Steve Forbes warns readers in the latest issue of Forbes magazine that the federal government has several ways to target your retirement savings in the future.
When the Cyprus bank crisis hit, this column warned that the precedent set by seizing people’s savings would not be lost on Washington politicians. Hardly had the digital ink dried than President Obama was unveiling his budget proposal to bar people from contributing to their 401(k)s if their plan had reached a certain threshold. Obama and his fellow statists, in their infinite wisdom, have decided what the maximum retirement income should be for you.
While the President’s budget will go nowhere now, this idea is the proverbial camel’s nose under the tent. In the next decade, once a foreign or financial crisis hits you can expect Washington or even statehouses to claw away, Cyprus-like, at your savings–and there are numerous savings honey pots for political bears to break into.
– Social Security benefits. These originally were to go to recipients tax free. After all, you’ve already paid income tax on the money taken for Social Security. But money-hungry pols never let mere promises get in the way of more revenue. Since the 1980s Social Security benefits have been subject to more and more taxation once certain thresholds are reached. The justification has been that the employer portion of the tax is deductible for the employer. That’s a flimsy excuse; most economists agree that levy merely constitutes personal income never received. With Social Security on its way to insolvency, more raids will come in the form of means-testing benefits.
– Roth IRAs. These are especially vulnerable to Cyprus-like depredations. The deal is that you put in aftertax money and get tax-free benefits. When the next crisis hits, expect those benefits to suddenly become taxable. The judiciary isn’t likely to save you when your Roth IRA is under such an assault. On economic policy American courts these days go out of their way to help the government (look at their acquiescence in the Obama Administration’s Third World-like, politics-infested reorganization of General Motors GM and Chrysler).
Other potential targets? Life insurance, variable annuities, and wealth taxes.
