DEBT DIAGNOSIS

Tax Qual­i­fied Retire­ment Plans, etc.

By R. Nel­son Nash August 1, 2009

Back in 2000 I wrote Becom­ing Your Own Banker – The Infi­nite Bank­ing Con­cept and in it I briefly addressed the sub­ject of retire­ment plans and specif­i­cally Tax Qual­i­fied Retire­ment Plans. Since that time it has become more appar­ent to me that this idea needs to be addressed more fully.  Amer­i­cans have become increas­ingly depen­dent on an idea that is defec­tive and won’t work   Basi­cally, it is a Social­ist idea and his­tory has proved con­clu­sively that Social­ism won’t work.

There is a fun­da­men­tal rea­son that this is so that most peo­ple fail to rec­og­nize.  To make my posi­tion on this sub­ject per­fectly clear let me state that, as of this writ­ing, I am 78 years old.  I have been a Chris­t­ian since age 9 and have stud­ied the Bible through and through dur­ing these years. I have also stud­ied, with a pas­sion, the teach­ings of the “Aus­trian” school of eco­nom­ics for over 52 years.  From this back­ground it is very evi­dent to me that all gov­ern­ment pro­grams are noth­ing more than a man­i­fes­ta­tion of man try­ing to play God, in the pagan sense of the word. The book of Exo­dus in the Bible tells you that God is a jeal­ous God. He won’t put up with such efforts by man try­ing to dis­place Him in the order of things.

All gov­ern­ment pro­grams are ini­ti­ated under the guise of “help­ing” cit­i­zens  –  when the real object is to con­trol their lives.  There is always the “hid­den agenda” that is never stated.  And Amer­i­cans swal­low the appar­ent imme­di­ate ben­e­fit, never real­iz­ing that there is a hook in that bait.  In fact, as a stu­dent of Aus­trian Eco­nom­ics, if you give me the mis­sion state­ment of any gov­ern­ment plan I can pre­dict, in due course, the even­tual out­come with absolute cer­tainty.  As Shake­speare said, “The Truth Will Out.”  Just give it enough time.  But man sees things over a very short time span as com­pared with that of God.  His time table and ours is dif­fer­ent.   All such efforts by man even­tu­ally fail but they do so over a long enough time frame that man does not see it hap­pen­ing to him.  He is sub­ject to the “boiled frog syn­drome.”  Put a frog in water his tem­per­a­ture and he is com­fort­able.  Add a tiny bit of heat and he is still com­fort­able.  He gets used to it.  Add a tiny bit more and he is still com­fort­able, etc.  Keep that process up and you can boil him!   Now, I don’t know whether that is true or not, but it is a great word pic­ture of what has hap­pened in the eco­nomic world of America.

Another object of this writ­ing is to demon­strate that we live in a world of lies!  Every­where we turn we are con­fronted with lies to the point of not being able to rec­og­nize this fact.  John Stos­sel wrote a book in the recent past enti­tled Myths, Lies and Down­right Stu­pid­ity in which he demon­strates this truth.

Napoleon Bona­parte is cred­ited with the obser­va­tion, “His­tory is lies agreed upon.”   Just a few days after Sep­tem­ber 11, 2001 Stephen Yates, a Phi­los­o­phy Pro­fes­sor affil­i­ated with the Lud­wig von Mises Insti­tute wrote an arti­cle on LewRockwell.com about a book he had read recently where the two authors had pre­dicted that some­thing like 9/11 was going to occur some­where about that time frame – give or take a cou­ple of years on either side – that would change the world for­ever.  Has the world changed since that time?  Unless you are a “boiled frog” just look at what is hap­pen­ing all around you.  Try tak­ing a trip in an air­plane.  The world had changed sig­nif­i­cantly!  All kinds of non­sense is going on under the sup­posed mis­sion of pro­tect­ing us.

The authors pointed out, go back 70 (+/-) years and you have The Great Depres­sion.  The world changed and has never been the same.  Go back another 70 (+/-) years and you have The War of North­ern Aggres­sion – known to some as The Civil War.   That was no civil war – a civil war is when two or more fac­tions fight for con­trol of a coun­try.  Jeff Davis, et al, in the South had no designs on tak­ing over Wash­ing­ton, D.C. and run­ning this coun­try, no more than George Wash­ing­ton, et al, had in tak­ing over Lon­don, Eng­land  some 70+ years earlier.

To the con­trary, in both cases – they wanted to get away from the oppres­sion of out­ra­geous tax­a­tion!  But, there is the ever-present hid­den agenda that can be exposed only by his­to­ri­ans who look deeply enough in the archives to fer­ret out the truth – more evi­dence of the fact that we live in a world of lies.   At that time the United States lived under a tax sys­tem of tar­iffs on man­u­fac­tured goods.  The South was an agri­cul­tural econ­omy and the North was based on man­u­fac­tur­ing.  As a result 85% of the taxes were being paid by the South.  Would you guess where the money was being spent?  In the North, of course!   If you lived in the South and were the least bit con­scious of what was really going on, you would prob­a­bly be a bit ticked off at this sit­u­a­tion.   The taxes were being spent on cor­po­rate wel­fare – rail­roads, canals, inter­nal improvements.

The plat­form on which Lin­coln ran for elec­tion was a high tar­iff, inter­nal improve­ments, and a cen­tral bank. Henry Clay was Lincoln’s idol and he labeled it The Amer­i­can Sys­tem.  It was a mer­can­tilist eco­nomic plan based on the “Amer­i­can School” ideas of Alexan­der Hamil­ton, expanded upon later by Friedrich List, con­sist­ing of a high tar­iff to sup­port inter­nal improve­ments such as road-building, and a national bank to encour­age pro­duc­tive enter­prise and form a national cur­rency. This pro­gram was intended to allow the United States to grow and pros­per, by pro­vid­ing a defense against the dump­ing of cheap for­eign prod­ucts, mainly at the time from the British Empire

That so-called Civil War was not about slav­ery – it was about tax­a­tion.  Read Tom DiLorenzo’s book, The Real Lin­coln. Read his follow-up book, Lin­coln Unmasked. Read Charles Adams’ book, When in the Course of Human Events. Read Lerone Bennet’s book, Forced Into Glory. Finally, read Eman­ci­pat­ing Slaves, Enslav­ing Free Men: A His­tory of the Amer­i­can Civil War by Jef­frey Rogers Hum­mel.  When you have fin­ished these books you will begin to see more clearly the hid­den agenda that is ever present in any gov­ern­ment activity.

Con­tin­u­ing with the train of thought by Stephen Yates – go back another 70+ years  –  I have for­got­ten what hap­pened.  Then go back another 70+ years  –  I for­got that one, too.  But the pat­tern is there!  You can count on it – every 70 years or so some­thing sig­nif­i­cant hap­pens that changes the world in which we live.   So, I e-mailed Stephen imme­di­ately and brought to his atten­tion that the Soviet Union came apart after 70 years.  In my book, Becom­ing Your Own Banker I had pre­dicted back in 1976 that Social Secu­rity would fail.  Before it fails they will attempt to prop it up.  The source of funds they will use is reserves on pri­vate pen­sion plans, HR-10 plans, IRA’s, et al.  Peo­ple laughed at me but in less than a year the first “trial bal­loon” went up that this is pos­si­ble.  And now, it is com­mon knowl­edge. In early Octo­ber 2008 the incom­ing admin­is­tra­tion had per­son­nel dis­cussing con­fis­ca­tion of all such plans and com­bin­ing them into a Guar­an­teed Retire­ment Account, or some name like that.  See this web­site. http://www.marketoracle.co.uk/Article7254.html

See how the “boiled frog” syn­drome works?  One small devi­a­tion from tried and true prin­ci­ple and peo­ple become com­fort­able with it.  It becomes “nor­mal.”  This leads to another devi­a­tion, etc., etc. etc. In due time it will lead to a com­plete U-turn in behav­ior and accep­tance.  The Con­sti­tu­tion of the United States is a per­fect exam­ple.  It started out based upon proven prin­ci­ples, but now I’m sure that at least 90% of what goes on in Wash­ing­ton, D.C. has no basis in the Con­sti­tu­tion at all.

Any­way, Social Secu­rity in the U.S. started in 1937.  Do the math.  We are over­due.  Any day now it will self destruct.  But the eas­i­est thing the gov­ern­ment can get to in order to try to keep the Ponzi scheme alive is to con­fis­cate the reserves on all the other tax qual­i­fied plans.  It is the largest block of secu­ri­ties in the world and so it will be irre­sistible to gov­ern­ment authorities.

And for you Bible schol­ars, in the Old Tes­ta­ment the Israelite nation ended up back in slav­ery.  In the book of Jere­miah he pre­dicted they would be there for 70 years.  They were only there for 68 years – but that’s close enough for gov­ern­ment work!   All the tax qual­i­fied retire­ment plans are a func­tion of the IRS Code – which has only been around since 1913.  The world got along very well before income tax.  We had sur­pluses in the national bud­get before then.  Wise men told us what would hap­pen when a coun­try gets in income tax – and we see the results in spades now!

Before World War II there weren’t many pen­sion plans.  Accord­ing to the Con­gres­sional Bud­get Office web­site (www.cbo.gov/) The Rev­enue Acts of 1921, 1926, and 1928 ini­ti­ated tax advan­tages for employment-based retire­ment plans.  By 1929, about 15 per­cent of private-sector employ­ees were cov­ered by employment-based plans, which were con­cen­trated in large cor­po­ra­tions and in sec­tors in which gov­ern­ment over­sight tended to be the strongest.

And, then along comes WWII.  I was a teenager at that time and very aware of what life was like.  When you went to buy gaso­line in those days it did not mat­ter how much money you had – the lim­it­ing fac­tor was – do you have an A, B or C sticker on your wind­shield of your car.  A bureau­crat in Wash­ing­ton knew how much gaso­line you needed.  This is an emer­gency!  We have a war going on!  Never mind that we had no busi­ness being involved in that war.  For a starter on this sub­ject read Churchill, Hitler, and “The Unnec­es­sary War”: How Britain Lost Its Empire and the West Lost the World by Patrick J. Buchanan.  Then read The New Dealer’s War by Thomas Flem­ing.  And The Roo­sevelt Myth by John T. Flynn.  Also, The Pearl Har­bor Myth by George Vic­tor. More evi­dence that we live in a world of lies.

And we con­duct our lives on the basis of that erro­neous under­stand­ing.   When the house­wife went to the gro­cery store, it did not mat­ter how much money she had.  The lim­it­ing fac­tor was another form of money called “ration points” and even with both these items she could only buy so much meat, so much but­ter, so much of this, so much of that.  Every­thing was con­trolled!  Frozen!  A Social­ist par­adise!   And so were wages.  You could not give any­one a raise!  Well, under such restric­tions, how does a busi­ness give an employee a raise with­out giv­ing him a raise?  Ben­e­fits, of course!   This marked the real begin­ning of Retire­ment Plans and Health Plans that were tax qual­i­fied.  It only applied to cor­po­rate employ­ees.  This is an excep­tion to the IRS Code, which was adopted in 1913.  The USA didn’t declare war until Decem­ber 1941.  In 1950 Paul Poirot at the Foun­da­tion for Eco­nomic Edu­ca­tion wrote an essay enti­tled, The Pen­sion Idea in which he demon­strated con­clu­sively that the idea would never work.  And here we are, early in the 21^st Cen­tury and we see cor­po­rate pen­sion plans falling apart with increas­ing rapidity.

After WWII sole pro­pri­etors and part­ners noticed that because of pen­sion plans cor­po­rate employ­ees had a tax advan­tage over them.  So appeal was made to the author­i­ties, “We need a tax-break, too.”  The result was the cre­ation of Keogh Plans (HR-10 plans).  Ini­tially, par­tic­i­pants in this cat­e­gory could con­tribute $2,500 per year to such a plan.  “The con­tri­bu­tion will be taken off your income for tax pur­poses this year.  It will build tax-free until your retire­ment age – and you are going to be in a lower tax bracket at that time!”  Of course, when you look at the his­tory of the IRS Code and all the changes that have taken place – and you can rest assured there will be changes in the future – none of them to your advan­tage.  The sole pro­pri­etors and part­ners agi­tated more and the con­tri­bu­tion limit was raised to $7,500 per year.   More time passed and the bal­ance of the pop­u­la­tion said, in essence, “Wait a minute, you author­i­ties have blessed the cor­po­rate employ­ees with a tax-break, you have blessed the sole pro­pri­etors and part­ners with a tax-break – what about us?  Give us a tax-break, too!” And so, along comes Indi­vid­ual Retire­ment Accounts.

How was the idea sold to Con­gress?  The ratio­nale went some­thing like this – the sav­ings rate among every­day Amer­i­cans is decreas­ing – our cap­i­tal base is erod­ing!  If we will give these folks a tax-break then they will start sav­ing more and we will solve this prob­lem.  Of course, the amount of the con­tri­bu­tion was lim­ited, too.  What was the result?  The sav­ings rate actu­ally went down!  Naturally!

All you have to do to under­stand this phe­nom­e­non is watch this TV com­mer­cial in Birm­ing­ham, AL years ago by Jef­fer­son Fed­eral Sav­ings & Loan.  (By the way, they don’t exist any more, along with thou­sands of other sav­ings & loan orga­ni­za­tions).  Ron Eason, their pub­lic rela­tions man is sit­ting in a big easy chair, cof­fee mug in his hand before the blaz­ing fire­place.  He looks you squarely in the eye and says, “How is your retire­ment plan doing?  Mine is fixed! I have an IRA at Jef­fer­son Fed­eral Sav­ings & Loan.  Do you know that for as lit­tle as $10 per month you can start an IRA there.  Your con­tri­bu­tion will be taken off your income for tax pur­poses and it will build tax-free until your retire­ment time, and you will be in a lower tax bracket at time?”   What did Joe Six­Pack con­clude as a result of watch­ing this com­mer­cial?  He says to him­self, “Wow!  With a plan that good, I don’t have to save half as much as I did before! I can take the dif­fer­ence and make a down pay­ment on a boat!” And so, the sav­ings rate went down.

Dur­ing that era, for two suc­ces­sive years, when I got my New York Life annual state­ment for pre­mi­ums due, there was another let­ter from the pres­i­dent of the com­pany explain­ing how the sav­ings rate had gone down.   And so, fol­low­ing this chain of events – pen­sion plans, then Keogh Plans, and finally IRAs and 401-Ks – now every­one has an excep­tion to the IRS Code! All of these plans are a func­tion of the IRS Code!

Con­sider then, this rea­son­ing – when gov­ern­ment cre­ates a prob­lem (oner­ous tax­a­tion) and then, turns around and grants you an excep­tion (any tax-qualified plan) to the prob­lem they cre­ated – aren’t you just a lit­tle bit sus­pi­cious that you are being manip­u­lated?  All of these plans were intro­duced as a means of help­ing cit­i­zens out.  If they really wanted to help, all they had to do is reduce the taxes!   Do you really think they want to do that?  The real object is to con­trol your life!   Does this help you to see the hid­den agenda that is always there in any gov­ern­ment pro­gram?  The best way for them to accom­plish this goal is to make you depen­dent on them for sustenance.

There is a tremen­dous ele­ment of depen­dence in the act of wor­ship.  You will wor­ship that on which you are depen­dent.  They sell these mind-crippling ideas through the use of lies!   Along this chain of thought – when I got out of the Air Force in 1954 and went to work in the civil­ian world did you know that Social Secu­rity did not apply to Farm­ers?  It did not apply to Doc­tors, Lawyers, and Cler­gy­men, either.  One by one, they suc­cumbed to the siren song of depen­dence on gov­ern­ment.   As of the time of this writ­ing, stu­dents cur­rently grad­u­at­ing from reli­gious sem­i­nars can opt out of Social Security.

Years ago, when I was in the life insur­ance busi­ness I con­vinced three young sem­i­nary grad­u­ates to opt out and sim­ply put what they would have to put into SS into high pre­mium whole life insur­ance with a Mutual Life Insur­ance Com­pany.  The results would be far bet­ter than any alter­na­tive.  After sev­eral years of doing so, all three fell by the way­side, a vic­tim of the siren song of gov­ern­ment depen­dence.  The decid­ing fac­tor was the intro­duc­tion of Medicare.  When it came into exis­tence it was tied to SS – one could not be cov­ered for Medicare with­out being cov­ered by SS.  They just couldn’t visu­al­ize life with­out Medicare!  The world got along very well with­out SS, Medicare and hun­dreds of other gov­ern­ment pro­grams for years but the hid­den agenda of gov­ern­ment method­ol­ogy com­bined with the “boiled frog” syn­drome has plunged Amer­ica into a one-way trip to dis­as­ter.  All empires fail – and so will this one.

When Chris­t­ian lead­ers (Cler­gy­men, Pas­tors, Church Lead­ers) don’t under­stand the con­nec­tion between the act of wor­ship and the con­cept of depen­dence, isn’t this a time of impend­ing dis­as­ter?  They claim to pro­fess wor­ship­ing God but can’t visu­al­ize life with­out a gov­ern­ment pro­gram!  Back them into a cor­ner by sug­gest­ing that SS, for instance, be ter­mi­nated and you will see who they really wor­ship. Their behav­ior tells the truth of the mat­ter.  Amer­i­cans are “cap­tives in Egypt” in slav­ery and don’t know it!  Once you take a hand­out from a gov­ern­ment pro­gram, it does some­thing to your mind.  You can’t think straight – and you become a slave.

Fig­ure 1

More evi­dence to help you visu­al­ize why Social Secu­rity will ulti­mately fail.

In fig­ure 1 you are look­ing at a graph­i­cal rep­re­sen­ta­tion of a 1958 Com­mis­sion­ers Stan­dard Ordi­nary Mor­tal­ity Table – the pat­tern at which peo­ple died at that time. In con­struct­ing such tables Actu­ar­ies are deal­ing with a pop­u­la­tion of 10,000,000 selected lives – peo­ple who have been through a screen­ing process. They have passed a phys­i­cal exam and are judged to live until nor­mal life expectancy.  And, until recently they were deal­ing with a the­o­ret­i­cal lifes­pan of 100 years.   The graph you see is extracted from that data.  Out of the 1,000 born at that time, 10% were pro­jected to die by age 45.  Out of the remain­ing 900 twenty five per­cent were expected to die by age 65.  Sev­enty five per­cent were expected to die after age 65. So, it is evi­dent that most of the deaths occurred after age 65.

Let’s take time out here and exam­ine where this weird idea of age 65 came from.  The idea of retire­ment is a rel­a­tively recent con­cept.  Nowhere, to any degree, in his­tory is the word even men­tioned.  I have stud­ied the Bible through and through for many years and can’t find any­where that “… and so, Moses retired and lived hap­pily there­after.” Basi­cally the idea started in Ger­many about 1890 with Bis­marck.  These were the folks that gave the world the idea of retire­ment.   Bis­marck set retire­ment age at 70.  In 1916 it was reduced to age 65.  In 1890 life expectancy for Ger­mans was about 45, so you see, it was prob­a­ble that the aver­age per­son would never col­lect anything.

Any­way, this is where Roo­sevelt (FDR) got age 65 for our Social Secu­rity in 1937.  At most peo­ple talk­ing about retir­ing at age 65 – or even less!  Get real!  It can’t hap­pen!   I have read pre­dic­tions of liv­ing to age 120 is pos­si­ble due to increased tech­nol­ogy.  Life insur­ance com­pa­nies now have pol­icy plans of Life Paid-Up 121 years in view of this pos­si­bil­ity.  But, yet, there are peo­ple who hope to “retire early” – say age 55 or so.  “I’m going to work for 30 years and retire for 50 years.  Get real!  It can’t work!   I have read stud­ies where it will take 80% of my grandchildren’s income to sup­ply Social Secu­rity income to their parent’s gen­er­a­tion.  That is impos­si­ble to do!  It can’t work!

Fur­ther­more, I drew up the fol­low­ing sce­nario over 30 years ago and no one had the courage to repeat it.  “Three men were born in the U.S. on the same day.  One was Cau­casian, one was His­panic, and the third was Black.  They all had sim­i­lar jobs dur­ing their work­ing life and hence paid max­i­mum into the Social Secu­rity scheme.  They all achieved retire­ment age and drew their first SS check.  But, one month later the Black man died.  It is a sta­tis­ti­cal fact that Blacks don’t live as long as His­pan­ics and Cau­casians.  You can pass all the laws you want to and you can’t change that fact!

The next month the Black man’s widow died.  How many times have you heard reports of one spouse dying and the sur­viv­ing spouse dies shortly there­after?  I read an exten­sive study lately about the effects of lone­li­ness on longevity.  It is real!  What hap­pened to all the money the Black man paid into SS all of his work­ing life?  The fact is, it doesn’t exist! That money has already been spent by the US gov­ern­ment and worth­less IOUs are put into a file in a cave in West Vir­ginia.  There is no money in the SS Trust Fund!

The fol­low­ing month the His­panic man dies – and the month after that his widow dies.  What hap­pened to all the money he put into SS?  Same thing – it doesn’t exist!   The net result of the fore­go­ing is that the money the Black man and the His­panic man paid into SS goes to sus­tain the Ponzi scheme for a few more years for the ben­e­fit of the White man’s widow – because they out­live the White men.  Please tell me how long that scheme will last when every­one catches onto this fact!”  This is totally unfair and is a ster­ling exam­ple of the Law of Unin­tended Con­se­quences that is the hall­mark of every gov­ern­ment program.

They will never work because they are all man­i­fes­ta­tions of man try­ing to play God in the pagan sense of the word.  God is a jeal­ous God.  He won’t put up with such non­sense.  Will US Cit­i­zens ever learn!?  

Invest­ments of Tax Qual­i­fied Plans

And so, since WWII there has been the accel­er­at­ing empha­sis on Tax Qual­i­fied Retire­ment Plans.  The con­tri­bu­tions have to be put to work in invest­ments of some kind.  In the very recent years empha­sis has been on 401-K plans (defined con­tri­bu­tion plans) as opposed to the orig­i­nal Pen­sion Plans (defined ben­e­fit plans) that are dis­ap­pear­ing from the scene.  What has been the uni­ver­sally rec­om­mended invest­ment for these con­tri­bu­tions?  Why stocks or mutual funds, of course!  They are always going to go up!

(Try read­ing The Brain­wash­ing of the Amer­i­can Investor by Steven R. Selengut.  Read Eat The Rich by P. J. O’Rourke.  Read Devil Take the Hind­most by Edward Chan­cel­lor. Read Invent­ing Money by Nicholas Dun­bar .)  These books will be a good start in under­stand­ing the lies that peo­ple believe and upon which they have based their finan­cial future.

By the way, stocks are often referred to as “secu­ri­ties.”  I don’t see any­thing that was secure about Enron, about World­com, about Health­south, about Long Term Cap­i­tal Man­age­ment, etc. „ etc., etc. The list could go on for sev­eral pages.  How do they get away with such des­ig­na­tions?  Words have mean­ing.  So the favorite strat­egy is to change the mean­ing of words.  “Boiled Frogs” feel more com­fort­able that way!

At the end of WWII there was a sig­nif­i­cant increase in birth rate in the US.  A gen­er­a­tion later there was a “birth dearth” – the birth rate went down.  Demog­ra­phers called this phe­nom­e­non a “pig in a python.”  A python is a large snake.  Snakes don’t chew things up – they swal­low the vic­tim whole.  This cre­ates a lump in their bod­ies and that lump moves down their diges­tive tract until it is absorbed over a period of time.  Hence, their great word pic­ture used to describe the “Baby Boomers.”  The first “Baby Boomer” turned 60 in Octo­ber 2007.   Go back and look at the graph in fig­ure 1.  Do you see the “pig in a python” on a ver­ti­cal plane?  That data was for 1958.  What has hap­pened to “the pig” since that time?  It has dropped sig­nif­i­cantly – or you could move the year 80 on the graph up to where 65 is located and you would have a pretty accu­rate pic­ture of the sit­u­a­tion today.

Accord­ing to all Tax Qual­i­fied Plans, when one turns 70 ½ you must begin to take income (tax­able) from your plan.  That means you have to sell your stocks or mutual fund shares.  Pray tell, who will you sell them to?  Where are the buy­ers in the next gen­er­a­tion?  Fur­ther­more, there is no way Amer­i­cans can enjoy their present stan­dard of liv­ing with­out the Chi­nese and Japan­ese buy­ing our gov­ern­ment bonds.  When we buy their mer­chan­dise, we pay for it with our dol­lars.  They have to do some­thing with those dol­lars, so they buy our bonds.

Years ago, Mil­ton Fried­man is cred­ited with say­ing, “What could be more idyl­lic than the Japan­ese send­ing us high qual­ity goods – and we send them worth­less bits of paper in exchange?”  Will they con­tinue to be fools for­ever?  I don’t think so!   About ten years from now, there will be a large num­ber of boomers who will have to sell their stocks and mutual funds.  What hap­pens to the value of these things when there are no buy­ers?   All HELL is going to break loose in the econ­omy at that time!

Again, as of the time of this writ­ing (mid 2009), sup­pose that you had your retire­ment nest egg in stocks and mutual funds and you just turned 70 ½ .  Great time to be sell­ing, huh?  Ten years from now is almost cer­tain to be much worse!  To help you under­stand this more fully, sub­scribe to www.dailyreckoning.com and read Bill Bonner’s stuff every day.  Bet­ter still, read Finan­cial Reck­on­ing Day by Bill Bon­ner and Addi­son Wig­gin.  Read their fol­low up book, Empire of Debt. Bon­ner says,  “We are at the begin­ning of a DEPRESSION -  not a reces­sion!  The cure for a depres­sion is a depres­sion!   The cor­rec­tion will be equal and oppo­site to the buildup.”  Amer­ica has been liv­ing in a “fool’s par­adise” for about 30 years.  Brace your­selves, there are some try­ing times ahead.

Just imag­ine what it will be like if you have put your con­fi­dence in Tax-Qualified Retire­ment plans.   Surely, some­time in your life you have eaten corn on the cob dur­ing a meal.  Have you ever counted the ker­nels on the cob?  I did recently – it was over 500.  Sup­pose you were a farmer and put a ker­nel of corn in the ground under favor­able con­di­tions.  It pro­duced a corn­stalk with three ears of corn, each with about 500 ker­nals.  So, one seed pro­duced 1,500 ker­nals.  Now, sup­pose you are going to be taxed by the gov­ern­ment – on which would you rather be taxed – the seed or the har­vest?  Most every think­ing per­son says, “The seed, of course.”  But, have you noticed that every Tax Qual­i­fied plan is pred­i­cated on the oppo­site?  They all say, “Your con­tri­bu­tion is taken off your income for tax pur­poses now – it will build tax-free until your retire­ment time – and you will be in a lower tax bracket at that time.” Lies!  Lies!  Lies! Amer­i­cans have swal­lowed those lies for many years, but even­tu­ally real­ity sets in and there is all kinds of despair.  Woe is us!  What can be done?  And they clamor for more gov­ern­ment plans to rec­tify the dis­as­ter that was caused by the orig­i­nal gov­ern­ment plans!  Unbe­liev­able!  That kind of behav­ior qual­i­fies for the def­i­n­i­tion of insan­ity – doing the same thing time and again and expect­ing dif­fer­ent results!

Hope­fully, this arti­cle has helped you to see that gov­ern­ment plans can’t work.  They are man­i­fes­ta­tions of “man try­ing to play God, in the pagan sense of the word.”  God is a jeal­ous God and he won’t put up with such non­sense.  Does this help in rec­og­niz­ing the “boiled frog syn­drome?”  Gov­ern­ments pro­mote their plans through the use of lies.  But even­tu­ally, truth will win out.  Free peo­ple con­tract­ing with one another can solve all our finan­cial and eco­nomic prob­lems.  But, one has to rec­og­nize a lie when it shows up.  All Tax Qual­i­fied Retire­ment plans need to be avoided like the plague – because they are!

click to enlarge: top tax brack­ets since early 1900’s

What was the tax rate when Qual­i­fied Plans were intro­duced? What will it be when you are 59 1/2?