Concerned

[maat55]

Is anyone concerned about the possible confiscation of 401k's by the government in the future to subsidize SS and Medicare?

I read about this in a book Larry Burkett wrote called "The Coming Economic Earthquake" written in 1991.

With the way things are going, I cannot rule this out. I am considering moving part of my portfolio to hard assets like real estate.

Any thoughts.

[happygirl]

I've never heard talk of this being an option. I do worry about how SS and MC will be funded in the future though as the baby boomers continue to age.

[creditcardfree]

I think that is a scare tactic personally. I think if this were to be suggested in mainstream media, there would be quite a bit of outrage. And in my opinon, it sure wouldn't get a politician re-elected.

Of course, if you feel better in real estate, that is your choice.

[maat55]

I think that is a scare tactic personally. I think if this were to be suggested in mainstream media, there would be quite a bit of outrage. And in my opinon, it sure wouldn't get a politician re-elected.

Of course, if you feel better in real estate, that is your choice.

The thing about 401k's is that the government basically owns part of it anyway. What would stop them from calling in their part?

[LivingAlmostLarge]

What part does the government own Maat? Scare tactic.

More likely they will just raise SS taxable income limits and double the medicare tax.

[maat55]

What part does the government own Maat? Scare tactic.

More likely they will just raise SS taxable income limits and double the medicare tax.

The part that was not paid in tax the year it was invested. You know as well as I that this money still has past tense tax liablility.

BTW, I'm not looking to scare anyone. IMO, this could only happen out of fascism and desparation, both of which are not impossible in the future.

[creditcardfree]

The thing about 401k's is that the government basically owns part of it anyway. What would stop them from calling in their part?

True...the tax liability. We all will have to pay that portion at some point. It is possible that could come to pass sooner than later. Although, politically, I think it would be a shot in the foot.

I wouldn't have much to cry about if they decided to take the tax portion, now. It woud probably cost me less now, rather than retirement! Legally, I don't think they could ever take it all.

Definitely an interesting topic. Thanks for bringing it up.

[tripods68]

This is really a scary tactic. I doubt this would happen especially if SS continue to exist.

[LivingAlmostLarge]

No, the tax liability occurs when you draw it from the 401k. It gets paid sometime.

More likely, it'll be easier to raise the taxes for SS by raising the income limit of $106k to unlimited or $250k. 6.5% of $250k is a lot more in taxes for SS. Then raising medicare from 1.5% to 2% on all income? Probably will help it be solvent, and won't raise people's ire as much.

[ActYourWage]

I read about this in a book Larry Burkett wrote called "The Coming Economic Earthquake" written in 1991.

Thanks for the book info. Larry Burkett was a man of very insightful information about people and money. Very good man.

[disneysteve]

I certainly expect some combination of higher income limits for SS tax, as LAL mentioned, decreased benefits, raising of the minimum age for benefits - 62 really is much too young at this point, higher income taxes, which would impact 401k money as well as current employment income, etc. I think any or all of these things are likely to happen as the money to pay all the debts being racked up has to come from somewhere.

[maat55]

No, the tax liability occurs when you draw it from the 401k. It gets paid sometime.

More likely, it'll be easier to raise the taxes for SS by raising the income limit of $106k to unlimited or $250k. 6.5% of $250k is a lot more in taxes for SS. Then raising medicare from 1.5% to 2% on all income? Probably will help it be solvent, and won't raise people's ire as much.

I agree that under normal circumstances, they would make adjustments. I'm refering to desparate measures that cannot be ruled out.

I know how the 401k withdrawal works as of today, but what if the government needed money fast? It could decide to confiscate the tax it is owed immediatly, and under a really desparate situation, all of it(but not likely).

[maat55]

I certainly expect some combination of higher income limits for SS tax, as LAL mentioned, decreased benefits, raising of the minimum age for benefits - 62 really is much too young at this point, higher income taxes, which would impact 401k money as well as current employment income, etc. I think any or all of these things are likely to happen as the money to pay all the debts being racked up has to come from somewhere.

I'm concerned that the government is not making the necessary adjustments soon enough. As with C&T and NHC the people are getting extremely vocal against harsh government policies and the government may lag in making the changes soon enough. Along with this, they continue to add more programs and debt.

Personally, I would consider confiscating IRA'a as an revolution ignitor, but it is not impossible for an desparate government to resort to drastic measures.

I suppose if it were to get to that level, hiding wealth in hard assets will not be safe as well. My concern is only worse case scenario based.

[MonkeyMama]

Confiscating 401ks? That would be some pretty big legal maneuvering.

No, not worried about it.

Will 401ks change and become a government program in the future? Perhaps. But I am 100% sure that the government is not going to sieze my assets. IF so, we will have bigger problems to worry about.

[LivingAlmostLarge]

Maat, I don't think they will be able to seize 401ks so quickly. It'll go through courts and take years. Yeah it's a scare tactic i think you're talking about. Very big legal maneuvering.

But increasing the age of SS? Easy peasy.

Decreasing benefits and increasing tax on that? Also easy. Just pass it legislatively.

You can't do that with 401ks and taxing it. You are sort of going over the edge, saying the government is going to get desperate for the taxes from 401k.

That's MINIMAL compared to imagine if they began unlimited taxing of income for SS at 6.5%? Can you even fathom how much more that is? Or doubling the medicare tax????

People haven't saved nearly 20% of what they earn in 401k. So imagine taxing 100% of EARNINGS! Woohoo.

And hitting it with a flat 6.5% or 13% for self employed and 3% for medicare? OMG, the revenues would be like cash growing from trees.