket that money for other uses? What will happen to those government retirement savings plan in the future as the system becomes more socialistic?

Also, seeing that World Economic Forum Klaus Schwab has warned of a cyber attack that would dwarf COVID, could it mean a false-flag cyber attack that would loot Bitcoin and be blamed on whatever convenient bogeyman? It seems like we are all being culled into Bitcoin, but for what?

Thanks, as always. 😉

Tim

Social Security will never go away

Hi Tim,

Those who contribute to tax-deferred retirement plans are generally making a wise decision if they can save money on their income taxes, and they don’t have better uses for the funds.

It all comes down to opportunity costs. If you can parlay this money into procuring a good rental dwelling or producing a viable business opportunity, then I would not contribute. But for most people, I still recommend contributing to tax-deferred plans. I often suggest contributing the minimum amount to get the maximum employee match.

Public pension schemes will never go away; they will effectively die by attrition. Here is the thing with pensions and defined benefit (DB) plans (different than the defined contribution (DC) plans you ask about). Those who save for pension and DB plan payouts generally suffer terrible opportunity costs, since the cost-of-living adjustments (COLAs) are lower than the true inflation rates. Thus, these payouts in a few decades are effectively reduced to the point of becoming a real fraction of their original value.

Young people worry about S.S. and other government schemes going away, but they should never worry about that. They should understand that by the time they retire, their benefit amount will render the real value of that payment a shadow of what it once was many decades prior. So, the real government burden is reduced over the years and this underreporting of the CPI data solves the government’s dilemma of rising pension costs. S.S. and gov’t pensions will always be around, they will just be worth less.

As long as we have QE, retirement plan assets are safe

I would give you the green light if you decided to contribute to a DC plan, since I still think these assets are safe from government confiscation.  We  cannot obsess over theoretical government intervention now, because the central banks have successfully used QE to ostensibly solve the fiscal deficit problems. Thus, I doubt any government would be willing to touch any retirement plan assets at this time.

During the nadir of the 2008 collapse, there was plenty of talk in Washington and elsewhere regarding the confiscation of retirement plan assets to help bridge the fiscal deficit gaps. Most of it actually pertained to the confiscation of DB plan and S.S. assets, but some DC plan action was proffered. Keep in mind that many government pension plans are considered pay-as-you-go schemes, and as such, there are not true assets held that are based on actuarial assumptions and future plan liabilities.

As long as QE is in force (and it will be for some time), retirement plan confiscations are off the table. There will be no need to raid any assets for now.

We can’t plan for the future based on scare tactics and outlier events. Even COVID ended up helping asset owners. If the elites confiscated our retirement money for fiscal spending, the asset markets would collapse as this money would be diverted from the asset markets and into spending.

2 thoughts on “A reader asks; Are retirement plans safe from confiscation?”

  1. Out of my ZKIN trade. Made 8-9 excellent scalps, but I still think it has legs. If you are long, please take some money off the table going into close and a nice pop above 8.

    1. Scalping more ZKIN in after hours while I write another article. What a day for ZKIN….

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