Watch Out Your Government is about to Steal Your Nest Egg

I’ve now read about yet more tinkering with the Australian Superannuation Retirement System and the US 401K Retirement system by your governments.

They just cannot help themselves. This time it is far more dangerous. They want to take control of some or all of your nest egg in the form of an annuity. Read this article, “Why the Government Wants to Hijack Your 401(k).”

The original retirement schemes were set up by governments to force (in Australia at least) people to save for their own retirement. It is known as a defined contribution scheme. The idea being that you contribute to your own retirement in a tax advantaged savings account.

This account was normally with a fund manager who’s job it was to diversity and balance your portfolio of investments so that when you retired you’d have enough to live on without a government pension.

How well has it worked? Not very well at all for you – but great for them.

The usual short-sightedness of governments and their failure to monitor the financial industry effectively has resulted in two major stock market crashes in 10 years resulting in many Baby Boomers losing 30-40% of their nest egg.

The wealth industry only makes “real” money when there is volatility in markets. Just look at how well they have done in 2009. And nothing has changed after the great financial crisis of 2008 – nothing.

But as usual politics gets in the way of objectively analysing what went wrong and fixing it.

Right now governments around the world are strapped for cash. Their bond issues are on the nose, especially those of western governments who have been running up huge Keynesian debts for years. They know this cannot go on. Governments will need your money to pay down their debts and finance the running of their governments.

Printing money will only work for so long before the people demand it be stopped as their wealth disappears under inflation.

Australia actually was in good shape financially until Mr Rudd decided to send us into serious debt – apparently for no good reason.

Your governments are now in the process of putting together some propaganda that says we cannot be trusted to provide for our own retirement. As proof they will point to the losses over the last decade. You will be blamed for not taking enough interest in your nest egg even though it is virtually impossible to get timely and useful information from the funds you are forced to invest with.

Those baby boomer who took responsibility for providing for their retirement will be hit the most.

What your government is now thinking of doing it taking a percentage (or all of it if they think they can get away with it) of your nest egg and placing it in some sort of government guaranteed annuity.

Why would they do this? Well in Australia there is over $1  Trillion locked up in Superannuation. This is too much for the government (especially a Labour Government) to bear. They can think of lots of socially good things to do with that money.

So this idea is gradually being sounded out with the various vested interests and as usual there will be pay-offs to those financial institutions that might “miss out” and a financial gift to those charged with the responsibility of setting up a national annuity scheme.

Private Annuity firms are lining up to try to get some of your money under government legislation.

The financial industry works on a percentage of funds under management so just think how much they are going to get of your money when they have to sell down some of the equities to placing a government annuity?

At each point in the process someone will have their hand in your nest egg pocket stealing a few dollars.

Annuities in and of themselves may be a good idea for part of your nest egg or all of it if you don’t have a big nest egg. But as with any financial product you need to chose the one that suits your personal situation and a government annuity scheme just cannot do that.

However I think the real danger here is just as we all rushed into stocks thinking that was the path to retirement wealth, so too will many rush into a government annuity scheme.

The problem is inflation. This is the next big threat based on the massive amount of money the central banks have created. Even if the government offers an inflation indexed annuity you can be sure if we get run-away inflation the government inflation figure will be massaged by your government. This will result in one thing, you getting less and less money over time.

Another concern is what if you just bought  an annuity and put 30-50% or your nest egg in it and died yesterday (as the insurance guys would say so there is no pressure)? Will your family get the bulk of the money in the annuity or would it just go to the annuity provider – in this case the government. Read, “Your Pension Payout: Annuity or Lump Sum?”

Make no mistake this will be a grab-for-cash by your government and will only lead to your nest egg being depleted or taken from you by force unless you object.

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