People’s retirement savings are a convenient source of revenue for governments that don’t want to reduce spending or make privatizations. As most pension schemes in Europe are organised by the state, European ministers of finance have a facilitated access to the savings accumulated there, and it is only logical that they try to get a hold of this money for their own ends. In recent weeks I have noted five such attempts: Three situations concern private personal savings; two others refer to national funds.The most striking example is Hungary, where last month the government made the citizens an offer they could not refuse. They could either remit their individual retirement savings to the state, or lose the right to the basic state pension (but still have an obligation to pay contributions for it). In this extortionate way, the government wants to gain control over $14bn of individual retirement savings.
The Bulgarian government has come up with a similar idea. $300m of private early retirement savings was supposed to be transferred to the state pension scheme. The government gave way after trade unions protested and finally only about 20% of the original plans were implemented.
When counseling clients on the propriety of transferring retirement funds to Roth IRA's I advise clients that there's no guarantee that these funds will remain tax free. Now I have to tell them they may not be there at all.
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1 comment:
Oh it could very easily happen here. And it could be done in a much more devious and sneaky way. It's called means testing. Means testing is openly discussed as a way to make social security cuts.
To the average Joe means testing seems fair. If you have the means to retire on yor own, you shouldn't also receive social security benefits. But to the trained eye, means testing is a back door way to raid private retirement accounts.
How? You just have to look at the end result. You neighbor gambles, parties and spends every penny of every paycheck. At age 65 he is tested and deemed to have no means. OTOH, you make sacrifices and save for retirement your whole life. At 65 you will be tested but deemed to HAVE means. You will be disqualified from the social security benefits your neighbor gets, unless you hand over your IRA. The net financial result is the same as having your IRA raided.
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