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Old 01-08-2010, 10:58 PM   #1
Ought Six
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Arrow Americans Oppose Initiatives Limiting 401(k) Choices, ICI Says

Americans Oppose Initiatives Limiting 401(k) Choices, ICI Says


Jeff Plungis
Bloomberg, via Business Week
January 08, 2010


U.S. investors oppose federal initiatives that would force them to give up control over their 401(k) accounts, the Investment Company Institute said.

Seven in 10 U.S. households object to the idea of the government requiring retirees to convert part of their savings into annuities guaranteeing a steady payment for life, according to an institute-funded report today.

“Households’ views on policy changes revealed a preference to preserve retirement account features and flexibility,” the institute, which represents the mutual-fund industry, said in the report.

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

The institute’s member companies manage $11.6 trillion of assets in mutual funds, including employer-sponsored 401(k) accounts. Some lawmakers have questioned the public-policy value of the tax benefits for people investing in retirement accounts, the ICI said in a report today.

The average 401(k) fund balance dropped 31 percent to $47,500 at the end of March 2009 from $69,200 at the end of 2007, according to a Fidelity Investments review of 11 million accounts it manages. The Standard & Poor’s 500 Index tumbled 46 percent in that period. The average balance of the Fidelity accounts recovered to $60,700 as of last Sept. 30 as the stock market rebounded.

Senator Herb Kohl, chairman of the Senate Special Committee on Aging, proposed legislation on Dec. 16 to require fund companies to do more to ensure 401(k) options are appropriate for workers. The Wisconsin Democrat cited reports that target- date funds designed for people retiring in 2010 invested in high-yield, high-risk corporate bonds.

Representative George Miller, a California Democrat, is advocating legislation to require more disclosure about 401(k) fees paid by investors. The Education and Labor Committee, which Miller leads, approved a bill requiring more disclosure about fees in June.

The ICI survey was based on a telephone survey of 3,000 households from Nov. 20 to Dec. 20 and had a sampling error of plus or minus 1.8 percent.
_____

--With assistance from Theo Francis in Washington. Editors: Tina Davis, Chris Thompson

To contact the reporter on this story: Jeff Plungis in Washington at +1-202-624-1835 or [email protected].

To contact the editor responsible for this story: Rick Levinson at +1-212-617-3377 or [email protected].
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Old 01-09-2010, 12:31 AM   #2
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Quote:
Seven in 10 U.S. households object
The other 3 have no retirement savings.....


Since it should be clear to any Pension fund manager of reading age that the
recovery is an illusion there is now tremendous pressure on pension
funds to exit the stock market in a rush . The first out will be the winners .

The Government is well aware of what will happen if all pension funds
rush for the exit simultaneously .
My guess is that pension funds of Government employees are at most risk
since they are likely to be slowest to exit and feel most bound not to
skip first.

Whether the public like it or not legislation will be introduced SUPER FAST
to prevent the exit and force annuities in lieu of payment .

I have no doubt Australians are going to suffer a similar fate .

As for the funds being used for purchase of Treasuries , huh! what funds ?
At an average of 50x earnings current stock market valuations are an illusion
perpetuated by secret government buying and market manipulation .
So if the intention is to fund government debt then it will be future
earnings that are taken as well meaning ZERO ( or close to ) remaining for
future pension funding .

If you possibly can ( with safety ) take it now and become self-employed
in the cash economy where your earnings are invisible .
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Last edited by Ross; 01-09-2010 at 01:24 AM.
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Old 01-09-2010, 12:37 AM   #3
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Default 401k/IRA Screw Job Coming?

401k/IRA Screw Job Coming?

Now this is a guaranteed rape job.

In a short conversation this noontime that CNBC apparently has omitted from their archives (Why's that folks?) Rick Santelli was talking about a potential to effectively force money into the Treasury market.

Where would they get this?

From your 401k and IRA accounts!
From Businessweek:
The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.
Let me tell you what this is - it is an attempt to prevent the collapse of the Treasury market!

Forcing people into Treasuries as an "annuity" is exactly what Social Security allegedly is. Except that Treasury stole the money that was collected in FICA taxes and spent it!

Guess what? They'll do that here too - you're going to "invest" in Treasuries which of course are effectively a CALL option on the future taxing ability of the government.

The problem is that with an aging population and the immigrant problem (illegal immigrants that is), along with offshoring, the aggregate wage base will drop and thus this is the most dangerous investment of all!

What's even worse is that the government has intentionally suppressed Treasury yields during this crisis (and will keep doing so by various means, including manipulating the CPI - the "inflation index" - as they have for the last 30 years) so as to guarantee that you lose over time compared to actual purchasing power.

THIS HAS BEEN THE CASE SINCE THE 1980s AND IT WILL NOT CHANGE!

I have been talking about this for quite some time and recall writing a Ticker on it a year or more ago, although I can't find the entry immediately.

Let me be clear:

I have no quarrel with the government mandating that you have a choice in your IRA or 401k account to buy short-duration Treasuries - much like the "G" fund that government and civil-service workers have.

But - "choices" have a funny way of turning into mandates, and this looks to me like a raw admission that Treasury knows it will not be able to sell its debt in the open market - so they will effectively tax you by forcing your "retirement" money to buy them!

This may be the only way for Treasury to hold down interest rates to something reasonable in the intermediate term, but doing so will instantaneously remove a major source of funding for the stock market - that is, the monthly and quarterly inflows from retirement accounts.

You can bet this won't be good for you, the ordinary American.

You can also bet that once such an "option" is made available there is a very high probability of the government doing things that either promote or simply don't stand in the way of another stock market crash as a means of "herding" your money into Treasuries - so they can blow it - all under the guise of being allegedly "safe".

Of course this begs the question - what if the government can't pay down the road when you retire, just as they can't pay on a forward basis with Social Security and Medicare?

This "proposal" can only mean one thing - Treasury smells smoke. Maybe you should pay attention to what they're huffing!

And before you say "oh they'd never do that" I want you to read this:
Here is a warning to us all. The Argentine state is taking control of the country’s privately-managed pension funds in a drastic move to raise cash.
...
My fear is that governments in the US, Britain, and Europe will display similar reflexes. Indeed, they have already done so.
The forced-feeding of banks with fresh capital – whether they want it or not – and the seizure of the Fannie/Freddie mortgage giants before they were in fact in trouble (in order to prevent a Chinese buying strike of US bonds and prevent a spike in US mortgage rates), shows that private property can be co-opted – or eliminated – with little due process if that is required to serve the collective welfare.
Any questions?

PS: If the video shows up I'll update this ticker.... and if you're wondering what hammered the dollar starting at about 9:00 today, this is probably it. Such a "move" would free the government to further abuse the issuance of Treasuries rather than take necessary austerity steps and places us even further down the road toward a political and economic collapse.

http://market-ticker.org/
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Old 01-09-2010, 12:49 AM   #4
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Old 01-09-2010, 03:59 PM   #5
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A few points:

1. The discussion is 401(k) plans, not IRAs.

2. Annuities are not treasuries. Annuities are sold by insurance companies for a high profit. They want to sell more annuities.

3. Until about 20 years ago, many workers were covered by lifetime annuity plans, called "defined benefit plans." You (and if you selected the option, your spouse) received retirement payments for life, no such thing as running out of money in old age.

The brokerage community pushed for ending lifetime income plans and substituting 401(k)s by advertising to employees that a 401(k) would give workers control of and access to "your own money" before retirement. They pressured employees to pressure employers to change the retirement plans. Brokers get lots more commissions from lots of individuals than from bulk rate investments by employers.

MOST people who leave a job spend the 401(k) money on cars and vacations and gifts for the kids instead of rolling it over. MOST workers today, having already spent most of their "retirement savings" (or not bothered to participate in the 401(k) plan) are headed into retirement with a few years worth of money instead of a lifetime income.

About 5 years ago the finance companies started pushing annuities to employers, "convert your 401(k) plan to annuities instead of allowing withdrawals so workers don't run out of money in old age." But most workers want the cash to spend now, not a lifetime income, so they aren't selecting the annuity option when offered.

And 401(k) account balances are small because people keep withdrawing and spending the money now instead of saving for retirement. Small accounts don't buy annuities paying enough to live on.

The annuity companies, having failed to convince employers and employees to buy annuities, are now trying to increase their income by lobbying Congress to make annuities mandatory, on the grounds that there is a public policy interest in making sure retirees don't run out of money and have to live on subsidized housing, food stamps, Medicare subsidy (if over 65).

The push for annuities has nothing to do with a government plot to take your money, it's the annuity salespeople trying to take your money by lobbying to mandate more profits for themselves by forcing you to buy their product.
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Old 01-09-2010, 05:20 PM   #6
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The push for annuities has nothing to do with a government plot to take your money, it's the annuity salespeople trying to take your money by lobbying to mandate more profits for themselves by forcing you to buy their product.
With respect LizB .....
The push for annuities is very convenient for the government at this time
and ( it seems to me ) has everything to do with government need to prevent a dramatic fall in the stock market and simultaneously assist in financing the government deficit .

Indeed the government has IMO no choice but to push this legislation
through as quickly as possible . Otherwise there will be a disorderly rush
to exit stocks by pension fund managers , IRA holders etc resulting in a significant decline in value held by such funds as they compete to sell down their holdings.

A consequence of that rush will be a plummet in stock market value and
soaring global depression fear . While there is still incentive to exit the
market , paying annuities allows the retirement players to continue holding stock during and after the decline without forcing mass selling and
immediate recognition of the diminished value .

There is evidence that it is the government that is now VERY keen to
see annuities implemented.
Refer the following quote....
Quote:
The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.
It is also most probable that a proportion of future contributions
will be required to be held as government bonds to cover ballooning
Fed and State government deficits .
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Old 01-09-2010, 11:29 PM   #7
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The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.
"Promoting" conversion of 401K & IRA could be another euphamism for simply snatching private funds to become part of a "guaranteed" government program (with a mandatory contribution). If so, the comments that you will hear will be of the sort that are improper to post hear under the rules of proper behavior. It will also shove another large portion of an already restless, frustrated, one could say angry (credit to the ugly little troll Katie Couric) population further into disaffection with the government. How far is the operative question.

Jeff B.
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Old 01-10-2010, 11:15 PM   #8
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Heloooo Argentina...



http://www.retirementsecurityproject...aft99087pm.pdf

Quote:
Over the next few decades, a substantial number of workers will retire with larger balances in their retirement accounts and have fewer sources of longevity protection than retirees today. They, therefore, must manage these resources to ensure they last throughout their retirement – a difficult task that results in many running out of assets too soon while others hoard their savings to a greater extent than necessary. Lifetime income products would benefit many because payments are made for life and thus mitigate the risk of running out of resources late in life, and because they tend to permit a higher monthly payment (while protecting against the risk of exhausting one’s savings) than nonannuity options.

Ponzi just got a new name......


http://jessescrossroadscafe.blogspot...401ks-and.html

Obama Administration Wants to Annuitize 401k's and IRA's - Mandatory "R Bonds"


As a rule of thumb, the worst possible time to convert lump sum savings into a fixed income annuity would be when interest rates are historically low.

Although products may vary, this is roughly equivalent to buying long term bonds at a time when interest rates are likely to increase, substantially reducing your principal in real terms, and eroding your fixed returns through inflation.


For some reason the Obama Administration is promoting the idea now that there should be some encouragement for Americans to start converting their 401K's and IRA's into annuities, to provide themselves with lifetime income.

The effort is being spear-headed by Mark Iwry of the Treasury and Phyllis Borzi of the Department of Labor. Here is a paper written on the subject by Mark Iwry when he was at the Brookings Institution.

The essence of this paper is that distributions from IRA's and 401K's would automatically be rolled into an annuity providing a monthly income by default.

This concept is known on the Street as the handling fees for meager returns pork barrel pigfest. The Fed likes it because they will undoubtedly get a two year rolling chunk of the people's retirement cash to play with.

Perhaps just rolling those 401K's and IRA's into Social Security or the Long Bond would be what they have in mind. Somehow the panacea of TIPS with inflation defined by the government sounds probable. The drawback perhaps is that this would not generate the highest recurring fees for Wall Street and the FIRE sector, which have to be eyeing that 'cash on the sidelines' hungrily.

How about Patriot Bonds that are fully invested in Mortgage Debt formerly owned by the Fed, with some tranches of Commercial Real Estate to add some zest to the recipe? The Treasury can give this option a small tax break, which can be largely consumed by Wall Street fees and mispricing of risk returns.

And I thought that Greenspan's advice for homeowners to step into ARMs into the knee of the housing bubble was foul.

Here's a modest proposal. Raise the amount of losses from investments that can be deducted from income in one year from $3,000 to $20,000 for individuals and $40,000 filing jointly so mom and pop can clean up their balance sheets. And if they really want to jump start the economy, declare a tax and penalty exemption on the first $150,000 that an individual can withdraw from their IRA or 401K in 2010.

And for God's sake fix the Alternative Minimum Tax levels.

Does it seems as though I have barely given this annuitization effort a chance, a fair hearing, the benefit of the doubt, improperly assumed it might not have the best intentions of the American public at heart?

Are you serious? After Healthcare Reform and TARP? These people in Washington and Wall Street have no shame, much less good intentions, common sense, or a conscience. They are strangling the real economy, slowly but surely.

My model for thinking about this annuitization is that the government wishes to appropriate your savings for a 2.0% return, ex fees and mispriced risk and inflation, as a source of funding for the bailouts of an oversized and insolvent FIRE sector (like AIG) and the imploding pretensions of a global financial elite.


"Officials in the Obama administration are moving quickly to develop the investment infrastructure behind the president’s proposal for mandatory automatic enrollment in individual retirement accounts, which could be supported by the creation of Treasury-issued retirement bonds

J. Mark Iwry, deputy assistant secretary for retirement and health policy at the Department of the Treasury, said that administration officials are exploring some “conservative” options for investing the assets of 78 million Americans that he estimates could be automatically en¬rolled in this “universal” workplace retirement system.

He said that officials have discussed the possibility of making a low-risk life-cycle or target date fund the default investment option for these auto-IRAs, which would be mandatory for employers if they don’t offer a retirement plan to their workers.

But there is also a chance that they could rely on a new form of bond — an “R bond” — as the basic building block for the auto-IRA, Mr. Iwry said in addressing reporters at the Treasury Department in Washington last week.

Administration officials are discussing the exact details of these R bonds, such as their interest rates, maturities and minimums, he noted. These bonds ideally would provide individuals with a source of secure, steady returns that would protect their initial investments."

Administration Explores R Bond For Retirement Accounts - Investment News 7 June 2009

Why have a separate "R Bond" instead of those government bonds they have now called 'Treasuries?' And why have a mandatory universal retirement system when you have this thing called 'Social Security?' Think about it.

Sounds like the kind of preparations governments make for things like 'new dollars' after a selective default.

Instead of "Yes We Can" the slogan for the Obama Administration should be "Over One Million Fat Cats Served." And the only difference in the Republicans is the breed of the fat cats whose desires they seek to fulfill. The public has lost its advocacy in Washington, and therefore the integrity of the democratic republic is in peril.

The banks must be restrained, and the financial system reformed, and the economy brought back into balance, before there can be a sustained recovery.


Bloomberg
Retiree Annuities May Be Promoted by Obama Aides
By Theo Francis

The government is looking at ways to promote the conversion of 401(k)s and IRAs into steady payment streams after a significant decline in plan balances

(Bloomberg) — The Obama administration is weighing how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged.

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

Annuities generally guarantee income until the retiree's death, and often that of a surviving spouse as well. They are designed to protect against the risk that retirees outlive their savings, a danger made clear by market losses suffered by older Americans over the last year, David Certner, legislative counsel for AARP, said in an interview.

"There's a real desire on a lot of people's parts to try to encourage something other than just rolling over a lump sum, to make sure this money will actually last a lifetime," said Certner, legislative counsel for Washington-based AARP, the biggest U.S. advocacy group for retirees.

Promoting annuities may benefit companies that provide them through employers, including ING Groep NV (INGA:NA) and Prudential Financial Inc. (PRU), or sell them directly to individuals, such as American International Group Inc. (AIG), the insurer that has received $182.3 billion in government aid...
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Old 01-11-2010, 12:34 AM   #9
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Arrow

I hope Obama and the Dems in Congress try this. It would guarantee they are out of power for at least a decade. When the Repubs then screw up again, there will be no choice other than third parties.
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* I have the right to my private property, thus I have the right to defend my property from thieves who would take it from me.
* I have the right to self-determination, thus I have the right to defend my liberty from tyrants who would take it from me.
* The only usable tools for these tasks are guns, and thus I have the right to shoot anyone who would take my guns from me.
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Old 01-11-2010, 06:10 PM   #10
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I hope Obama and the Dems in Congress try this. It would guarantee they are out of power for at least a decade. When the Repubs then screw up again, there will be no choice other than third parties.
Or a Fascist dictatorship.

Be careful what you wish for.

Gridlock is better.
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