Our headline is incomplete. Uncle Sam is not coming just for your IRA; he is coming for your 401(k), 403(b) and corporate and government pension. In short, he is coming for all your retirement assets. The government is coming for your pension for precisely the same reason Willy Sutton robbed banks – because that’s where the money is. It already has begun with the imminent passage of the Secure Act.
The “Setting Every Community Up for Retirement Enhancement” Act, known euphemistically by its acronym, the Secure Act, passed the House of Representatives 417-3 in May. It is expected to pass the Senate with widespread support although a few senators are holding it up for various reasons. The Secure Act is a poster child for two MLLG principles. The title of a law is inversely related to its effect and the more euphonic the name, the greater the harm. Second, any law that has near unanimous support is, ipso facto, bad for the nation – if both parties like it, we’re screwed.
Politicians and IRAs are analogous to grave robbers and King Tut’s tomb
The Secure Act destroys decades of meticulous planning by millions of middle class Americans by eliminating the stretch IRA – that allows savers to leave their IRAs to children and grandchildren and to stretch distributions over their lifetimes. This taxpocalypse gobbles up 35% of inherited IRAs without Congress having to vote for a tax increase; it upends college planning; and, it creates an estate planning cataclysm. Although the Secure Act targets IRAs, it also ensnares Roth IRAs, 401(k)s and the entire panoply of retirement assets which can be rolled into IRA accounts.
The Secure Act is only the beginning; it gets worse – much worse
Among the Secure Act’s occult provisions is a mandate that annuities be offered as a payout option on all retirement accounts. This is the camel’s nose under the tent and could lead to mandatory annuitization of all retirement accounts. That would force distributions into higher brackets, accelerate taxable distributions and eliminate all inherited IRAs – not just the stretch ones. Best of all for politicians, they could accomplish this without voting for a tax increase. But wait; it gets even worse.
The spending crisis will reach critical mass – likely in the coming decade. Please see our four-part series on the US spending crisis that ran from April 28 to May 19, 2019; it is on our website: www.mllg.us. US public debt will approach $40 trillion by the end of the coming decade. By a calamitous coincidence, US retirement assets also will approach $40 trillion in exactly the same time frame. BINGO!
When the debt crisis is tearing America asunder and there is a pool of money that would pay off the entire debt, is there any sentient person who believes the ineluctable won’t happen? The government, either piecemeal or in one fell swoop, will seize all your retirement assets and convert them into government pensions to be paid in fiat currency. Think this is farfetched? In recent years, Poland, Hungary, Bulgaria, Ireland and France have, through one artifice or another, seized money from pension assets.
It’s so obvious Willie Sutton and King Tut’s grave robbers understood it. Uncle Sam must go where the money is and that is your retirement assets. The Secure Act is but the first step in what will be a long train of usurpations of your retirement assets.
Next up on November 24th is our special Thanksgiving posting.