Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
Bitcoin Price Rises Higher Than Gold… But Its Value Is a Different Story - 30th Mar 17
Critical Fibonacci Extensions May Mark End Of Trump Stock Market Rally - 29th Mar 17
Ending Syria’s Nightmare will Take Pressure From Below - 29th Mar 17
Charts That Reveal US Real Employment Status and It’s Not Good - 29th Mar 17
SNP Controlled Scottish Parliament Demands Right for Scotland to Commit Suicide - Indyref2 - 29th Mar 17
USD Gold Myriad of Signs - 28th Mar 17
Ominous Social Trends That Will Shape Our Future - 28th Mar 17
Foundation And Empire: Is Donald Trump The Mule? - 28th Mar 17
Top Ten US Dollar Risks - 27th Mar 17
The Popularity of Gambling and Investing Amongst Students - 27th Mar 17
Is Political Betting on the Rise? - 27th Mar 17
US Stock Market Consolidation Time - 27th Mar 17
Russia Crisis - Maps That Signal Growing Instability and Unrest - 27th Mar 17
Goldman Sachs Backing A Copper Boom In 2017 - 27th Mar 17
Foundation – Fall Of The American Galactic Empire - 27th Mar 17
Stock Market More Correction Ahead - 27th Mar 17
US Dollar Inflection Point - 27th Mar 17
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

American Retirement Funds at Serious Risk of Being Seized

Personal_Finance / Pensions & Retirement Dec 07, 2010 - 09:44 AM GMT

By: Jeb_Handwerger

Personal_Finance

Best Financial Markets Analysis ArticleThe news of Hungary effectively seizing private pension fund assets to pay for the debt obligations of the state last week should come as yet another reminder of the urgent need to get tax-sheltered retirement savings away from the clutches of the state before it's too late. Hungary is just the latest country to decide that it's citizens retirement savings are the property of the state.


The last major country to use similar tactics was Argentina who confiscated about $3.2 billion of pension savings in 2001 before the country stopped servicing its debt and then nationalized the $24 billion industry two years ago to compensate for falling tax revenue after a 2005 debt restructuring.

On November 24th the Hungarian government gave its citizens an ultimatum: move your private-pension fund assets to the state or lose your state pension. Economy Minister Gyorgy Matolcsy announced the policy, escalating a government drive to bring 3 trillion forint ($14.6 billion) of privately managed pension assets under state control to reduce the budget deficit and public debt. Workers who opt against returning to the state system stand to lose 70 percent of their pension claim.

Americans who think "this can't happen here" may want to think again.

In September of this year the US Treasury investigated the possibility of requiring retirement funds to hold a percentage of government securities in their investment portfolio. That, in effect, would be a nationalization of 401ks and IRAs.

And don't think for a second that the US is in better financial shape than Hungary.

The moves in Hungary were prompted by large annual budget deficits and a large debt to GDP ratio. So, let's compare Hungary's deficit and debt to that of the US.

First, a warning: Accept the US governments own financial statistics at your own risk. Federal debt, unemployment and CPI, just to name a few, bear no resemblance to reality.

The federal debt, as proclaimed by the US government is stated to be $13.8 trillion but just subjecting federal government numbers to Generally Accepted Accounting Principles (GAAP) shows a true debt, if accounted for properly, of $71 trillion as of 2009.

In 2009 the US GDP was $14.26 trillion. Therefore, the debt to GDP ratio of the US is 497.89%.

Hungary's 2009 GDP was $128.96 billion and their national debt was $93.36 billion for a debt to GDP ratio of 72.4%.

That doesn't look so good for the US. How about the budget deficit as a percentage of GDP?

Hungary posted a budget deficit of 4% in 2009. Meanwhile, when accounted by GAAP standards, as calculated by Shadowstats.com, the total deficit in 2009 was $4.3 trillion. Compared to a GDP of $14.26 trillion the 2009 budget deficit as a percentage of GDP was 30.15%.

Considering that Hungary was downgraded today by Moody's to Baa1, close to a "junk" rating, and the US' debt to GDP ratio is five times worse than Hungary's and the US budget deficit as a percentage of GDP is more than 7 times worse, those with retirement savings in the US should quite easily see the writing on the wall.

Gold made an all-time high of $1423.40 today, also clearly showing the writing is on the wall for the entire US dollar based financial system.

Keeping retirement funds inside of tax-sheltered accounts, which the US government will soon look to as the next source of funds to try to pay off its mountain of debt and keeping retirement funds in US dollar based "assets" is putting your retirement and future at great risk.

Grab your free 30-day trial of my Members-Only Premium Stock Analysis Service NOW at:
http://goldstocktrades.com/premium-service-trial

By Jeb Handwerger

http://goldstocktrades.com

© 2010 Copyright Jeb Handwerger- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Alex Kovacs
09 Dec 10, 15:35
RE: American retirement

The Hungarian government is not "nationalizing" the private pension plans in the sense that term is usually understood.

The current administration is reversing a law implemented by a previous rival admistration. That old law allowed employers to make contributions into private plans rather than to the state pension system (US equivelant of Social Security payments.) The reversal to the old law would simply give workers the choice to opt out of the state pension system entirely by staying with their private plans, but they would not lose any benefits from past contributions. The monies collected from the private plans, thus far, would be used to plug the deficit in the states pension plan, not for other sxpenses.

Unlike in the US, 401ks and IRA's were plans intended to be in addition to Social Secirity, the old Hunagrian law diverted funds away from the state pension system, thus leaving it with a deficit. Had some of the state pension contributions not been diverted into private plans in the first place (via the old law) there would be no deficit in the state pension sysytem now. In Hungary the money in the state pension system cannot be used for anything other than pension payments! Further, no past contributions that effect future worker's benefits made to the state system will be lost if one chooses to stay with the private plan.

The choice belongs to the individual worker to either opt out of the state system entirely (and give up any benefits from FUTURE contributions only) by staying in the private plan or to have his private plan contributions revert back to the state system.

It is true that states like Argentina often raid private coffers. However, It is not likely that it will happen in the US. 401ks might be at risk for some kind of capital controls. IRAs most likely not. Roth IRAs, no chance, as they have already had the taxes paid on them.

Thanks for the article.

Alex Kovacs


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife