This is not even in the top 1000 of things I am worried about.
I believe that our government is more like Cyprus's than many people think, but the scenario this happens in is absolutely catastrophic and it's unlikely that this would be my top concern in the conditions when it would happen.
I believe that our government is more like Cyprus's than many people think, but the scenario this happens in is absolutely catastrophic and it's unlikely that this would be my top concern in the conditions when it would happen.
The key difference is we control our currency, they don't. Thus we have other options to deal with debt they didn't, which would make seizure pointless.
It would also make our assets rapidly lose value, so you need to be invested to prepare for that scenario, if you think it's plausible, but seizure seems very implausible.
This is not even in the top 1000 of things I am worried about.
+1.
Our government is nothing like Cyprus, and if it was, we'd see it coming quite a long way off.
Some people would be in denial, of course, and still do nothing, but we're nowhere close to that, and there are many, many better ways to deal with our debt.
Other than accelerating the issuance of T-bills (printing money) and devaluing the currency, what options are left? There will be a tipping point at which the debt is unsustainable and the government defaults on its obligations.
Options at that point will be 1) increase taxes (likely on high net worth individuals, aka mustachains), 2) decrease spending (unlikely), 3) raid the cookie jar of tax-advantaged retirement accounts, 4)...?
I've been allocating a great majority of my investments into my employer sponsored 401k for the obvious tax benefits - I plan on being in a lower bracket post-FI than we are currently in.
Recently I have been concerned about potential confiscation of retirement funds/mandatory conversion to treasury notes, etc. It may seem like a theory for the tinfoil hat club but it has happened in several European countries before, and with the unsustainable debt spiral we are currently in, the retirement accounts seem like a prime target for a fat greedy government with a spending problem. All it takes for the game to completely change is the stroke of a pen on some bureaucrat's desk.
Has anyone factored this possibility into their asset allocation strategy? I'd love to hear others' thoughts on it.
It wasn't the government but a private company who legally confiscated my pension. The company I work for was sold and bought by another corporation. The pension I worked toward for 20 years was eliminated and replaced with a much lesser cash value. I'll receive less than half of what I was expecting to receive now. I fear corporations far more that the government now.
I can also envision a scenario where ideological radicals get a hold of nuclear weapons and plant a dirty bomb in a major US city. I think it is a very real concern but I have good reason to believe that the forces of non proliferation are effective.Perhaps seizure is more far-fetched, but I can envision a scenario where the government forces a 401k conversion to T-bills, essentially "nationalizing" the private retirement system. Of course, it would be for the good of the victims, to get their money out of the hands of the greedy Wall Street bankers. I'm sure they would provide you a generous "safe" yield of .5% or even 1% annually.I believe that our government is more like Cyprus's than many people think, but the scenario this happens in is absolutely catastrophic and it's unlikely that this would be my top concern in the conditions when it would happen.
The key difference is we control our currency, they don't. Thus we have other options to deal with debt they didn't, which would make seizure pointless.
It would also make our assets rapidly lose value, so you need to be invested to prepare for that scenario, if you think it's plausible, but seizure seems very implausible.
I believe that our government is more like Cyprus's than many people think, but the scenario this happens in is absolutely catastrophic and it's unlikely that this would be my top concern in the conditions when it would happen.
The key difference is we control our currency, they don't. Thus we have other options to deal with debt they didn't, which would make seizure pointless.
It would also make our assets rapidly lose value, so you need to be invested to prepare for that scenario, if you think it's plausible, but seizure seems very implausible.
I'm not concerned about my money being confiscated as much as I am that tax rates are going to be higher in the future. Maybe wealth confiscation is a bit far fetched but they can certainly change the rules at any time, and I doubt they'd be to the benefit of those with a million plus sitting in retirement accounts.
None of the candidates running for office even seem to have a legitimate plan for balancing the budget either...we have Trump that wants to cut taxes by 9 trillion over the next decade and Sanders that wants to increase spending by 17 trillion over the next decade...neither one of those is possible without the debt increasing, which can't go on forever, or massive increase in taxes which you'd have to be nuts to think won't trickle down to the middle class.
I'm also in a state with income tax at the moment, and I don't plan on this being the case forever...so if my 401k now means no state tax and I can pull it out in an income tax free state down the road from now...that's definitely a huge win. Even if I RE and plan to let the money in my 401k compound a few more years rather than immediate SEPP and an emergency happens...that 10% penalty doesn't seem too bad when I'm sitting in a 6% state income tax bracket now anyhow.
Long story short I don't think you'll ever regret having money in retirement accounts, but I do think people who end up with "too much" in them will end up regretting it as I'm extremely doubtful tax rates will be the same or lower 20 years down the road from now.
It wasn't the government but a private company who legally confiscated my pension. The company I work for was sold and bought by another corporation. The pension I worked toward for 20 years was eliminated and replaced with a much lesser cash value. I'll receive less than half of what I was expecting to receive now. I fear corporations far more that the government now.
It wasn't the government but a private company who legally confiscated my pension. The company I work for was sold and bought by another corporation. The pension I worked toward for 20 years was eliminated and replaced with a much lesser cash value. I'll receive less than half of what I was expecting to receive now. I fear corporations far more that the government now.
That doesn't make any sense - corporations can't reduce the pension benefit you already earned.
I'm not concerned about my money being confiscated as much as I am that tax rates are going to be higher in the future. Maybe wealth confiscation is a bit far fetched but they can certainly change the rules at any time, and I doubt they'd be to the benefit of those with a million plus sitting in retirement accounts.Regardless of the fact that discussing Trump and Sanders as "the options" is hilarious, as neither has a snowball's chance of getting elected, discussing their "policies" is pointless, because neither would have the remotest chance of getting their agenda through if (by some miracle) he got elected. Right now, no candidate is spending time rounding out a budget, because this isn't the time for that.
None of the candidates running for office even seem to have a legitimate plan for balancing the budget either...we have Trump that wants to cut taxes by 9 trillion over the next decade and Sanders that wants to increase spending by 17 trillion over the next decade...neither one of those is possible without the debt increasing, which can't go on forever, or massive increase in taxes which you'd have to be nuts to think won't trickle down to the middle class.
I'm also in a state with income tax at the moment, and I don't plan on this being the case forever...so if my 401k now means no state tax and I can pull it out in an income tax free state down the road from now...that's definitely a huge win. Even if I RE and plan to let the money in my 401k compound a few more years rather than immediate SEPP and an emergency happens...that 10% penalty doesn't seem too bad when I'm sitting in a 6% state income tax bracket now anyhow.
Long story short I don't think you'll ever regret having money in retirement accounts, but I do think people who end up with "too much" in them will end up regretting it as I'm extremely doubtful tax rates will be the same or lower 20 years down the road from now.
I can also envision a scenario where ideological radicals get a hold of nuclear weapons and plant a dirty bomb in a major US city. I think it is a very real concern but I have good reason to believe that the forces of non proliferation are effective.Perhaps seizure is more far-fetched, but I can envision a scenario where the government forces a 401k conversion to T-bills, essentially "nationalizing" the private retirement system. Of course, it would be for the good of the victims, to get their money out of the hands of the greedy Wall Street bankers. I'm sure they would provide you a generous "safe" yield of .5% or even 1% annually.I believe that our government is more like Cyprus's than many people think, but the scenario this happens in is absolutely catastrophic and it's unlikely that this would be my top concern in the conditions when it would happen.
The key difference is we control our currency, they don't. Thus we have other options to deal with debt they didn't, which would make seizure pointless.
It would also make our assets rapidly lose value, so you need to be invested to prepare for that scenario, if you think it's plausible, but seizure seems very implausible.
Consider the old economic framework of expectation value ( EV= P*C where EV is expectation value, P is probability and C is cost). If EV of an event is higher than your trigger value, you have to mitigate. For most people, EV from radical changes to their retirement is miniscule because we have good reason to believe that the fed gov will maintain our current system.
As pointed out, even if EV is high, what're you going to do about it? Stash your gold in my residence, a nuclear fallout bunker ?
I'm not concerned about my money being confiscated as much as I am that tax rates are going to be higher in the future. Maybe wealth confiscation is a bit far fetched but they can certainly change the rules at any time, and I doubt they'd be to the benefit of those with a million plus sitting in retirement accounts.Regardless of the fact that discussing Trump and Sanders as "the options" is hilarious, as neither has a snowball's chance of getting elected, discussing their "policies" is pointless, because neither would have the remotest chance of getting their agenda through if (by some miracle) he got elected. Right now, no candidate is spending time rounding out a budget, because this isn't the time for that.
None of the candidates running for office even seem to have a legitimate plan for balancing the budget either...we have Trump that wants to cut taxes by 9 trillion over the next decade and Sanders that wants to increase spending by 17 trillion over the next decade...neither one of those is possible without the debt increasing, which can't go on forever, or massive increase in taxes which you'd have to be nuts to think won't trickle down to the middle class.
I'm also in a state with income tax at the moment, and I don't plan on this being the case forever...so if my 401k now means no state tax and I can pull it out in an income tax free state down the road from now...that's definitely a huge win. Even if I RE and plan to let the money in my 401k compound a few more years rather than immediate SEPP and an emergency happens...that 10% penalty doesn't seem too bad when I'm sitting in a 6% state income tax bracket now anyhow.
Long story short I don't think you'll ever regret having money in retirement accounts, but I do think people who end up with "too much" in them will end up regretting it as I'm extremely doubtful tax rates will be the same or lower 20 years down the road from now.
I can also envision a scenario where ideological radicals get a hold of nuclear weapons and plant a dirty bomb in a major US city. I think it is a very real concern but I have good reason to believe that the forces of non proliferation are effective.Perhaps seizure is more far-fetched, but I can envision a scenario where the government forces a 401k conversion to T-bills, essentially "nationalizing" the private retirement system. Of course, it would be for the good of the victims, to get their money out of the hands of the greedy Wall Street bankers. I'm sure they would provide you a generous "safe" yield of .5% or even 1% annually.I believe that our government is more like Cyprus's than many people think, but the scenario this happens in is absolutely catastrophic and it's unlikely that this would be my top concern in the conditions when it would happen.
The key difference is we control our currency, they don't. Thus we have other options to deal with debt they didn't, which would make seizure pointless.
It would also make our assets rapidly lose value, so you need to be invested to prepare for that scenario, if you think it's plausible, but seizure seems very implausible.
Consider the old economic framework of expectation value ( EV= P*C where EV is expectation value, P is probability and C is cost). If EV of an event is higher than your trigger value, you have to mitigate. For most people, EV from radical changes to their retirement is miniscule because we have good reason to believe that the fed gov will maintain our current system.
As pointed out, even if EV is high, what're you going to do about it? Stash your gold in my residence, a nuclear fallout bunker ?
This is the only post that made any sense so far. It's wrong to say that the probability of such an event is zero. It also makes me scratch my head when people act as though it is so small that its not worth worrying about. The average age of nation-states is something like 150 years. The chance of a major disruption in the way the United states behaves over the next 50 years obviously isn't 100%, but it probably isn't much less than 10% either.
A lifespan living off of a 401(k) can be a very long time. The 401(k) system probably won't change much in the next 10 years, but you'd be crazy to think it'll be around in 500. Does it have an equal chance of going away every year? Probably not, but pretending that it's a less than 1% chance over the next 50 years probably doesn't make sense either.
In my view the most likely scenario (~20-30% over the next 30 years) is that 401(k)s with over a million dollars in them get hit with some kind of soak-the-rich tax. I don't think its the most likely scenario, but do we really think that the populist rhetoric that's dominated this election season is going to die a quiet death?
I don't have any ready solutions, but it's probably a problem that bears thinking about once you get into a high-net-worth situation.
But you're going to be dead in 500 years. All we can act on is what we know now. There is little to no probability that this will happen now. The odds of you being hit by a runaway car is greater than 0. Do you cower under your bed all day when you realize this?
Thanks Adam Woods. I think the approach I laid out is useful and we all use internalize the theory for everyday decision making.I can also envision a scenario where ideological radicals get a hold of nuclear weapons and plant a dirty bomb in a major US city. I think it is a very real concern but I have good reason to believe that the forces of non proliferation are effective.Perhaps seizure is more far-fetched, but I can envision a scenario where the government forces a 401k conversion to T-bills, essentially "nationalizing" the private retirement system. Of course, it would be for the good of the victims, to get their money out of the hands of the greedy Wall Street bankers. I'm sure they would provide you a generous "safe" yield of .5% or even 1% annually.I believe that our government is more like Cyprus's than many people think, but the scenario this happens in is absolutely catastrophic and it's unlikely that this would be my top concern in the conditions when it would happen.
The key difference is we control our currency, they don't. Thus we have other options to deal with debt they didn't, which would make seizure pointless.
It would also make our assets rapidly lose value, so you need to be invested to prepare for that scenario, if you think it's plausible, but seizure seems very implausible.
Consider the old economic framework of expectation value ( EV= P*C where EV is expectation value, P is probability and C is cost). If EV of an event is higher than your trigger value, you have to mitigate. For most people, EV from radical changes to their retirement is miniscule because we have good reason to believe that the fed gov will maintain our current system.
As pointed out, even if EV is high, what're you going to do about it? Stash your gold in my residence, a nuclear fallout bunker ?
This is the only post that made any sense so far. It's wrong to say that the probability of such an event is zero. It also makes me scratch my head when people act as though it is so small that its not worth worrying about. The average age of nation-states is something like 150 years. The chance of a major disruption in the way the United states behaves over the next 50 years obviously isn't 100%, but it probably isn't much less than 10% either.
A lifespan living off of a 401(k) can be a very long time. The 401(k) system probably won't change much in the next 10 years, but you'd be crazy to think it'll be around in 500. Does it have an equal chance of going away every year? Probably not, but pretending that it's a less than 1% chance over the next 50 years probably doesn't make sense either.
In my view the most likely scenario (~20-30% over the next 30 years) is that 401(k)s with over a million dollars in them get hit with some kind of soak-the-rich tax. I don't think its the most likely scenario, but do we really think that the populist rhetoric that's dominated this election season is going to die a quiet death?
I don't have any ready solutions, but it's probably a problem that bears thinking about once you get into a high-net-worth situation.
But you're going to be dead in 500 years. All we can act on is what we know now. There is little to no probability that this will happen now. The odds of you being hit by a runaway car is greater than 0. Do you cower under your bed all day when you realize this?
Furthermore there are way more many things that the government will and can do other than this one thing.
What's the alternative, to have extra money in taxable accounts and pay tax on it down the road anyway?
Regardless of the fact that discussing Trump and Sanders as "the options" is hilarious, as neither has a snowball's chance of getting elected, discussing their "policies" is pointless, because neither would have the remotest chance of getting their agenda through if (by some miracle) he got elected. Right now, no candidate is spending time rounding out a budget, because this isn't the time for that.
If we're talking about 50% tax rates as a serious possibility, then we have to consider the possibility that capital gains will be taxed by a desperate government as ordinary income. :PWhat's the alternative, to have extra money in taxable accounts and pay tax on it down the road anyway?
Nah, the alternative is to just pay my 25-28% on it today because when I'm pulling it out it may very well be taxed at 40-50%. Don't get me wrong, I contribute to retirement accounts but I plan on throttling it down when I get closer to where I want to be, I want to make sure I don't end up with so much in retirement accounts I have to pull it out at a high tax bracket when I could just have post tax investments earning me dividends getting taxed at capital gains rates, which I'm also rolling the dice will stay significantly lower than income tax rates.Regardless of the fact that discussing Trump and Sanders as "the options" is hilarious, as neither has a snowball's chance of getting elected, discussing their "policies" is pointless, because neither would have the remotest chance of getting their agenda through if (by some miracle) he got elected. Right now, no candidate is spending time rounding out a budget, because this isn't the time for that.
Pick any of the candidates you want and look at their basic proposals, none of them are anywhere near budget balancing....you really don't need a line item budget to tell you that. Unless we can somehow slash spending by 30% or raise taxes massively to offset spending increases it seems like the debt is going to be continued to get added too for at least the next presidents term. I'm going to hate to see what tax rates are like when running up the debt no longer is a sustainable option and we have to balance the budget and start paying it down.
If we're talking about 50% tax rates as a serious possibility, then we have to consider the possibility that capital gains will be taxed by a desperate government as ordinary income. :P
This is the only post that made any sense so far. It's wrong to say that the probability of such an event is zero. It also makes me scratch my head when people act as though it is so small that its not worth worrying about. The average age of nation-states is something like 150 years. The chance of a major disruption in the way the United states behaves over the next 50 years obviously isn't 100%, but it probably isn't much less than 10% either.
FWIW, when IRAs were first created, the law included an excise tax on large accounts (over $1MM or something, I can't remember). The IRA was created to help lower income people save for retirement, and was specifically designed to not be a tax dodge for wealthy people. Hence the excise tax. That's also why there was a $2000 contribution limit.
So it is conceivable they could bring the excise tax back, although I find that unlikely.
I completely agree that tax rates are almost certain to be higher in the future than they are now--as a general matter, not just on the rich/relatively well off. I would not be remotely shocked to see excise taxes return, for some of the "deal" to be pulled out from under the rug of Roth accounts (i.e., if you have X of assets, you get taxed on the withdrawal), and for means testing on social security that will basically reduce it to zero for anyone with any respectable level of assets.
...it has happened in several European countries before,
ps: aren't there laws/constitutional issues against retro-active laws? I.e. changing rules for Roth contributions that have already been made under one legal regime. Recently been reading about Roman republic and even they forbid such laws as they were used for extreme shadyness.
ps: aren't there laws/constitutional issues against retro-active laws?
It is clear there is no absolute constitutional bar to retroactive tax legislation. Nonetheless, it is possible, albeit rare, for retroactive tax legislation that increases a taxpayer’s tax liability to violate the Constitution. |
In this thread: people who don't know how markets work.
The Govt won't seize the cash in your retirement account. Because there is no cash in your retirement account. There are stocks and bonds in your retirement account. The govt would have to find buyers for your assets to exchange for cash. In this scenario, no one would be buying. You may all relax.
But that's putting the cart before the horse. You keep saying there is an unsustainable debt spiral, but is there? The deficit expressed a percentage of GDP has decreased every year for the last six years, down to about 2.8% of GDP last year. While a lot of money, that's not particularly high by historical standards and the trend is that the debt is becoming easier to manage, not harder. If we were to return to roughly Bill Clinton-era levels of taxation, that deficit would be mostly wiped out.You jumped from deficit to debt without much explaination.
In short, the debt is a problem but a manageable one for the foreseeable future.
We are using about 8% of our taxes to pay interest on the Federal debt.
If interest rates rise 2%, we would be spending almost 20% of our tax base to pay interest on the debt.
Saw this article up today...
https://taxes.yahoo.com/post/136676721708/feds-say-gigantic-ira-accounts-are-a-tax-problem
Gave some IRA statistics...
$1 million or less 42,382,192
> $1 million to $2 million 502,392
> $2 million to $3 million 83,529
> $3 million to $5 million 36,171
> $5 million to $10 million 7,952
> $10 million to $25 million 791
> $25 million 314
Basically if you have over a million you are, or are close to, a 1%er in terms of retirement account savings. Don't fool yourself into thinking if the rules change they will be neutral, or in your favor. I'm definitely making use of the benefits of my retirement accounts but I'm going to make sure to not put myself in what will probably be the target population at some point.
Saw this article up today...
https://taxes.yahoo.com/post/136676721708/feds-say-gigantic-ira-accounts-are-a-tax-problem
Gave some IRA statistics...
$1 million or less 42,382,192
> $1 million to $2 million 502,392
> $2 million to $3 million 83,529
> $3 million to $5 million 36,171
> $5 million to $10 million 7,952
> $10 million to $25 million 791
> $25 million 314
Basically if you have over a million you are, or are close to, a 1%er in terms of retirement account savings. Don't fool yourself into thinking if the rules change they will be neutral, or in your favor. I'm definitely making use of the benefits of my retirement accounts but I'm going to make sure to not put myself in what will probably be the target population at some point.
We are using about 8% of our taxes to pay interest on the Federal debt.
If interest rates rise 2%, we would be spending almost 20% of our tax base to pay interest on the debt.
What happens to the value of the bonds when interest rates rise?
We are using about 8% of our taxes to pay interest on the Federal debt.
If interest rates rise 2%, we would be spending almost 20% of our tax base to pay interest on the debt.
What happens to the value of the bonds when interest rates rise?
We are using about 8% of our taxes to pay interest on the Federal debt.
If interest rates rise 2%, we would be spending almost 20% of our tax base to pay interest on the debt.
What happens to the value of the bonds when interest rates rise?
They tend to go down in value.
Now I want to make sure this next part is VERY clear... that doesn't change how much debt the US government has. A 10,000 bond could become a 9,000 bond on the secondary market if interest rates rose, but the US government would still owe 10,000 and that final principal payment would still be par... which is $10,000.