American Retirement Funds Risk Seizure
The Hungarian moves were prompted by large budget deficits and a large debt to GDP ratio.
The news of Hungary effectively seizing private pension fund assets to pay for the debt obligations of the state last week should come as yet another reminder of the urgent need to get tax-sheltered retirement savings away from the clutches of the state before it’s too late. Hungary is just the latest country to decide that its citizens retirement savings are the property of the state.
The last major country to use similar tactics was Argentina. It confiscated about $3.2 billion of pension savings in 2001 before the country stopped servicing its debt and then nationalized the $24 billion industry two years ago to compensate for falling tax revenue after a 2005 debt restructuring.
On November 24th the Hungarian government gave its citizens an ultimatum: move your private-pension fund assets to the state or lose your state pension. Economy Minister Gyorgy Matolcsy announced the policy, escalating a government drive to bring 3 trillion forint ($14.6 billion) of privately managed pension assets under state control to reduce the budget deficit and public debt. Workers who opt against returning to the state system stand to lose 70 percent of their pension claim.
Americans who think “this can’t happen here” may want to think again.
In September of this year the US Treasury investigated the possibility of requiring retirement funds to hold a percentage of government securities in their investment portfolio. That, in effect, would be a nationalization of 401ks and IRAs.
And don’t think for a second that the US is in better financial shape than Hungary.
The moves in Hungary were prompted by large annual budget deficits and a large debt to GDP ratio. So, let’s compare Hungary’s deficit and debt to that of the US.
First, a warning: Accept the US governments own financial statistics at your own risk. Federal debt, unemployment and CPI, just to name a few, bear no resemblance to reality.
The federal debt, as proclaimed by the US government is stated to be $13.8 trillion but just subjecting federal government numbers to Generally Accepted Accounting Principles (GAAP) shows a true debt, if accounted for properly, of $71 trillion as of 2009.