By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com …..
During last week’s State of the Union address, US President Barack Obama announced plans to create new myRA retirement accounts. The next day, he signed paperwork directing the Department of Treasury to create these government-backed accounts.
MyRA accounts are available only to Americans who are not covered by employer-sponsored retirement plans. This would include about half of all workers (including about 75% of all part-time workers).
In several respects, MyRA accounts would work much like a Roth IRA account. Workers not covered by employer retirement plans that earn less than $191,000 year and are paid by direct deposit can sign up. The initial investment must equal or exceed $25. Subsequent investments must be at least $5, and be withdrawn automatically by a payroll deduction. These accounts are treated as after-tax, meaning that workers would have to pay Social Security, Medicare, and income taxes on these amounts in the year the investment is made.
Like Roth IRA accounts, the investments can be distributed at any time with no tax liability. Any income withdrawn before age 59-1/2 will be subject to taxes and a possible penalty. Workers can invest as much as $5,500 per year into MyRA accounts.
MyRA accounts are intended to be only for small investments. One the total investment reaches $15,000 or it has been open for 30 years, it must be converted to a private sector Roth IRA. The investor would have the option to convert the account to a Roth IRA earlier than that.
An attractive feature of MyRA accounts is that there are no fees. Another nice feature is that this account stays with the worker, so there are no problems in changing employment. A worker could even make contributions from each paycheck if working two or more jobs.
A horrible feature is that such accounts have only one investment option—US government savings bonds that pay the same rate as the Thrift Savings Plan’s Government Securities Investment Fund that the US government offers to federal workers. In 2012, this fund earned about 1.5%.
As a practical matter, MyRA accounts won’t do much for the workers. For instance, how much after-tax funds could a part-time worker afford to set aside every payday? So what is the real benefit of setting up such accounts?
The major beneficiary of establishing MyRA accounts is the US government. Every dollar that workers put into such accounts becomes a loan to the federal government, helping it to finance budget deficits. It also has another unstated benefit to the US government.
Beginning in the Clinton presidency, the US government has been working to seize assets in private retirement accounts—including precious metals individual retirement accounts. The Republican majority elected to the House of Representatives in 1994 stopped progress for a few years. In 2008, a House committee held hearings on a proposal for the US government to seize all private retirement accounts and replace them with US government debt. During these hearings, it was explained that such a move could not be done in a single event. Instead, the plan could only be put over on the American people by taking smaller steps over a period of years.
In 2010, the Departments of Labor and Treasury held joint hearings about requiring retirement plans to offer retiring workers the option to convert their assets in to annuities, with the residual assets upon death going to the insurance companies or US government instead of to the heirs.
President Obama’s MyRA accounts are the next stop toward the eventual seizure of all private retirement assets—including precious metals IRAs. Once people accept that their retirement assets are US government debt, it won’t be a much larger move to then take existing private retirement account assets and also convert them into US government savings bonds. The politicians in Washington could even pretend that they are doing this to “protect” workers’ retirements.
For more than a decade, I have been warning that the US government would find the trillions of dollars of assets in private retirement accounts to be too tempting to leave alone. In the past year, even Steve Forbes of Forbes and investment guru Jim Rogers have warned that the government will sooner or later seize such assets. Already, Argentina and several European nations such as Hungary, Ireland, Poland, and Spain have taken private retirement assets.
It may not happen this year, but don’t wait too long to take measures to protect your precious metals and other private retirement assets from seizure from the US government. Because of an unusual personal tax situation last year, I took distribution of all but a small amount of my IRA accounts last year. When will you protect yourself?
Patrick A. Heller was honored with the American Numismatic Association 2012 Harry J. Forman Numismatic Dealer of the Year Award. He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster (under “News & Articles) . His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.
LOL! Oh, wait – you are being serious?
Yes, I am absolutely serious. Go read the October 7, 2008 transcript of testimony by Professor Teresa Ghilarducci before the US House Committee on Education and Labor at http://www.uknowiamright.com/storage/bourbon-graph/2008-10-07-TeresaGhilarducci-1.pdf. Prof Ghilarducci has been asked multiple times if her remarks imply that the US government will eventually seize all private retirement account assets and replace them with US government debt. She consistently states that she did not advocate that extreme step. However, read what she actually said here. Then translate her words from “governmentese” into plain English to understand exactly what she was proposing–a long term plan for the US government to eventually only allow only US government debt as assets in “private” retirement accounts. What Obama did was one of the steps she outlined in 2008. You don’t have to believe me, just read her testimony.
Sorry, Patrick, but you are not interpreting this info. correctly. First, this professor is simply offering a suggestion, she was not a gov’t official, and academic experts provide suggestions at hearings of Congress all the time. And the kind of steps you discuss would require legislation voted on by Congress and then sent to the president to be signed, and lawsuits could be filed against them too if the kind of extreme step you imply were ever taken. Her proposal was simply to give people the option, if they so choose, to turn their private 401K into an annuity with a return guaranteed by the gov’t. Workers can already do this now with annuities that have a guaranteed rate by the private asset company to which they pay fees for such an annuity. Obama’s MyRA proposal is only designed for certain employees who do not currently have retirement accounts and he has no unilateral power to implement that proposal. It would also have to go through Congress. But most importantly these are simply options and they are far from anything that would force anyone to only have government debt in their accounts. Remember the professor’s remarks were made at the height of the financial crisis when many Americans were concerned about major losses to their retirement savings and she was responding to that concern, which left many Americans in very bad shape because they did not stay in the market. A privately owned 401K that held with a company such as Fidelity always offers a wide range of asset options, mutual funds, etc. There is nothing in Obama’s proposal that says what you suggest based on the reporting I have seen. Privately held retirement accounts are not government assets, and individuals have full control over them and how they are invested. Short of replacing our form of government with a dictatorship, I do not see how what you suggest could ever happen. And anyway our government can print an unlimited amount of money, so why go after this small change that would cause such an uproar and would never make it through Congress anyway.
Just like paying income tax is voluntary compliance. The govt will take your money!
Thank you for your comments. It does not take an act of Congress for the president to have advocated this program in his State of the Union address or for him to then issue orders to the US Treasury to prepare to implement the MyRA program. As the president stated in his address, he claims that it is not necessary for Congressional action to achieve this step.
Before many laws are introduced and enacted there are trial balloons floated to test the reaction. Professor Ghilarducci floated her trial balloon in October 2008. In her testimony she explained that an immediate enactment of her eventual goal would never pass resistance. Instead, she advocated a series of gradual steps, each appearing to be innocent enough (as you claim) yet invariably leading to the eventual goal.
To go through multiple steps, first you make changes that are optional and voluntary. Then you restrict the flexibility. Finally you make it mandatory, especially when you can claim that it is “for the good of the people.” The sequence of steps I outlined in my article are the implementation of Professor Ghilarducci’s tactics to eventually replace all private retirement account assets with US Treasury debt and only offering retirees an annuity when they retire. This latter step means the US government (though it might be the insurance companies to start) would get the residual assets upon death of the retiree instead of the retiree’s heirs.
At any stage of the process, it can be plausibly denied that the actions have the ultimate goal of the outcome that Professor Ghilarducci advocated. You have to understand how it all looks on the surface and what is really happening behind the scenes.