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Jake
9th February 2010, 16:34
Insurers Test Market as Obama
Opens Door for 401(k)s (Update1)
http://www.businessweek.com/news/2010-02-09/insurers-test-market-as-obama-opens-annuity-door-for-401-k-s.html
February 09, 2010, 11:07 AM EST
By Margaret Collins
Emphasis: Jake
Red Comments: Jake
http://patdollard.com/wp-content/uploads/obama.png
Feb. 9 (Bloomberg) -- Insurers and mutual-fund companies are starting to sell retirement accounts with built-in annuities in response to concerns Americans will outlive their savings.

President Barack Obama on Feb. 1 called for a change in government rules to allow adding annuities to 401(k) retirement plans. While the annuities offer a steady stream of income in exchange for upfront payments, the price for peace of mind may be higher fees and less access to cash.<--Better For Govt<---They Will Steal Your Money And You Won't Be Able To Do A Thing About It

“You’re paying for a benefit that you may or may not use,” said Glenn Daily, a fee-only insurance consultant, referring to annuities. “These things are so complicated I doubt many people will understand what they’re buying.”<--Of Course They're Complicated, Minds Full Of Mush, Who Voted For Obama Are Too Stupid To Ask The Right Questions About These Anuities.

MetLife Inc. and Prudential Financial Inc., the two largest U.S. life insurers, are aiming to tap into what may become a $1 trillion market by blending annuities with target-date 401(k) funds, which shift to more conservative assets such as bonds as an investor nears retirement. The funds were used as the default investment by 87 percent of retirement plans in 2008 with automatic enrollment, according to Vanguard Group Inc.

Insurers are working with mutual-fund companies to build the guarantees into 401(k) funds because state laws require an insurance charter to sell annuities.

The income guarantee that insurers and mutual-fund companies are developing lets workers pay for an annuity in installments using their regular contributions to retirement accounts, said Garth Bernard, chief executive officer of the Boston-based Sharper Financial Group, which specializes in retirement income solutions for financial companies.

Fund Scrutiny

Legislators have scrutinized target-date funds because some lost as much as 41 percent in 2008. The funds attracted $45 billion last year, up from $28.7 billion in 2006, according to Chicago-based Morningstar Inc.

“It’s a huge market,” said Tom Johnson, senior vice president in New York Life Insurance Co.’s retirement income security business, of the potential for annuity/retirement accounts. Americans held $6.8 trillion in 401(k) plans and IRAs as of September 2009, according to the Investment Company Institute, a Washington-based mutual fund trade group. If 15 percent of those assets went to guarantees, it could mean more than $1 trillion for insurers, Johnson said.

“We believe guaranteed income is important because it locks in a level of retirement income,” said Jamie Kalamarides, senior vice president of retirement solutions for Prudential, based in Newark, New Jersey. “Most Americans aren’t saving enough.”<--People aren't saving enough because they are taxed to death or their company can't compete and they've been laid off. Lower taxes and people will save more. Saving Money is the People's business anyway if they want to save, not some Govt Bureaucrat.

Prudential, MetLife

Prudential and MetLife have already introduced income guarantees designed for target-date funds. Investment-management firm BlackRock Inc. is offering to employers a target-date fund with a MetLife annuity as the fixed-income component, said Kristi Mitchem, head of New York-based BlackRock’s U.S. defined contribution.

Asset manager AllianceBernstein Holding LP is working on a similar product with multiple insurers including Axa SA, while Putnam Investments LLC expects to announce a lifetime income benefit for its 401(k) funds this year, the companies said. John Hancock Financial Services, a unit of Manulife Financial Corp., has a guaranteed lifetime income benefit available in some of its 401(k) plans, said spokeswoman Melissa Berczuk in an e-mail.

Fidelity Investments, the largest target-date fund provider, offers employers a 401(k) fund with an annuity through insurer Genworth Financial Inc., said Michael Doshier, vice president of the Boston-based company’s workplace investing group. Vanguard is also exploring income stream options within its retirement plans, said spokeswoman Linda Wolohan.

Two Forms

The types of guarantees being developed vary and have trade-offs, said Bernard of Sharper Financial. One type has relatively high fees and another prevents retirees from liquidating their savings once they start receiving monthly income, he said.<--Who wants an investment where you can't withdraw YOUR money?

Annuities and guaranteed income benefits in retirement plans can be an important safeguard against outliving savings as more Americans fund their own retirement, said Moshe Milevsky, a finance professor at York University in Toronto. Combining them with target-date funds is a concern, he said.

“Let’s not get carried away,” said Milevsky, who specializes in insurance. “To say that we are going to lever these guarantees on top of target-date funds that have not been fully tested yet, I’d be wary.” The Department of Labor endorsed target-date funds as a default investment option for employers in 2007.

The Treasury and Labor departments started reviewing public comments this month on how to make it easier to convert savings into lifetime income streams.

Government Guidance

“Many plan sponsors would like explicit guidance from regulators,” said Tom Idzorek, chief investment officer at Ibbotson Associates, a unit of Morningstar. A government endorsement would create “a rush of sponsors trying to add these to plans,” he said.

Last year, 4 percent of employers offered a plan that allowed participants to allocate a portion of contributions to an income guarantee, according to Callan Associates Inc., which surveyed 90 plan sponsors with more than $100 million in assets. The previous year, the total was 3 percent. Employers are concerned about cost, portability and how to pick an insurance provider, said Lori Lucas, defined contribution practice leader for the San Francisco-based investment-consulting firm.

Annual fees for guarantees in 401(k)s can be 95 basis points or more above the retirement plan’s investment-management fees, she said. A basis point is 0.01 percentage point.

Hard to Transfer

“Those fees may reduce account values by 7 percent to 9 percent over 10 years,” said Drew Denning, vice president of retirement and investor services at Principal Financial Group Inc. The Des Moines-based firm, the fourth-largest provider of target-date funds, recommends investors wait until retirement, when they know their financial circumstances, before deciding to shift a portion of their savings to an annuity, Denning said.

Employers also are concerned that guarantees will prevent employees from exiting their retirement plans if they transfer jobs, said John Carl, president of the New York-based Retirement Learning Center, which consults plan sponsors.

“The portability of these contracts at this juncture is minimal between insurers,” Carl said. “You’re essentially locked into the program you choose -- or are defaulted into.”

That’s because an insurer calculates its annuity payments based in part on the life expectancy of a pool of individuals holding such contracts, which makes it harder to switch from one insurer to another, Carl said.

Company Solvency

Solvency of the offering company is another impediment, said Robert Toth, an attorney who specializes in retirement plan products and services.

“How do you make a decision that the insurance company will still be here 30 years from now?” said Toth, who is based in Fort Wayne, Indiana. “Employers fear making that choice and being responsible.”

Longevity insurance, another type of income guarantee, may be a better, cheaper option for protecting against outliving savings, said Daily, the New York-based insurance consultant. Longevity insurance guarantees future monthly income typically around age 80 and may be less expensive because “you’re only buying the tail end” of the benefit, Daily said.

“Why should you take the plunge now instead of waiting?” said Daily. “Some of these guarantees are so hard to value that you have to be an economist to figure it out.”
Whatever you do, never opt-into these anuities. They won't let you withdraw your money, they carry ridiculous fees, reduce the amount of the principal and if any principle is left, the Govt gets it.

Jake
10th February 2010, 19:08
Prepare Now to Protect Your 401Ks
By: Ron Holland
Posted on February 8, 2010
http://projectworldawareness.com/2010/02/prepare-now-to-protect-your-401ks/
http://usa.altermedia.info/images/dictator_obama2.bmp
Prepare Now to Escape Obama’s Retirement Trap
As the United States moves into a new decade of military overreach abroad and national bankruptcy at home, Washington is in a desperate search for more revenue and a solution to the future financing of the trillions in national debt obligations currently held by foreign central banks and investors. Economists, politicians and smart investors know the dollar’s days as the world reserve currency are numbered as is our ability to finance the national debt.

Although the historical government solution to unsustainable government debt loads has always been the destruction of the debts by currency depreciation and eventual hyperinflation, there is always an intermediate step used to buy more time for the politicians in power. This action, usually sidestepped and downplayed by the establishment historians paid to hide the real facts of history is wealth confiscation. Napoleon had it right when he stated, “History is a state of lies agreed upon.”

The largest source of liquid private wealth remaining in the United States are the $15 trillion in private retirement funds and the ultimate ownership, control and future of these funds have already been compromised and exchanged for the favorable tax treatment of private retirement plans. Congress writes the laws, so they can tax, penalize, hold your funds hostage and although they’d never use the word, “confiscate” your assets at their discretion.

The retirement trap I’m writing about is only a proposal at the present time and since it may well begin in the latter years of the Obama Administration assuming the Democrats can somehow maintain their majorities in Congress, I’m calling it the “Obama Retirement Trap”. But make no mistake, the government need for current revenue and their frenzied search for a short-term fix to fund a backstop of liquidity to buy future government debt obligations when no credible investors will buy them is an unspoken quest of both political parties. The establishments of both political parties will do anything to stay in power and this will include raiding and pillaging your retirement funds.

Washington Proposals For A Mandatory Guaranteed Retirement Annuity

The government is getting ready to use that power and in a remarkably cunning way.

The prototype for their plan was devised in 1991 by Alicia H. Munnell, then Director of Research for the Federal Reserve Bank of Boston. She presented the idea in a paper entitled “Current Taxation of Qualified Pension Plans: Has the Time Come?” Later she was promoted to Assistant Treasury Secretary, and along with Robert Reich, Henry Cisneros and Hillary Clinton, she began to plot a raid on retirement funds. One element of the scheme was to create a Mandatory Pension System and fund it with a one-time 15% tax on retirement assets and a recurring 15% tax on retirement plan income.

I warned about this in my 1994 book, “Escape the Pension Trap”. Fortunately, the GOP election victory that same year derailed the Mandatory Pension System.

Guess what? It’s back… and nicely repackaged. It’s back because, due to slumping tax collection, Washington is on a desperate search for a new revenue stream. And this time they don’t want to just tax your retirement assets, they’re out to take them.

Teresa Ghilarducci: The New Architect of the Retirement Plan Wealth Attack

The latest leftist plan first appeared in 2007 at the Economic Policy Institute: Agenda for Shared Prosperity. In 2008, she became the new Director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research. In her book, “When I’m 64: The Plot Against Pensions and the Plan To Save Them” she hypes her retirement solution for millions who do not have adequate retirement savings and her solution is to confiscate most of the retirement assets of successful Americans.

"When I'm Sixty-Four is an excellent book . . . and makes a bold and workable proposal."--Clive Crook, Chronicle of Higher Education

During a Seattle radio interview on October 27, Ghilarducci explained the motive behind the plan, stating, “I’m just rearranging the tax breaks that are available now for 401(k)s and spreading - spreading the wealth.”

Unfortunately, as we have again painfully learned in light of the Federal Reserve’s refusal to identify where $2 trillion of taxpayers’ money has gone, governments that propose “spreading the wealth” under socialist-style financial reforms almost always collect the wealth under the pretext of being the saviors before greedily hoarding it all for themselves.

http://freespeech.vo.llnwd.net/o25/pub/images/teresa.jpg
Ghilarducci let slip the true agenda being the move in her testimony before Congress and also acknowledged that social security payments are a form of taxation when she stated, “Should we mandate savings in a recession? Yes, as long as fiscal policy provides for short-term stimulus. No one is proposing we suspend Social Security taxes in recessions

“Not only does Ghilarducci promote Peterson’s call for mandatory savings, she also fesses up to the crime that is our Social Security system. Social Security is not the mandatory retirement savings plan it was sold as to the American people. It is simply another tax. Ghilarducci admits the bait and switch in one breath and in the other proposes the next bait and switch. Except, this time it will be different.”

Would the government risk a widespread revolt and potential riots by confiscating 401(k)s and IRAs? They probably wouldn’t brazenly do it under that banner, but in the name of financial reform and saving the economy, Americans could find their voluntary retirement savings stolen and replaced by a government promise of a completely devalued mandatory savings account.

Think of it as an ATM for the government. Part two would be confiscating current 401Ks and IRAs and rolling them into the GRAs. Knowing that could be very politically unpopular (riots, perhaps?), Ghilarducci said, “Short term, I propose that since 401(k) accounts and the like are financial institutions — the bank about where 38% of the workforce can intend to save for their retirement — Congress let workers trade their 401(k) and 401(k) - type plan assets (perhaps valued at mid-August prices) for a Guaranteed Retirement Account composed of government bonds (earning a 3% return, adjusted for inflation).” —- “Short term”? And surely, we’ll all “retire” on 3% (or less) returns.”

Jake
10th February 2010, 19:16
Prepare Now to Protect Your 401Ks (PART 2)
http://img222.imageshack.us/img222/9031/obamavisionfa6.jpg
Here's Her Plan
Each year, the government will put $600 into a Guaranteed Retirement Account for you and every other working person in America. If $600 amounts to more than 5% of your annual compensation (if you earn more than $12,000) you will be required to contribute 5% of your total annual compensation to the GRA. The Feds will promise to pay a 3% “inflation adjusted return” on each GRA, based on the government’s Consumer Price Index. When you retire, you receive a portion of the account each month. Then — get this – when you die, your heirs receive only 50% of what’s in your GRA. The rest goes to Uncle Sam. Remember, this is the good news!

Next…
Following the introduction of Guaranteed Retirement Accounts, the next step will be to cap the tax deduction for annual contributions to existing private retirement plans at 5,000. (Many Americans will support this, given the hostility to the well-publicized Wall Street mega-bonuses and retirement plans.) Next will be a tax on every retirement plan’s income, to provide an immediate flow of revenue to the Feds. Finally, there would be a prohibition on buying any non-U.S. investment for any retirement plan.

What Would Spark this Nationalization?

A plan this radical can’t just be slipped through Congress. It can only ride into law on a first-class national crisis. Have you noticed that somehow the politicians are always able to find one when they need one.

- Loss of Triple-A Status for U.S. Treasury Bonds

The loss of triple-A status for Treasury bonds is the most likely trigger. And according to Steven Hess, Moody’s lead analyst for the U.S., it’s not that far-fetched. He states, “The AAA rating of the U.S. is not guaranteed. So if they don’t get the deficit down in the next 3 to 4 years to a sustainable level, then the rating will be in jeopardy.”

- Terrorist Attack or Military Disaster
A terrorist attack or a military disaster like the collapse of Pakistan or an Israel/Iran conflict and disruption of oil shipments could close American markets just as we saw in 2001. That would create a financial crisis over night.

- Another Economic Meltdown
After years of deficits, the greatest hazard to our economy is a run on the dollar and on Treasury securities by foreign investors. Although America’s foreign creditors don’t want to start a run on Treasury debt – they prefer a slow, orderly retreat — no one intends to be the last to head for the exit. Political or economic pressure in Asia could force Japan or China to take immediate action and dump our debt and knock the prices down to fire-sale levels.

What happens if China decides to cut its losses on U.S. Treasuries and issues a $100 billion sell order? That’s only 10% of their holdings, but it could set off panic selling of dollar-denominated bonds and crush the U.S. stock market like an egg shell. Mortgage rates would spike, which would suck the housing market into another air pocket. The President would probably sign an Executive Order closing the markets until order could be restored.

Any of those events would take place in an atmosphere of deep public worry and fear. That’s when Washington would come to your rescue and guarantee to restore your retirement funds back to a “pre-crash” level. How nice, right? However, in exchange you would need to “voluntarily” move your retirement assets into your new Guaranteed Retirement Account.
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For those who don’t sign up for a GRA because they’re not fooled by the carrot, there would be sticks to consider.

1. Additional withdrawal penalties and taxes on their retirement plan.

2. Limitations on permissible investments — nothing that isn’t “in the public interest.”

3. Mandatory minimum holdings for targeted investments, such as Treasury obligations.

Remember, these retirement proposals are just in the discussion stage but progressives are promoting this confiscation agenda to the Obama Administration as a new source of revenue for a bankrupt federal government desperate for additional sources of revenue.

When the next economic or stock market crisis hits, your retirement assets will be at risk from this type confiscation effort regardless of whether the Democrats or Republicans are in control.

The Confiscation Event

At some time during the next decade, a global run on treasury debt and the dollar will also likely take the American stock market down past lows not seen since the financial meltdown crisis in 2008 and 2009. The 50% to 75% stock market pullback during the actual bankruptcy of the Washington debt and paper dollar will send shock waves through retirees and current plan participants as their private retirement plan balances plummet.

At this time, Washington will come to the rescue and guarantee all private retirement plan market values back to pre-crisis levels. The gullible American public will overwhelmingly support this effort by switching their dwindling funds into the Guaranteed Retirement Annuity managed by the government. For the first few years, Washington will probably label those few of us who warn that that Americans have lost their retirement benefits as extremists, Ron Paul paranoids and Tea Party advocates.

Then it will become crystal clear to all Americans that their retirement benefits have been given away for a promise by an evil group of plunderers who have never in their history kept a promise, a guarantee or their word on anything. The greatest theft of wealth in the history of the world will have taken place and only those few who heeded an early warning will still have their retirement benefits and security.\

The Pension Confiscation move in Argentina sent stock markets plummeting with critics accusing the government of stealing the pensions to get their hands on extra money at a time of economic crisis, as citizens protested across the country.

RDJ
10th February 2010, 19:37
First, they're trying the soft approach. If that doesn't work, they'll make it mandatory-contribution like Social inSecurity. Sooner or later the cash outflows for unfunded liabilities will be so high they'll be forced take everything like Argentina. Next, hyperinflation.

Google: "Mark Iwry", he's the mastermind of the confisication plan.

I cashed out one account a couple weeks ago. Liquifying the rest now. Taxes suck but will be higher in the future no doubt.

-RJ

Jake
10th February 2010, 19:48
First, they're trying the soft approach. If that doesn't work, they'll make it mandatory-contribution like Social inSecurity. Sooner or later the cash outflows for unfunded liabilities will be so high they'll be forced take everything like Argentina. Next, hyperinflation.

Google: "Mark Iwry", he's the mastermind of the confisication plan.

I cashed out one account a couple weeks ago. Liquifying the rest now. Taxes suck but will be higher in the future no doubt.

-RJ

You cashed out your IRA right?
The only way to "cash out" your 401k is to leave or be laid off from your job
http://www.womens-finance.com/401k/cashout.shtml

"For example, if you have $15,000 in your 401(k) and decide to take a lump-sum distribution after you leave your job, you'll lose the benefits of tax deferral and the potential opportunity for investment gains worth tens of thousands of dollars. Assuming an eight percent annual return, that same $15,000 could reach nearly $70,000 in just 20 years.

Additionally, taking a distribution can mean you'll get socked with a 10 percent early-withdrawal penalty as well as federal and state income taxes. If you're in the 27.5 percent tax bracket, federal taxes and penalties will add up to a large bite-$5,400 before state taxes-of your $15,000 distribution. "

akak
10th February 2010, 20:39
You cashed out your IRA right?
The only way to "cash out" your 401k is to leave or be laid off from your job
http://www.womens-finance.com/401k/cashout.shtml

"For example, if you have $15,000 in your 401(k) and decide to take a lump-sum distribution after you leave your job, you'll lose the benefits of tax deferral and the potential opportunity for investment gains worth tens of thousands of dollars. Assuming an eight percent annual return, that same $15,000 could reach nearly $70,000 in just 20 years.

Additionally, taking a distribution can mean you'll get socked with a 10 percent early-withdrawal penalty as well as federal and state income taxes. If you're in the 27.5 percent tax bracket, federal taxes and penalties will add up to a large bite-$5,400 before state taxes-of your $15,000 distribution. "



"ASSUMING an eight percent annual return ... in 20 years ...."!

Wow, is that rich! And if I assume pigs had wings, they could fly too!

(I'm not attacking you here, Jake, just the idiotic rote repetition of discredited financial "advice" from the last decade that has no pertinence to the realities of today's financial landscape.)

gottago
10th February 2010, 21:34
"ASSUMING an eight percent annual return ... in 20 years ...."!

Wow, is that rich! And if I assume pigs had wings, they could fly too!

(I'm not attacking you here, Jake, just the idiotic rote repetition of discredited financial "advice" from the last decade that has no pertinence to the realities of today's financial landscape.)

$10,000. worth of shinny trinkets now or government issued Alpo later???

tough decision, huh.....

RDJ
10th February 2010, 23:31
yea, cashed out one of the IRA's. Working to liquidate another one. 401K is the problem as you''ve noted. Not paranoid, just don't trust the gov't to not change the rules to thier benefit.

Sitting on the cash is better than waiting on a dream.
-RJ.

Jake
11th February 2010, 13:26
yea, cashed out one of the IRA's. Working to liquidate another one. 401K is the problem as you''ve noted. Not paranoid, just don't trust the gov't to not change the rules to thier benefit.

Sitting on the cash is better than waiting on a dream.
-RJ.

The only way to cash out and not pay them a penalty is to do it after you reach 59-1/2.
That's the trouble with being young.
The other way is to quit(after you're fully vested)...take the distribution...roll it into an IRA and wait until you reach 59-1/2. You never get out of paying taxes.

I hope they don't raise that age limit...Then everyone will riot in the streets I think.

Jake
11th February 2010, 13:31
"ASSUMING an eight percent annual return ... in 20 years ...."!

Wow, is that rich! And if I assume pigs had wings, they could fly too!

(I'm not attacking you here, Jake, just the idiotic rote repetition of discredited financial "advice" from the last decade that has no pertinence to the realities of today's financial landscape.)

Absolutely!
Thanks for pointing that out...This is the mentality of the Broker/Mutual Fund Manager/Banker. Sucker you into fabulously high rates of return, then raise fees and penalties.

It's a two-edged sword...You contribute for years, get employer contributions for free if you stay long enough to become fully vested, delay taxes. Then, when you get close to 59-1/2, the country collapses.

What a world we live in!

akak
11th February 2010, 17:25
Absolutely!
Thanks for pointing that out...This is the mentality of the Broker/Mutual Fund Manager/Banker. Sucker you into fabulously high rates of return, then raise fees and penalties.

It's a two-edged sword...You contribute for years, get employer contributions for free if you stay long enough to become fully vested, delay taxes. Then, when you get close to 59-1/2, the country collapses.

What a world we live in!

That's why I completely cashed out of my 401k and IRAs in 2008 --- I just didn't know where taxes or even the ability to cash out early itself might be in another 2 or 3 years, but my assumption then and now are that the former will certainly be higher before very long, and that the latter will most likely be restricted if not eliminated not far down the road as well.

DaBrownsRPhat
11th February 2010, 17:41
Absolutely!
Thanks for pointing that out...This is the mentality of the Broker/Mutual Fund Manager/Banker. Sucker you into fabulously high rates of return, then raise fees and penalties.

It's a two-edged sword...You contribute for years, get employer contributions for free if you stay long enough to become fully vested, delay taxes. Then, when you get close to 59-1/2, the country collapses.

What a world we live in!

*** Puts envelope on forehead ***

Takes your hopes and dreams and emotions and uses them against you along with your trustfulness for their own selfish, sometimes personal gain. .......

*** opens envelope ***

The government