Uncle Sam Wants Your Retirement Money Post Election Update
Uncle Sam Wants Your Retirement Plan
Post Election Update
Protect Yourself Before It’s Too Late With These 4 Smart Strategies
By Larry Grossman, CFP®, CIMA®
One of the big topics of discussion at the Offshore Academy conference in Cabo was, "How would the win by Republicans affect the attack on retirement plans". Many of the attendees seemed to feel if the republicans had an overwhelming victory the attacks might stop.
I am here to tell you not only have the attacks not stopped but also they have zeroed right in on your retirement plan. At the very least you had better be prepared for significant changes. A possible disruption of the entire system seems even more likely.
0BYou Retirement Plan WILL Own 100% Treasuries When You Retire
The November 15th issue of UUUPensions & InvestmentsU ran an article called "Pension plan tax breaks facing challenge" by Halonen, D. It started out with the following paragraph-
"Corporate pension industry lobbyists are bracing for an attack on the tax breaks for pension plans as the White House and federal lawmakers struggle to slash the federal budget deficit."
"The Debt Reduction Task Force" fired the first salvo of the attack in its final draft.
The Task Force plan will let most individuals retain the ability to contribute enough to qualified retirement plans to accumulate enough tax-free assets to purchase an annuity that replaces a substantial share of their earnings in retirement. Individuals and employers combined will be able to contribute up to 20 percent of annual earnings to qualified plans, up to a maximum of $20,000 per year, indexed to inflation. However, qualified plans will no longer be a vehicle for wealthy individuals to convert a substantial share of their assets into tax-free retirement assets. In addition, to spur saving by rank-and-file workers, the plan will introduce an expanded and refundable savings credit for taxpayers in the 15-percent bracket."
3BUncle Sam Holds Hearings On "Lifetime Income"
Translation- They are going to drastically cut contributions by more than 50% for many individuals. Some in the industry have predicted this will effectively kill the retirement plan industry. Even more concerting to me is the call for retirement plans to "purchase an annuity". This little sentence speaks to the heart of what is going on and is really frightening to me. It confirms everything I have predicted.
2BUncle Sam Will Tell You When You Can Take Your Own Money
(And they won’t let you take it all at once)
A major step towards the forced purchase of treasuries will come through a fundamental change in the way you take the money out of your retirement plan. The Debt Reduction Dudes want to change the way you do it today by removing all of the flexible withdrawal options you have. Instead they want to force you to withdraw money in equal payments over your remaining life span, known in the industry as a lifetime annuity.
Let me explain- An annuity is a steady stream of income that will be paid to the retiree over the remainder of his or her life expectancy. A 67-year-old male would receive his payments over a 15-year period. Contrast this with the rules in place today which give you the ability to withdraw all of the funds lump sum or as needed after reaching age 59 ½. (The current rules require mandatory distributions begin by age 70 ½.)
4BWhat is the Ultimate Game Plan?
I will guarantee you the government solution for funding an annuity is to have all of your retirement assets purchase treasuries with maturities matched to the payment stream. They have been looking for a way to force your retirement assets into treasuries and this is the first step. My guess is rather than forcing everyone to buy treasuries today, which would start a political firestorm, once you reach retirement age and the lifetime income stream starts they will firstly force you to buy treasuries. Once retirees become accustomed to the new lifetime income stream, it will be an easier transition for the government to eventually require retirees to invest in treasuries as the only allowable investment for retirement plans.
5BExit Strategy For The Boomers
(Capture Their Retirement Assets)
It is a brilliant plan! I admire the creativity while hating the outcome. Think about it, beginning next year the first wave of the 76 million Baby Boomers will begin turning 65 and there will be a ton of money flowing into treasuries each year for the foreseeable future.
Teresa Ghilarducci Wants You To Share The Wealth Through Mandatory Redistribution
They aren’t stopping there though. Our good friend Teresa Ghilarducci is back and she has a plan to help redistribute your wealth. I have been reporting on this part of her strategy as well as others that are equally frightening for several years.
In the November 15th issue of the UPensions & InvestmentsU article previously referenced, Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School, New York, said: "I would roll back the cap to about $5,000 and then redistribute the savings to workers without pensions in the form of a tax credit of $600, and that would be revenue neutral. It would be a lot fairer and would expand pensions to more than 60 million people who currently don't have pensions."
What can I expect if the Attack works?
Get your retirement plan offshore while you still can. They are coming for it and you are running out of time.
They will force you to buy treasures.
You won’t be able to control when you take the money out.
They will look for ways to "redistribute the wealth" which means take yours away.
They will substantially reduce the amount you can contribute to your retirement plan.
Make no mistake about it, Uncle Sam Wants Your Retirement Plan!!
How To Protect Your Retirement Wealth While You Still Can
How to Protect Yourself (While You Still Can)
And your three best offshore options — and the benefits to each — are as follows:
Option #1: Move Your Funds to a Non-U.S. Bank
You’ll get relief from the clutches of greedy bureaucrats, lawsuit-hungry lawyers and data-mining snoops.
Privately trade stocks, bonds, mutual funds, CDs, precious metals and currencies.
Buy into elite mutual funds, managed by analysts who have consistently outperformed their American counterparts.
Option #2: Purchase a Non-U.S. Annuity
Prevent creditors from gaining unwarranted access to your funds.
Participate in investments that are normally unavailable to U.S. citizens.
Hold your assets in a safe offshore haven without violating IRS regulations.
Note: To buy an offshore annuity, you must work with an adviser who has been approved by the insurance company. These investment vehicles are not self-directed — so it’s important to choose an adviser carefully.
Option #3: Form an International Business Company (IBC) or Foreign Corporation
Adds a significant layer of asset protection and privacy to your business (if established in the right jurisdiction).
Can be used to open a foreign banking/trading account, purchase an annuity, make foreign investments directly or purchase real estate.
Physical possession of your funds rests with a non-U.S. company that may not recognize judgments awarded by U.S. courts.
Note: Your IRA would be the owner or member of the corporation depending upon the structure and YOU would be the manager with complete control over where the corporation does business. The custodian will, of course, insist on an annual statement of the corporation’s activities and assets it owns.
6BOption #4: Direct Foreign Investment
In some instances you are able to make a direct foreign investment thereby moving your assets offshore. A good example of this type of investment would be the purchase of real estate in a foreign country. There are other direct foreign investments available to the holders of retirement plans. These types of options continue to dwindle as our government pressures them to become, in effect, extensions of the IRS.
1BDefend Yourself Now!
If I am completely wrong about government nationalization, there really is no downside to moving your retirement plan offshore. After all, even offshore you can still invest in everything you own today.
If I’m right and the government does try to keep retirement plans in the U.S. and, as much as possible, invested in U.S. government securities, you would still be better off moving your account offshore. The logistics involved in trying to force offshore illiquid assets to come back probably won’t justify the expense and time involved. The most likely course of action by the government will be some type of grandfather clause on existing accounts. Your time is limited. Don’t take any chances – there’s no time like the present to liberate your retirement from the potential clutches of the U.S. government.
. Email: lgrossman@
Larry C. Grossman, CFP®, CIMA®
Tel.: (727) 286-6237