# US Government Planning to Confiscate 401K/IRA Accounts? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [February 12, 2010, 2:11pm UTC](https://boards.straightdope.com/t/us-government-planning-to-confiscate-401k-ira-accounts/528702 "2010-02-12T14:11:37Z")\ **Posts on this page:** 5\ **Page:** 3
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [February 14, 2010, 4:41am UTC](https://boards.straightdope.com/t/us-government-planning-to-confiscate-401k-ira-accounts/528702/41 "2010-02-14T04:41:19Z")
> [@Richard\_Parker](#): > > The disconnect here is almost comical. I’ll let someone else explain it, if anyone cares. What’s comical about members of congress attacking individual incomes? What’s comical about members of congress talking about taxing 401K’s at a higher rate? ---
**Author:** ![Algorithm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/algorithm/32/12204_2.png) [@Algorithm](https://boards.straightdope.com/u/Algorithm)\ **Post date:** [February 14, 2010, 5:17am UTC](https://boards.straightdope.com/t/us-government-planning-to-confiscate-401k-ira-accounts/528702/42 "2010-02-14T05:17:38Z")
> [@Magiver](#): > > And the other cite that I gave showing a legislative desire to tax 401k’s for more money didn’t register? It doesn’t show that, though. The only thing in there is a quote from McDermott’s press secretary saying such ideas are “intriguing”, and a quote of dubious origin regarding stagnant savings rates despite the tax breaks afforded to those investing in 401(k)s. The second quote is alternatively attributed to Miller or McDermott, depending on what newsblog you read. Wouldn’t “legislative desire” amount to laws being proposed? Can you cite any proposed law that would change the tax status of 401(k)'s? ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [February 14, 2010, 5:48am UTC](https://boards.straightdope.com/t/us-government-planning-to-confiscate-401k-ira-accounts/528702/43 "2010-02-14T05:48:01Z")
> [@Algorithm](#): > > It doesn’t show that, though. The only thing in there is a quote from McDermott’s press secretary saying such ideas are “intriguing”, and a quote of dubious origin regarding stagnant savings rates despite the tax breaks afforded to those investing in 401(k)s. The second quote is alternatively attributed to Miller or McDermott, depending on what newsblog you read. > > Wouldn’t “legislative desire” amount to laws being proposed? Can you cite any proposed law that would change the tax status of 401(k)'s? No, I only submitted that legislators discussed it. When you consider the rate that the national debt is growing there will be a point when politicians begin to seriously focus on large taxable assets. Currently we’re looking at debt of over $45,000 per person. for each additional trillion in debt it goes up $3,000. I’m not trying to be an alarmist but debt can’t continue to climb indefinitely and something will have to give. ---
**Author:** ![Iridescent\_Orb](https://avatars.discourse-cdn.com/v4/letter/i/9de053/32.png) [@Iridescent\_Orb](https://boards.straightdope.com/u/Iridescent_Orb)\ **Post date:** [February 14, 2010, 5:56am UTC](https://boards.straightdope.com/t/us-government-planning-to-confiscate-401k-ira-accounts/528702/44 "2010-02-14T05:56:05Z")
**fruitbat’s** post (#25) is great. One other type of annuity that is getting attention recently is the delayed or deferred annuity. For example, an annuity that you buy at age 65 but that does not start paying you until age 85. These are generally quite cheap to purchase, as (1) the annuity provider gets to invest and grow your purchase price for 20 years, (2) you might not live until 85, and (3) even if you do, you might not live much past 85. So, why the heck would you want to buy such a product? Because it solves the problem of an uncertain lifespan. Let us say you buy an deferred annuity that pays enough money to live on once you reach 85 (and lasting until you die). As mentioned above, the cost will be relatively low (vs. an annuity that starts paying at age 65). Your remaining wealth can be spent in its entirety over the intervening 20 years. It is much easier to plan for a fixed time frame than an uncertain time frame, and you will typically be able to enjoy a much higher standard of living as a result. The downside is that you may die before age 85, in which case your heirs would have been better off had you not bought a deferred annuity. In that sense, the deferred annuity is insurance to protect you from the “problem of living too long” (yes, economist do use this phrase), and like all insurance you lose money if you never use it. Of course, your heirs would be best off financially if you died as soon as you stop working… 😉 ---
**Author:** ![Fuzzy\_Dunlop](https://avatars.discourse-cdn.com/v4/letter/f/848f3c/32.png) [@Fuzzy\_Dunlop](https://boards.straightdope.com/u/Fuzzy_Dunlop)\ **Post date:** [February 14, 2010, 3:52pm UTC](https://boards.straightdope.com/t/us-government-planning-to-confiscate-401k-ira-accounts/528702/45 "2010-02-14T15:52:39Z")
> [@fruitbat](#): > > It is absoutely critical to understand the difference between variable annuities and income annuities. Variable annuities are mutual funds in an insurance wrapper sold by financial firms. They tend to be very expensive and unsuitable in most cases for the great majority of investors. They use the insurance component to promise some worst case scenario to protect you against market decline. > > Income annuities are nothing you need to consider until you are actually approaching retirement. What they are is a contract between you and an insuarance company to pay you so long as you, or you and your spouse are alive. So let’s say you have $500k in your IRA. You could hand over $200k to the insurance company in exchange for $1100 a month for as long as you live. That $200k is now gone. It has been replaced by what is, in effect, a pension. > > An earlier poster said it wasn’t worth it unless you lived a long time. That is generally true. The attraction of this arrangement is that even though you know the insurance compnay will ‘win’ in the aggregate, you still benefit. It is very hard to guard against the possibility that you might live much longer than the average. The annuity will protect you, and you are basically getting the dollars from the people who died earlier than expected. > > Imagine you had that same $200k and you are 65. You start drawing money from it. You have to be very careful and maybe draw $850 a month, not knowing when you will die. When you die your heirs get the remainder, but during your life you are taking less to guard against longevity. So taking $1100 rather than $850 in exchange for not passing the remaining balance on to your heirs can be attractive. The Economist ran an article 2 weeks ago about efforts to create a capital market to hedge against longevity risk: [http://www.economist.com/businessfinance/displaystory.cfm?story\_id=15453033](http://www.economist.com/businessfinance/displaystory.cfm?story_id=15453033) [QUOTE=The Economist] Demand for ways to offload longevity risk is increasing, particularly in Britain, which has lots of annuities and defined-benefit pensions. Solvency 2, a pending set of rules governing European insurers, is one source of pressure: it will force annuity providers to hold more capital against unhedged longevity risk. Pension schemes, fed up with filling in deficits only to see them widen again, are desperate to manage away as much risk as they can. Many schemes have now hedged against interest-rate movements and inflation; longevity is the next thing on the list. [/QUOTE] [Previous page](https://boards.straightdope.com/t/us-government-planning-to-confiscate-401k-ira-accounts/528702.md?page=2)