Sunday, April 10, 2011

Government and Retirement Plans

Posted by Bionic Mosquito on 4/10/2011 7:56:58 PM

@Jeannie Queenie

"I am not a NON productive citizen as a retiree.... I DID MY JOB AND A DAMN GOOD ONE"

When I use the term "non productive" I use it in a quite value-neutral manner. A productive person produces goods and services desired in a free market. A non productive person does not.

So non productive can include individuals for whom being productive is not an option, due to some physical or mental shortcoming. It can include someone who is no longer active in a productive capacity, after a lifetime of being tremendously productive. I make no negative statement regarding such people.

On the other end of the spectrum, non productive can include professions that would not exist, or to nowhere near the extent they currently exist, absent the coercion of the state: military personnel, defense contractors, university professors, lawyers, most government positions, etc., are some examples.

Or professions that would exist without the state, but without the excessive compensation made available only due to state involvement: the most egregious example is what passes today for bankers. But you could include lobbyists as another example.

So, by my definition, retirees are, at least to a large extent, non productive. There is nothing wrong with this, as long as they saved over a lifetime (or are supported by family) and do not demand sustenance via coercion.

Non productive as I define it is value neutral. The number of people producing goods and services desired in a free market is shrinking, or not growing as fast, as the number of non productive people that are not producing such goods and services.

So no need to yell at me!

"Are you saying that most boomers are so bereft in brains that they will just lay down and play dead after putting monies into their 401Ks for 10, 20, 30 and even 45 years...."

They will volunteer the next time the stock market falls by 50% or more, and the government offers the chance to come in to the government endorsed investment option at your previous high-water mark.

Start with defined benefit pension plans. These are administered by boards with a fiduciary duty. A typical plan might have hundreds of millions to hundreds of billions in assets. With the next market correction, they will lose half the value. Now the government says: "give us the assets, and we will credit your beneficiaries with the high water mark as the coming in position." As a board member with fiduciary duty and potentially personal liability for taking the "wrong" decision, how would you respond? If they give the assets to the government, there is no way they will be held liable for the decision in a government court. But if they don't? How will they defend themselves in those same courts? They did not take advantage of making the beneficiaries whole? A no-brainer for these board members. They will hand the assets (and obligations) to the government

Now, as an individual with a 401K or an IRA, how would you respond? Three years from retirement, and your assets fell from $500K to $200K. Or, five years into retirement? The government will give you credit for $500K, the previous high water mark.

Most will convert voluntarily. It will buy a few years time for the state, once again delaying the required bust, and ensuring it will be even larger.

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