The Next Shoe to Drop: IRA Grab Being Set Up NOW–Heads Up! (UPDATE 1X)

~~By InsightAnalytical-GRL

Over the last couple of days I’ve received a couple of regular newsletters from pretty reputable places mentioning an article in Business Week about the growing buzz about plans to get people to shift their IRAs and 401Ks into “income streams/annuities” under the auspices of the crowd in Washington, D.C.  Following the link from both emails resulted in a link that went to a weird Business Week page that looks like a sitemap , but NOT the article in question…a very unique way of scrubbing? (*see rediscovered link with title change, Update below)

Here’s part of what one of the newsletters quoted from the missing article:

Jan 8th:

http://www.businessweek.com/news/2010-01-08/americans-oppose-initiatives-limiting-401-k-choices-ici-says.html

4th paragraph down reads:

“The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.”

I don’t have time to poke around as much as I would want now, but I wanted to direct you to a blog which is on top of this and has provided links to various other articles that have appeared in recent months, including those from Bloomberg, as well as analysis from Karl Denninger.

Please check out this post dated January 13, 2010 from the Finance Blog:

Converting 401k and IRA Funds Into “Steady Payment Streams”

Part of the post quotes the January 8 story from Bloomberg.com, which is still available. It seems the Business Week article picked up the story from Bloomberg, since the snippet from the newsletter reads the same.

Retiree Annuities May Be Promoted by Obama Aides (Update2)

By Theo Francis

Jan. 8 (Bloomberg) — The Obama administration is weighing how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged.

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

Guess who’s involved looking out for all of us??   Starts with an A…

Annuities generally guarantee income until the retiree’s death, and often that of a surviving spouse as well. They are designed to protect against the risk that retirees outlive their savings, a danger made clear by market losses suffered by older Americans over the last year, David Certner, legislative counsel for AARP, said in an interview.

“There’s a real desire on a lot of people’s parts to try to encourage something other than just rolling over a lump sum, to make sure this money will actually last a lifetime,” said Certner, legislative counsel for Washington-based AARP, the biggest U.S. advocacy group for retirees.

Oh, yeah and guess who else is taking their piece?

Promoting annuities may benefit companies that provide them through employers, including ING Groep NV and Prudential Financial Inc., or sell them directly to individuals, such as American International Group Inc., the insurer that has received $182.3 billion in government aid.

MAY BENEFIT????   You have to be kidding…And, AIG, AGAIN???

The article continues discussing how people just aren’t putting much money into annuities so they have to be “encouraged.”

There’s a bit of concern being raise, however:

Asset managers are concerned the government may go too far in encouraging annuities, said Mike McNamee, a spokesman for the Investment Company Institute. Seven in 10 U.S. households would object to a requirement that retirees convert part of their savings into annuities, according to a survey the group released today.

“Households’ views on policy changes revealed a preference to preserve retirement account features and flexibility,” the institute said in a report.

But there’s puzzlement, too:

The institute also said annuities have received support from academic research and “it is unclear why individuals usually forego the annuity option” even when it is available. The survey didn’t ask about potential efforts by the government to encourage voluntary use of annuities.

Of course, in the next sentence, the question is answered:

Annuity sales to individuals have come under regulatory scrutiny in recent years over the size of sales commissions and whether some varieties are suitable for older investors.

So, who’s pushing this idea?

One proposal raised by Iwry as co-author of a paper while at the Retirement Security Project, before joining the administration, has reached Congress. A bill requiring employers to report 401(k) savings both as an account balance and as a stream of income based on an annuity was introduced on Dec. 3 by Senators Jeff Bingaman, a New Mexico Democrat, Johnny Isakson, a Georgia Republican, and Herb Kohl, a Wisconsin Democrat.

WOW, bipartisanship!!

And, this crap may not be a product of the Obama crowd alone…Chuck Butler, President of EverBank, and the author of the Daily Pfenning newsletter (one of the two newsletters I received that are discussing this) writes:

Well… A reader sent me a report from May of 2008, where a Washington Think Tank came up with this idea of taking a piece of our pie…

I can’t vouch for this information so I will try to track it down.  But if it’s true, then the idea was around during Bushco…and, if so, then it means this is another example of the continuity into Obama World.

In the meantime, also check out the analysis of Karl Denninger at Market Ticker in a post entitled “401k/IRA Screw Job Coming?” He mentions CNBC’s Rick Santelli’s belief that this is all about forcing money into the Treasury market and then he concludes:

Let me tell you what this is – it is an attempt to prevent the collapse of the Treasury market!

And he goes on to discuss the risks all this portends for the future.

Read it and weep…

****

UPDATE

*One of the newsletters just popped into my mailbox and they’ve discovered the missing Business Week link, complete with a title change, by the way…from

“Americans Oppose initiatives limiting 401 k choices ICI says”

to:

“Retiree Annuities May Be Promoted by Obama Aides”

Notice the change of emphasis??????

Here’s the story:

Retiree Annuities May Be Promoted by Obama Aides

http://www.businessweek.com/investor/content/jan2010/pi2010018_130737.htm