Is Your Retirement Really Yours?

I saw this article a few days ago.  Could it happen here?  Of course not.  We don’t do that here in America, right?  Well, normally we don’t.  Of course, we didn’t used to bail out big companies, either.  What might it look like if the U.S. were to confiscate IRAs?

All the hullabaloo started when the idea of Government Retirement Accounts was floated.  For more information on the logic behind them, go here.

Aside from the fact that government should not be in this business, there is an imminently practical reason to be skeptical.  In any plan for realizing a return on some money, there must be a mechanism for making that money.

If I were to offer you a plan under which new investors were the sole source of profits, I would soon be in jail–that is a Ponzi scheme.  Social Security is a Ponzi scheme.*  The money you and I get, if we get it at all, will come from our children and grandchildren (essentially, new investors).  We have juiced them but good.

If I were to offer you a plan under which you were to realize a return on your investment through legitimate means, you would probably want to know how the “extra” money was to be made.  No matter what instrument I were to offer, behind it there must be a business or a set of businesses.  The “extra” wealth does not come from bonds or stocks themselves, but from creations of the human mind.  Without that, no true wealth is created and there is nothing extra to distribute.  The paper instruments represent the wealth, but they are not the wealth itself.

If the government itself were to handle your retirement, similar rules would apply.  If it were to pay back in real money, businesses would have to be behind it somewhere–the government itself does not create wealth. They do not have to do that, though.  They can create the money.

By now, the cat is out of the bag.  More citizens realize that printing money will eventually lead to inflation, so it is unlikely that the government would do such a thing openly.  Rather, they would likely require us to invest in an annuity-like instrument guaranteed by the government.  In name, these would be private entities.  In fact, they would be thinly-veiled extensions of the long arm of Washington.

How would Washington pull this off without upsetting the apple cart?  The way they always do–by generating or taking advantage of–a crisis!  We all want a guaranteed retirement.  Government tells us we can have it.  Because we are too lazy to figure things out for ourselves, we believe them.  Our dream, which was a fantasy to begin with, starts to unravel and we march like cattle to slaughter as government steps in to “save” us.

“Saving” us usually means that those of us who are starting to get our noggins in gear and are building a retirement shielded from governmental incompetence will be asked (did I say “asked”–I meant forced) to contribute our retirement to the common cause.

Many of us who counted on IRAs and defined-benefit plans are starting to wake up to the fact that Oz is just a place in a movie.  Anyone reading my blog regularly is already (hopefully) pretending that his/her retirement in its present form does not exist.  Ditto for Social Security.  Instead, they are educating themselves on investments, new businesses, and other ways to survive when they either cannot or do not want to work anymore.

We can survive this, but we must do so in spite of government’s attempts to help us.  When they come after the nest egg you worked so hard to build, you will have to be smarter than they are.


*It is doubtful that anyone in government will be prosecuted for Social Security.

About Terry Noel

I am an Associate Professor of Management and Quantitative Methods at Illinois State University. My specialty is entrepreneurship.
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