For several years now, many whistleblowers have warned that Uncle Sam won’t be able to keep his hands off personal retirement. The tax-break encouragement to set aside retirement savings has resulted in a pretty sizeable nest egg out there.

Movements to gain from the savings of the people of a country is nothing new. We already see how it’s done as pension plans have defaulted in some cases, both private and public: American Airlines, United Air, Prichard, Central Falls, AT&T, Verizon and many others are included in the list of those who have defaulted, reduced or are threatening pensions. In many cases the pensions are insured, relieving the bankrupt entities of obligation while still providing for retirees. But all too often, retirees who held up their end of the bargain are kicked to the curb.

According to consultant Girard Miller, local and state governments in California are over $325 billion behind in pension funding – adding $22,000 in debt for every working person. Kellogg School of Management’s Joshua D. Ruah put out a report claiming $3.2 trillion in underfunded state pension plans. Who’s going to bail them out? The people who aren’t going to get their pensions?

The current “official” U.S. deficit is well on its way to $16 trillion, rendering every man, woman and child in debt to the tune of well over $50,000 each. Of course, those are the “official” numbers, which means that the reality is much, much more. Some have estimated it to be in excess of over half a million dollars per household. In other words, it’s a mess. And it has gotten to the point where nobody is big enough to clean it up.

Perhaps the U.S. will take its cue from what some European nations started doing well over a year ago. Recognizing retirement savings as an untapped well of opportunity, many governments did what they do best; found ways to “legally” tax it. Since most pension plans in Europe are state run, this wasn’t a huge step. But even the private savings have been threatened in some cases.

Hungary – In an effort to meet deficit requirements set by the European Union, Hungarians were basically told that they could either move their private pension funds to the state’s pension or forfeit any state pension they had coming. In other words, it’s all or nothing. Give up your freedom in your private pension plan by subscribing fully to the state pension, or give up all your state contributions if you want to maintain your private pension. This measure was expected to add as much as $14 billion to the state pension fund, offering legislators more flexibility in keeping up with current pension expenses. Of course, what that means for retirees in another decade remains to be seen. With the way things are going, confidence in sustaining such a scheme is low, at best.

Bulgaria – Though on a smaller scale, Bulgarian workers were being pressured to “contribute” more to state pension plans as well. Trade unions were able to rally against the legislation, however, reducing the original proposal considerably.

Perhaps you see where we’re headed with this. What it comes down to is that there is no sacred cow when it comes to governments’ willingness to tap the resources of the populace. With this in mind, of course, private reserves are one way to maintain some freedom from such oppressive measures. Tomorrow we’ll take a look at a few more countries, discuss some legislation in the U.S. and then offer some ideas that could help you preserve your wealth.

For your prosperity,

J. Keith Johnson
The Gold Informant