Retirement Robbery

It’s not a popular thing to say, but the US is broke. Busted. Bankrupt. If Uncle Sam were a corporation, it would have been declared insolvent decades ago.

Audited financials from the General Accountability Office prove my point. They show that official US government liabilities come to $21.5 trillion. Total assets, including federal lands, national parks, accounts receivable, and the interstate highway system total a little more than $3.2 trillion. The accounts receivable include about $1 trillion or so in student loans – more than 10% of them in default. (And yes, they’re actually listed as an “asset.”)

In case you’re counting, that gives the federal government a net worth of negative $18.3 trillion. (Yes, with a ‘t.’)

But these numbers are just the tip of the iceberg of the federal government’s dismal fiscal condition. Boston University Professor of Economics Laurence Kotlikoff has calculated an incredible $222 trillion “fiscal gap” using figures provided by the Congressional Budget Office. Kotlikoff’s analysis takes into account future projected government expenditures for unfunded mandates like Social Security, Medicare, and military and federal pensions. It

If this plan becomes a reality — and it may, as it has influential backers in both major parties — how likely do you think it is Congress will resist the temptation to tap GRAs for its own purposes? That’s exactly what’s happened to the nonexistent Social Security trust fund. In reality, there is no trust fund — only an obligation backed by IOUs to pay off tens of millions of retirees in the years ahead.

Personally, I think it’s far more likely GRAs will become another piggy bank — ATM may be a better analogy — for Congress to loot. Your retirement funds will be used to prop up dictators in the Middle East, research how people find love (or lust) on the Internet, or on any other purpose legislators find politically expedient.

I’m not predicting an outright confiscation because that would be politically disastrous. Instead, what I think will probably happen is Congress will mandate that a portion of private retirement assets be held in long-term government bonds. That percentage would gradually go up as Congress discovers new things on which it needs to spend money.

The only way out of this mess it to keep as much money as you can out of the clutches of the US government. That means offshore investments, holding gold in secure international private vaults, and saving as much after-tax money for your retirement as you can possibly afford.

Incidentally, I don’t advocate cashing out retirement plans, especially if you’re under 59½ years old. That triggers a 10% early distribution tax, plus you’re taxed (in most cases) on the entire value of the plan. Just don’t place too much confidence in receiving 100% of the value when you actually need the money.

Reprinted with permission from Nestmann.com.

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