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SOVEREIGN MAN

How the US government will seize your retirement account

May 11, 2011
Santiago, Chile

Following in the footsteps of a rather ignominious list of nations like Argentina and Hungary, the government of lreland is set to take its ‘fair share’ of private retirement funds.

Drowning in debt and faced with unpopular, unrealistic, ridiculously unpopular austerity measures, the government has announced that it will now tax private pension savings in order to raise 470 million euros (roughly $675 million) per year… a lot of money in a country of only 4.4 million people.

Somehow, the government expects to be able to create 100,000 jobs to bring down an unemployment rate at 14.7%.  Perhaps they plan on hiring 100,000 new workers to go around the country and collect the tax.

It reminds me of what I saw in Bolivia a couple of weeks ago– there’s a tax or toll or fee for nearly everything you do. Driving on the highway (if you can call it that) outside of Santa Cruz, you pay a toll… obviously not for the maintenance of the road, but to pay the salary of the toll collector.

At the airport, you have to pay an airport tax before departure… obviously not for the upkeep and efficiency of the airport (it took 2-hours to make it to my gate), but to pay the salaries of the guys who collect the airport tax.

This is what politicians consider ‘job creation,’ yet these positions only serve to destroy value.  That they would stick up the retirement funds of hard working people is even more immoral.

Here’s the best part, though. If you are a government worker in Ireland, your pension is exempt. They’re only going after people in the private work force.  It’s truly disgusting logic to force private workers to pay for years of political incompetence while absolving government employees.

Coincidentally, there are a few other loopholes as well, particularly for non-residents and non-resident funds. Apparently those Irish who saw the writing on the wall and got busy moving themselves and their assets offshore will get to keep all of their savings.

Ireland is not the first country to call this play, nor will it be the last. Pension funds are attractive targets for politicians who have wide eyes and the most carnal thoughts at the site of any large pool of cash.

Think it can’t happen where you live? Think again. Late last year, the French government went through an elaborate process to change its pension laws, ‘legally’ allowing politicians to steal retirement funds from the public in order to pay off other debts.

In the US, public pensions have been raided for years, Congress routinely ‘borrows’ from Social Security to make up budget shortfalls.  This is what talking heads mean when they play down concerns of a $14 trillion debt “because we owe it to ourselves–”  $4.6 trillion of the debt is owed to intragovernmental agencies like Social Security.

Chances of this money being repaid to Social Security in full? Slim.  The trend is more debt, not paying off existing debt. In fact, I’m convinced that politicians have their eyes firmly fixed on the trillions of dollars in private, individual retirement accounts (IRAs) in the United States to fund new spending.

Here’s how it will go down:

First, there will be some event… some sort of financial cataclysm, similar to the market meltdown we saw in 2008 after Lehman.

Bear in mind that most IRAs are managed by boneheads at big financial institutions; they get compensated not based on the performance of their portfolio, but on the total amount of assets under management.  Your interests and their interests do not align.

As such, most IRAs are callously tossed into S&P index funds or some such generic vehicle, citing the safety of broader market diversification, as if that nonsense they teach in MBA finance classes is how the real world actually works.

When a big crash occurs, these unhedged broad market positions get hammered the most. Don’t worry though, your fund manager will still get a big fat bonus check, because his performance is irrelevant.

This is when Congress will step in. Citing its desire to ‘protect’ the American people from future market shocks, the politicians will mandate that a portion of all managed retirement funds be invested in the ‘safety and security’ of US Treasury bonds. And, just to be on the safe side, let’s park them in 30-year bonds that yield 4.35%.

Sound fair? Well who asked you anyways… just be a good citizen and turn over your money already. The important part is that the big financial institutions still get their big fat fees, and the government gets its hands on the mother lode.

This is how US taxpayers will end up being forced to loan their hard earned retirement savings to the government at rates far below any expected inflation.

Right now, there is a window of opportunity to take action; US taxpayers with retirement accounts can set up a special kind of IRA structure that allows you to take control of your retirement savings, and even ship it offshore if you want to, completely legitimately.

After taking control of your IRA, you can do any number of things– buy and store gold and silver coins overseas; hold foreign currencies in an offshore bank account; buy securities on international stock exchanges; purchase agricultural property overseas, or even a beautiful apartment on the beach in some sunny country.

The possibilities are incredible… but the most important thing is that you get this retirement money off the radar of the politicians before they pull an Ireland and announce some new measure, virtually overnight. These things can happen very, very quickly.

I’ve talked about this before a number of times, and every time I read the news of yet another country taking this approach, it serves as a reminder to take action.

If what I’m saying makes sense to you, my recommendation is to check out Terry Coxon’s book on this subject, Unleash your IRA.  As one of the world’s foremost experts on this strategy, Terry walks you through the process of protecting your retirement savings quickly and legitimately. You can read more about it here.

I’ll be out tomorrow looking at some fantastic deals on agricultural property in Chile’s beautiful Central Valley, stay tuned for more.

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

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Comments on this entry are closed.

  • yt

    I currently have a self-directed Roth with Ameritrade. While not as flexible as an open opportunity IRA these types of accounts don’t seem vulnerable to this kind of government intervention. Am I missing something?

  • austexhm

    Simon–I agree that the USG is likely to go after retirement accounts in coming years (months?). Having researched the issue carefully, I now know how to set up a self-directed checkbook IRA LLC and to move the funds offshore; bit of paperwork, but no real problem.

    What I do not fully understand is how such an offshore structure will protect my IRAs from confiscation via 30-year Treasuries any more than holding them in the USA would. The feds will know who has what in IRAs — all they have to do is levy a full-disclosure requirement on all of the U.S.-based custodians, then follow the trails of depreciated dollars overseas.

    Even if my offshore SDIRA LLC has invested fully in non-cash assets like real estate, what would prevent the government from putting the muscle on me and others to get liquid and invest X percent of my account in Treasuries, under all sorts of nasty penalties or consequences that only they can dream up?

    I may be missing something here, or I just don’t get it. Please address this issue asap in one of your public blogs, as I’m ready to begin the offshore SDIRA LLC process.

    Many thanks for all you do.

    • Govmann

      I am considering the LLC IRA and have been for awhile. CAn you tell me how the process has been for you?  

  • http://www.mynotetakingnerd.com/blog Lewis LaLanne – NoteTakingNerd

    Simon, you’re a god send.

    Making people conscious of this BS via your experience traveling abroad is a blessing to those who use their common sense to understand it.

    My hope is that your message reaches the masses to help call these thugs out on the schemes. But then again, in societies where the majority wants something for nothing, these schemes always sound righteous and dignified.
    Who will win the war?

  • VoxFox

    Why do you think there are these types of pension-grabbing exemptions? Perhaps, it’s for the fat-cats who have been living off the backs of the working people for years (not just gov. types).

  • http://profiles.google.com/jamesld30pct178 James LD30PCT178

    I hate these twitter comments. They are just links back to this article. We don’t need to see that, go tweet on your own page.

  • Omega64

    I’ve heard of moving your IRA offshore, but what about 401K’s? Can that be legally moved into a self directed IRA? Any direction on this would be greatly appreciated.

  • http://a308539.myopenid.com/ Allen

    I don’t understand how moving the funds in an IRA overseas is going to protect them from the US government, which would simply require one to repatriate the funds, correct?

  • Gbarnett

    Simon,

    Thanks for exposing what will probably happen in the future in the U.S. I have been warning clients about this for a long time. I think you are exactly correct.

    I would mention that the government doesn’t really raid Social Security because it doesn’t exist. ALL funds collected go directly to the general fund, and have been spent before they arrive. In addition, 2 trillion more dollars are spent in excess of this amount. There is no such thing as a Social Security Trust Fund. That is a myth. The only existing account has worthless IOUs, and the only way to pay those is to print money out of thin air or take it directly from current taxpayers. That of course would cause a monetary depreciation, or monetization, rendering that fund completely worthless. The government cannot raid something that doesn’t exist in the first place.

    All my best to you,

    Gary D. Barnett
    President/Barnett Financial Services, Inc.
    Lewistown, Montana
    USA

  • Looking

    I would also like to know how one could actually avoid confiscation since the USG would know exactly where one’s money is, even if it is overseas. I’m assuming that would involve moving your money out of said financial vehicle and into another offshore account. If that is even possible without the money being repatriated first? (Those with these account should be able to answer?). And since the g-men will be pissed off once you do this, one basically have to just get out of dodge himself/herself and never step foot on US soil again.

    • Indostocks

       Buy something in the US which is equably as salable abroad. Then take this item with you abroad and convert the sales proceeds into such instruments that you can deposit into an account.
      I doubt that “sovereignman” wants to provide any clearer details due to concerns about legality of same.

  • stevor

    The “cataclysm” that will cause this in the USA is likely WWIII, which we’ve been trained to accept the inevitability of for decades.

    I already plan to take my IRA out next April and put it into silver, but what about my 401k? It’s got a lot more money. I’d love to put it in silver, too, but I guess I’d have to withdraw it, which would be a “taxable event”, and pay a large portion in taxes (but that still might be better than losing it altogether in the long run).

    If anybody KNOWS about such things, I’d appreciate a reply.

    • Jbuckner-cpa

      You can roll your 401k over into a self-directed IRA unless your company set up restrictions on such roll-overs.   You should check this out now, before things change.  Just make certain that you have the 401k fiduciary write a check to the fiduciary that will hold your IRA assets.  Do not have funds paid to you!  As long as it’s a fiduciary-to-fiduciary transaction there are no tax consequences.

    • Shedingdog

      Faced with this dilemma, I chose to take a loan from my 401K. I then bought silver. Since my workplace has the usual menu of limited, underperforming funds, this seemed like the best solution. I’m now paying the loan back with depreciating dollars, while my physical silver appreciates. Ultimately, the best solution would be to quit the job and roll the 401K into a self directed IRA, for maximum control. This is something I hope to accomplish soon.

    • Libertylover

      Stevor, I also have 401k to deal with…a good information source…go to Republic Broadcast Network. Search around and find Jeffery Bennett, you can get some valuable info. there.
      I just turned 59 and am not waiting…Take your own money while you still can.  

    • Wellth

      you can do a custodian to custodian transfer with no tax consequence, and then put it into silver. You would need to do this with a good trust company who allows you to do this like Summit Trust, Pensco, etc.

  • shirley williams

    robert sayes your ss tax money is spent by the Government on things like stress partys like the top ceo,s spent a cupple of years ago they spent a bit over 8 million dollars on a stupid party with we the working peoples Retirement money and that will never be paid back and now there wanting to tax the same workers stolin ss tax money that the ss ceo,s stole to party on there is no difference in state or local governments there all corrupt thives not to be trusted. 

  • GMT

    The situation in Argentina was different. The Government took all the money from private retirement accounts because the retirement companies were doing a disastrous work with the people’s money. The commissions were excessively high, the retirement companies used the money to play with their sisters companies assets. Basically they used the money from retirements to improve their own companies, no matter if the profits for people were good enough.

    • 1stAv

      And I’m sure the government managed the people’s money far better… 

  • Steve400

    One way to avoid this is to remove the funds from your tax deferred retirement accounts (if you are age 59.5 or older), pay the tax, and use the money to pay off your indebtedness.   If under age 59.5, then you face the 10% penalty plus the tax, unfortunately.  This will generate an income stream by the fact that you no longer have to make monthly payments (assuming the fund values are >= your indebtedness).  You will ultimately pay some tax on the $$$ anyway.

    • nomadcapitalist

      I for one have never seen the point in an IRA anyway. Do you really think the government won’t change the rules in the 40+ years from when you start saving to when you retire? Anytime the government has direct access to what you’re doing, you’re in trouble.

  • Gawaine

     do u happen to have any actual facts that support what u say ? like do u have government documents from Bolivia showing where the toll money goes? do u have the same documents regarding the airport ? I would almost bet money u dont :) and just saying I took 3 years of logic and umm how on earth do u go from What u say is happening in Ireland to u knowing the the US government will follow Ireland??  your argument although very interesting does not, logically anyways, pan out … thats like saying bluejays eat oranges a pigeon is also a bird so it must eat oranges….it’s not a logical conclusion given the facts that u have laid out …just saying:)  

    • Guest

      Gawaine wake UP–see NJ and NY and Penn especially NJ where you are NOT ALLOWED to pump your own gas as that would take a govt job from the mandated govt pumper at the station. Also the tolls in NY to NJ ($40 +) for a truck to cross a bridge ONCE!! and the bridge is a potholed JOKE. So it’s not road repair the toll supports it’s the toll takers, (govt job) that you are paying for and his her retirement  healthcare etc. Think and leave home and  REALLY LOOK AROUND for what is really going on.   

  • http://twitter.com/BeeSmirch Bee Smirch

    We shouldn’t assume Congress would have the power to mandate anything as contraversial as this article suggests following a “financial cataclysm, similar to the market meltdown we saw in 2008 after Lehman”. As it stands, the U.S. economy simply could not survive another such event. We’d be looking at the total collapse of the global economy and probable civil revolt. Those who hold the opinion that such a “financial cataclysm” is in fact on the horizon may want to question whether buying a book on IRAs is practical…
     

    • Mitch

      The collapse is comming. And so is revolt to whatever extent I do not know. But you are going to be asked to leave your homes to FEMA camps for food and safety. The camps will unfortunately be akin to Nazi death camps. The government is gearing up for war with the American people. It has purchased 8 billion with a B rounds of hollow point ammunition for the Homeland Security department alone. The IRS is hiring thousands and they also have purchased rifles, pistols and shotguns … (evidently they are going to step up tax collection to a new level). Anyhow, I have no easy answers… but the United Nations is going to war with the American people using our own government against us. I suggest you prepare to fight the best you can… or be subjected to death in a camp or extermination in your own home. Either way war is comming to your front yard soon.

  • Johnson25

    To get these Pension Funds on time the employer makes regular contributions to the plan to fund the participant’s future benefits.These are really very beneficial for everyone.

  • http://www.newportrentalsnj.com No Fee Apartment NJ

    Hi, 

    Its brilliant topic guys that HOW THE US GOVERNMENT WILL SEIZE YOUR RETIREMENT ACCOUNT. I also want to know more about it.

  • http://federalhumancapital.wordpress.com/2011/09/29/federal-hiring/ federal hiring

    Hello. .
    Simon
    This is really the perfect topic for the post. This is the topic that will grab every ones eye to your blog. So as mine.
    Thanks,
    Andy

  • YT

    Are you serious with this crap?  

    It is one thing to dislike the current administration but another to be a racist asshole about it.  Go troll somewhere else. 

  • jane doe

    ha ha move to another county with a small child and medical conditions even if we did move how will we earn income or get jobs there what about the reliability of electricity and other utilities that are needed if you need insulin or a c-pap machine looks like most of us are sorry out of luck

    • Sharnewman

       It does help to speak the language, but Chile’s medical system is on par with the levels the US were at in 2007. Not bad. I’ve been here for 3 years. It is not the third world. I suppose we did have a one hour power outage one time here in the capital.

    • Savagecolombia

      This isn’t 1776 anylonger.  Those that gather for a revolt on the Concord Bridge will be systematically wiped out by a Drone driven by some pencil necked geek at Foggy Bottom!   Come on people………. do you really think you can go to arms like 1776??  IMHO, get real and be smart.  Start setting yourself up to live a great life and leave your heirs a true legacy!

  • http://n1ghthawk75.myopenid.com/ Dilbert

    If those idiots in Washington pull this BS, we are going to revolt, and it’s not going to be pretty.

    • Mike

      Just like the other 100 things they were going to revolt about…

  • Timetogo


    from each according to their means, to those according to their needs ” 

    • http://www.facebook.com/james.morency1 James Moe Morency

      You know who says crap like that? People who want YOUR money! Get a friggin job, keep it til you find a better one, repeat step two that is how I got ahead. I started with nothing worked my ass off. I’m not friggin close to rich, probably never will be, but what I got, I earned, and I can look at myself in the mirror and say, I DID build that! I am a non union carpenter, and I could never join a union because they don’t let you get anything done. They have a million reasons to stop production, and the damn politics involved, I just want to do my job. Get some self respect, it is priceless

  • Cjohnsondies

    pathetic post mate!  get a life, buy a book, and go back under the rock you came from.  truly an embarrassing member of the human race. 

  • http://www.PeteSisco.com/ Pete Sisco

    Bingo! This will be one of the biggest cash grabs Congress can do and it’s a virtual certainty once the ship starts to go down. It’s the behavior of a junkie who will stab you and take your wallet just to get one last fix on the way out. There is little doubt in my mind this will happen, I just don’t know if it will be in 12 months or 12 years. But one look at the graph of the total national debt and you can see it’s inevitable. All the rest of us can do is work like beavers to stash something away where it can’t be taken from us by the addicts.

  • Wellth

    If you have an IRA at Ameritrade, it is not truly self directed. Can you buy real estate with it, notes, private equity, etc? If not it is not self directed. Yes you can roll 401k , 403b, and other plans to SDIRA. You can also set up a self directed 401k if you are an entrepreneur with earned income from a business you own with no employees who work more than 1000 hr.

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