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Author: yodaorange Big red star, 1000 posts Feste Award Nominee! Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 465374  
Subject: The giant sucking sound is your assets. . . Date: 2/12/2012 8:29 PM
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. . .being pulled into the US treasury. Increasingly, I am thinking that we METARites might not be focused on the most important investment theme. We are concerned with improved returns relative to benchmarks or in some cases absolute returns. As we witness the Greek’s deal with getting their budget closer to balance, should we spend more time considering when/how the US will do the same?

With a broad brush, for purposes of this post let’s stipulate that METARites are in the upper 50% of income and/or assets. As the US deals with the wide budget deficit, I am thinking that METARites are going to be called on to help out. Kind of like Willie Sutton and banks, METARites are where the money is located.

If you profusely save, prudently spend, and/or have good investment returns, you are ripe for the picking. So far, none of this is news to METARites. What prompted this post was an excellent article in today’s New York Times entitled: “Even Critics of Safety Net Increasingly Depend on It.” The writers went to Chisago County, northeast of Minneapolis which they portray as typical of the Midwest US.

The story interviews people from a broad range of ages and backgrounds. The essential point is that all of these folks:

a) Believe the government should spend less and tax more

b) Are NOT aware of how much personally they or their families are getting from Uncle Sam

When the writers point out how much they receive from Uncle, several of the folks are shocked/surprised and brought to tears. While this is not surprising to METARites, there are a few facts and figures in the story that might be new to you. A few highlights:



Dozens of benefits programs provided an average of $6,583 for each man, woman and child in the county in 2009, a 69 percent increase from 2000 after adjusting for inflation. In Chisago, and across the nation, the government now provides almost $1 in benefits for every $4 in other income.

.....
Almost half of all Americans lived in households that received government benefits in 2010, according to the Census Bureau. The share climbed from 37.7 percent in 1998 to 44.5 percent in 2006, before the recession, to 48.5 percent in 2010.

The trend reflects the expansion of the safety net. When the earned-income credit was introduced in 1975, eligibility was limited to households making the current equivalent of up to $26,997. In 2010, it was available to families making up to $49,317. The maximum payout, meanwhile, quadrupled on an inflation-adjusted basis.
…..

But Medicare’s situation is even direr because a worker earning average wages still contributes only $1 in Medicare taxes for every $3 in benefits likely to be received in retirement.

A woman, who was 45 in 2010, earning $43,500 a year, will pay taxes that will reach a value of $87,000 by the time she retires, assuming the money is invested at an annual interest rate 2 percentage points above inflation, according to the Urban Institute analysis. But on average, the government will then spend $275,000 on her medical care. The average is somewhat lower for men, because women live longer.
…..
Mr. Qualley, who owns a tattoo parlor in Harris, north of North Branch, said some of his customers paid with money from government disability checks.

“They’re getting $300 or $400 tattoos, and they’re wearing nice new Nike shoes that I can’t afford,” he said, looking up from working a complicated design into the left leg of a middle-aged woman. “I guess I shouldn’t say it because it’s my business, but I think a tattoo is a little too extravagant.”



There is a lot more to the story and the graphs are particularly insightful. I highly recommend every METARite take the time to read it. I think it helps define the budget challenge the US faces:

Link:
http://www.nytimes.com/2012/02/12/us/even-critics-of-safety-...

There are many implications for METARites, most of which are not news. Two that I think are significant are:

1) ROTH IRA’s probably should NOT be used. ROTH’s have been great for people in low tax brackets. I have recommended them often for students with part time jobs, where the parent/grandparent would fund the ROTH. In those cases, the taxes due were zero when earned and presumably will be zero when the money is withdrawn 40+ years down the road.

I suspect that Congress at some point in the future will find ROTH withdrawals as a rich source of taxes. It would likely be means tested something like social security is today. Clearly this is not going to occur today or tomorrow, but in 10 or 20 or 30 years, it seems more likely IMO.

2) Regular IRA’s/401k’s/403b’s are likely to be “confiscated” in one form or the other. They will not call it confiscation, but probably just implement some method of getting out sized tax revenues. There is a pretty famous professor, Teresa Ghilarducci that has published several papers and testified before congress that 401k’s should be “confiscated” (My word, not hers BTW) by Uncle to help subsidize retirement funding for the less fortunate. She says: ‘The rich and poor alike deserve secure and adequate retirement income after a long working life.”

Teresa Ghilarducci website:
http://teresaghilarducci.org/

BOTTOM LINE is that METARites or anyone else with significant assets and/or income in retirement is going to pay a lot more to support the less fortunate. If you spend a lifetime building up a significant nest egg looking forward to a comfortable retirement, you might be sorely disappointed.

Maybe we should be spending more time working on legally “hiding” our assets. (And NO, I am not suggesting Cayman Island type accounts.) Maybe we have to be house/farm rich and cash poor. Or maybe we have to use more exotic trusts to attempt to get around Uncle’s hand.

I would not expect anything dramatic in the next few years, but with a multi-decade timeframe, I think I am starting to hear a giant sucking sound. Where is Ross Perot when you need him?

Thanks

Yodaorange
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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385391 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/12/2012 9:58 PM
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<Maybe we should be spending more time working on legally “hiding” our assets. (And NO, I am not suggesting Cayman Island type accounts.) Maybe we have to be house/farm rich and cash poor. Or maybe we have to use more exotic trusts to attempt to get around Uncle’s hand.>

Being house/farm rich and cash poor isn't the answer because retired people are likely to need a large lump of cash to pay medical costs -- and the worst thing would be a forced sale of a house or farm.

I'm not sure tax-deferred trusts are "trustworthy." For example, charitable remainder trusts. Like IRAs, they would be on record and ripe for plucking.

The IRS is clever and has everyone's information. This isn't a simple question. I agree with you that it's a critical issue.

Wendy

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Author: NewEchota Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385392 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/12/2012 10:11 PM
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There is a pretty famous professor, Teresa Ghilarducci that has published several papers and testified before congress that 401k’s should be “confiscated” (My word, not hers BTW) by Uncle to help subsidize retirement funding for the less fortunate. She says: ‘The rich and poor alike deserve secure and adequate retirement income after a long working life.”

Do you have a direct link to this quote, please? The supposed suggestion from Ghilarducci has been falsely floated on different boards here in the past, apparently based on a fictitious "news" report by the Carolina Journal:

The Carolina Journal report claims that Democrats on the House Education and Labor Committee held hearings Oct. 7 on "proposals to confiscate workers’ personal retirement accounts." The report describes in particular the testimony of Teresa Ghilarducci, a professor at the New School for Social Research in New York City. We’ve reviewed Ghilarducci’s written testimony and a video recording of the entire hearing, both of which are posted on the committee’s official Web site and are available to anybody who cares to read or listen. Contrary to the Carolina Journal report, nobody at the hearing talked about confiscating or seizing accounts.

Full details here...

http://www.factcheck.org/2008/11/iras-401ks-and-you/

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Author: OrmontUS Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385393 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/12/2012 10:17 PM
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Yoda provides a confirmation of something we are all aware of. In order to maintain a standard of living for the middle class (currently defined as the vast majority of Americans), almost half receive additional benefits. Since, by definition, "almost half" outnumber the wealthy (or even the tranche of middle class above the 50 percentile) there is a numerical rational for stripping resources from others rather than a reduction in living standards.

But let's take a step away from class distinction and let's ask one simple question:

What is the level of standard of living that we, as a society, wish to pay to guaranty for all of the inhabitants of our nation? It's that simple. If a citizen through lack of luck, aptitude, brains, skill, or ambition is not able to afford that standard (yet to be defined), that we are all willing to pitch in and make up the difference. At the most primitive level, I suppose food, clothing and shelter are important (presumably macaroni & cheese - not filet mignon, foot coverings - not Nike Air's, a room - not a house). Medical costs should be covered (though ironically many of those better off do not have this benefit). Education at public institutions should be free for all who show a reasonable level of aptitude (at least for non-liberal arts degrees).

Should we simply support a survival level or are we, as a nation, entitled to some higher level of sustenance and, if so, why not give this level to the poor as well in addition to the majority of the middle class? After all - it's simply a difference in circumstance of which side of the poverty line an individual is.

We, who presumably wish to rise above the 50th percentile someday, will be responsible for supporting that level of sustained standard of living for the rest of the country. We should be careful what we wish for. Yoda brings to the fore the concept of protecting one's assets (acquired fair and square) from the raids of the majority. Strategies within the law must be found or crafted to allow us to retain our assets or, should conditions become unbearable (thinking Russian Revolution here), an ability to gracefully depart should be planned for.

It is not the lack of caring for our fellow man which should concern us (as I think we can all agree that our fellow man should at least be supported to a subsistence level as a "safety net"), but rather our fellow man's lack of interest in our own wellbeing (as the safety net becomes a financial scaffold paid for by others).


Jeff
(Tired of being the only one paying cash in a grocery store whose other clients drive up in Mercedes and pay in food stamps). BTW, for those who might care, after paying unemployment insurance premiums for much of my adult life as an employer, I elected not to file for unemployment insurance when I retired because I thought it would be "tacky".

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Author: voiceinthedin Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385396 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/12/2012 11:41 PM
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.....
Almost half of all Americans lived in households that received government benefits in 2010, according to the Census Bureau. The share climbed from 37.7 percent in 1998 to 44.5 percent in 2006, before the recession, to 48.5 percent in 2010.

uhhhhmmmm Yoda,

what growing percent of Americans are seniors?

How many college loans and other federal help for college are you using for such stats?

yes there are major abuses of the system....but who says the system will fall in on its self? I firmly think that line of thought is unfounded.

Roth IRAs make a tonne of sense in an environment where capital gains taxes will more than likely go up.

I dont agree that they will confiscate IRAs 401Ks and other vehicles, but they will fee them tax them and other wise make them sorry arsed as vehicles.

ofw,

Dave

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Author: PolymerMom Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385398 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/12/2012 11:58 PM
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yoda,

Having never heard of Teresa Ghilarducci, I Googled her. Your right, your words aren't what she uses. She wants to have a Federal savings plan, separate from Social Security, replace the current 401k system. The article I found in Annuity Digest summarizes her argument for this. Here are a few of the points they listed:


1) Making people professional money managers and charging them with complex financial decisions is not sound policy.

2) The asset management community has benefitted greatly from the advent of the 401k and the general
trend away from defined benefit pension plans.

3) Fund managers have also benefitted greatly from the growth in 401k assets.
</PRE


http://www.annuitydigest.com/blog/tom/teresa-ghilarducci-pen...

For the vast majority of 401k owners, that's probably true.

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Author: salaryguru Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385399 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/13/2012 12:17 AM
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BOTTOM LINE is that METARites or anyone else with significant assets and/or income in retirement is going to pay a lot more to support the less fortunate. If you spend a lifetime building up a significant nest egg looking forward to a comfortable retirement, you might be sorely disappointed.

Maybe we should be spending more time working on legally “hiding” our assets. (And NO, I am not suggesting Cayman Island type accounts.) Maybe we have to be house/farm rich and cash poor. Or maybe we have to use more exotic trusts to attempt to get around Uncle’s hand.


Hmmmmmm. . . sounds pretty chicken little to me.

I can think of lots of financial scenarios for the future. I diversify my investments as a means to hedge against which of the the various possibilities might actually occur. Having my retirement nest egg taxed out from under me is not a possibility that I consider a high probability, but it is possible. I own some things, maintain some skills and keep in touch with professional contacts. These things will maintain significant value if we sink that far. But the majority of my investments are focused on higher probability events and corresponding investments. I recently rebalanced my investments to try to maintain the a risk level I feel comfortable with, and right now, stock market performance is pretty good.

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Author: Merpathan Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385401 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/13/2012 12:32 AM
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What is the level of standard of living that we, as a society, wish to pay to guaranty for all of the inhabitants of our nation? It's that simple. If a citizen through lack of luck, aptitude, brains, skill, or ambition is not able to afford that standard (yet to be defined), that we are all willing to pitch in and make up the difference. At the most primitive level, I suppose food, clothing and shelter are important (presumably macaroni & cheese - not filet mignon, foot coverings - not Nike Air's, a room - not a house). Medical costs should be covered (though ironically many of those better off do not have this benefit). Education at public institutions should be free for all who show a reasonable level of aptitude (at least for non-liberal arts degrees).

Drivel.

http://revolutionarypolitics.tv/video/viewVideo.php?video_id...

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Author: voiceinthedin Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385402 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/13/2012 12:37 AM
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http://www.aoa.gov/aoaroot/aging_statistics/index.aspx

about thirteen percent of Americans are seniors....

http://www.studentdoc.com/student-loan-debt.html
http://pewresearch.org/pubs/1391/college-enrollment-all-time...


students with federal student loans are about 50% of all of recent college grads.....

"Just under 11.5 million students, or 39.6% of all young adults ages 18 to 24, were enrolled in either a two- or four-year college in October 2008 (the most recent date for which comprehensive nationwide data are available). Both figures -- the absolute number as well as the share -- are at their highest level ever."

so over 4 million kids have college loans will being enrolled in a program and maybe as many are recent grads......perhaps we can say 20 million folks are still paying off loans????

20/310 is roughly 6% of Americans who have some sort of current relationship to a govt program for colledge education.........
6 plus 13.......percent....something akin to 20% of folks are not really just taking a free ride......

now....your article bolded by you says 48.5% of HOUSEHOLDS are using the govt in some way......because some folks get married and one spouce has college loans or one spouce before another is retirement age....or recent college grads move back home.......

well dare I say that half of all your stat is nonsense? that only 25% of households are taking help from the govt......while this is ashame.....much of it might well be reasonable......

http://www.census.gov/prod/3/97pubs/cenbr975.pdf

Disable folks number 20% of all folks......medicare....social security disability......who knows how many households or live with other family members that entails......

http://www.childstats.gov/americaschildren/tables/pop1.asp


now the real number braker.....kids under 19 in school getting a free lunch.....yep that might well count...whether it be the free lunch or text book or some monetary figure that school district got for building the school or teaching in the school from the federal govt.....lets look up this problematic figure.....sarcasm involved there.....

well there are 76 million little monsters from the age of zero to 17 in the US.....and they are using our money like we print it or something......ofw....

we cant truly count the overlaps with these horrid little creatures....but we know......we know the damage they do to the world....

cya,

Dave

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Author: voiceinthedin Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385404 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/13/2012 12:42 AM
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small correction.....

the banksters have households....

Dave

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Author: whafa Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385411 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/13/2012 7:23 AM
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It is not the lack of caring for our fellow man which should concern us (as I think we can all agree that our fellow man should at least be supported to a subsistence level as a "safety net")

From what I see and read here and elsewhere, I don't think this is true at all. A lot of people seem perfectly content to assume that someone else will take care of it.

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Author: Hochizen Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385423 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/13/2012 11:20 AM
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The idea that there would be outright confiscation of assets has been around a long time...see, e.g., the "Share Our Wealth" proposal by Huey Long.

Fact is, I just don't see Congress changing the nature of Roth IRAs, even with a means test. Further, I don't see an "confiscation" of 401ks ever happening. Now, there MAY be increased taxes on SS by getting rid of the cap....and there MAY be means testing for SS in the future. That is a far cry from confiscation of 401ks or changing the Roth rules.

IF one is concerned, however, about government confiscations, then one should simply bop on over to your local coin dealer, and buy some silver or gold for cash. If you pick up, say, older British gold sovereigns, they will be considered numismatic coins that would have been exempt from seizure the last time the government seized gold (or, for that matter, any pre 1933 US gold coins will likely be exempt as well). Now, I don't think that such seizure will happen....but IF this is something that worries you, picking up some old gold and silver coins for cash means that no one knows what you have, and you can happily have at least some of your nest egg when the guvmint comes to take your toaster ovens.

-Hochizen, who knows quite a few folks who really DO think the guvmint is going to come take their toaster ovens.

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Author: whafa Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385425 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/13/2012 11:26 AM
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picking up some old gold and silver coins for cash means that no one knows what you have, and you can happily have at least some of your nest egg when the guvmint comes to take your toaster ovens.


When is the last time you did this? The last time I did, even though I paid with cash, the merchant would not sell me the coins without recording my identity, presumably to report the purchase.

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Author: steve203 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385426 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/13/2012 11:40 AM
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Fact is, I just don't see Congress changing the nature of Roth IRAs, even with a means test. Further, I don't see an "confiscation" of 401ks ever happening.

Anyone consider all the backstairs rumbling about "big gummit confiscation" is disinformation?

Recall the talking points about Social Security privatisation "your own account that noone can take"

What better way to induce people to accept their 401K or IRA being rolled into an annuity and their Social Security taxes going to the financial industry, than flood the media with fear mongering about "big gummit confiscation"? Of course, the real confiscation is by the financial industry that skims all the money being handed to it with service fees.

Steve

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Author: mauser96 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385437 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/13/2012 1:16 PM
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Probably the main reason that older gold coins were not confiscated was that FDR was a coin collector. There is no particular reason to think that older coins will be spared in the future. A government desperate for income will make it's choices based on expediency and the political effects.
http://en.wikipedia.org/wiki/Executive_Order_6102
the gold was seized without an act of congress. Nixon also took the US off the gold standard with an executive order. Many totalitarian states have banned the private ownership of gold in most forms, and have sent people who tried to use anything except their fiat currency to prison. Or worse.

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Author: whafa Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385439 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/13/2012 1:23 PM
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Probably the main reason that older gold coins were not confiscated was that FDR was a coin collector. There is no particular reason to think that older coins will be spared in the future. A government desperate for income will make it's choices based on expediency and the political effects.
http://en.wikipedia.org/wiki/Executive_Order_6102
the gold was seized without an act of congress. Nixon also took the US off the gold standard with an executive order. Many totalitarian states have banned the private ownership of gold in most forms, and have sent people who tried to use anything except their fiat currency to prison. Or worse.



This gets bandied around as a fear, but I don't think it would happen. The reason FDR outlawed gold in 1933 was to confiscate it so he could devalue the dollar substantially. He needed to do this because the dollar was on a gold standard. Since that is no longer the case, there would be no reason to confiscate gold now. Gold is just another commodity now. The government might confiscate sugar or corn or any other commodity too, but it's not really a fear.

Gold is legally not money so there's no reason to confiscate it. The dollar can be devalued more easily these days :)

(http://boards.fool.com/the-reason-the-story-could-be-relevan...)

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Author: Hochizen Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385440 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/13/2012 1:27 PM
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"When is the last time you did this?"

Few weeks ago; my name was not requested. Also, if you go to a coin show, the odds of anyone asking for ID is nil. Now, I don't buy over 10k at a time....maybe if you do then the reporting is required.

As an aside, I have been dealing with the same dealer primarily for about 30 years....maybe they put my name on records after I leave, I dunno.

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Author: PosFCF Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385441 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/13/2012 1:36 PM
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When is the last time you did this? The last time I did, even though I paid with cash, the merchant would not sell me the coins without recording my identity, presumably to report the purchase.

Could be a matter of timing, or the choice of seller.

The timing could have been that the merchant was concerned about that 1099 kerfluffle from a few years ago where the new law required a 1099 to be issued for any transactions totaling more than, I believe, $600. That section of the law was repealed before the end of the same tax year so, basically, no harm no foul (except for all the wasted time, effort, paperwork, etc).

The other alternative is that the seller is particularly paperwork conscious for any number of reasons and wants to have the "I"s dotted and the "T"s crossed.

I now mostly buy my bullion from one of two local merchants, one a jeweler and the other a Coin shop, both of which have the signs: "We buy gold!". Neither asks me for ID, I pay cash.

Poz

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Author: PKnudsen Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385444 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/13/2012 2:28 PM
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. .being pulled into the US treasury.


Weren't you the bunch complaining about the deficit?

Regards, TTT.
-----------------------------------------


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Author: KodiakBear Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385460 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/13/2012 6:44 PM
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Taxes aren't going to destroy your savings, currency debasement will.

KB

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Author: OrmontUS Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385461 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/13/2012 7:08 PM
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KB,

Sometimes they amount to the same thing :-)

As inflation causes your wages to rise, but not your standard of living, you end up in a higher tax bracket. (AMT anyone? :-)

Jeff

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Author: VUCommodore Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385492 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/14/2012 9:32 AM
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"ROTH IRA’s probably should NOT be used"

Disagree 100%. One policy change that is all but certain is an across-the-board increase in tax rates over the next generation. Roth IRAs are designed specifically to help you diversify your tax risk in case of this sort of situation. It is much less likely, in my opinion, that Roth IRAs will be singled out for tax disadvantage in a scenario where regular IRAs are not similarly penalized.

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Author: notehound Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385495 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/14/2012 9:53 AM
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It is much less likely, in my opinion, that Roth IRAs will be singled out for tax disadvantage in a scenario where regular IRAs are not similarly penalized.

IMHO, the singling out of Roth IRAs would be completely dependent upon the political clout of whatever percentage of the population is/are Roth IRA holders. How big a voting bloc do they represent?

It is clear that savers do not represent a large enough political class to prevent their being singled out for financial repression. That being the case, Roth IRA holders would seem an easy mark.

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Author: voiceinthedin Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385524 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/15/2012 1:19 AM
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Taxes aren't going to destroy your savings, currency debasement will.

KB


KB,

if a hypothetical couple retires this year with one million dollars and a house bought and paid for, they can barely afford to retire.

their returns on bonds? suck.
money markets? zero.
stocks after 65? yep that is the only long term ticket, but most dont understand or trust long term imvesting.

taxes currently with long term investing outside a roth ira or an ira take 15$. This figure long term will not stand.

Let us suppose the couple at age 65 are both fit exercising eating well and long lives exist on both sides of the family......

.....and further lets us expect the couple to live into their mid 90s......

....add insult to injury lets suppose capital gains taxes will go north of 30% within a decade...when they hit age 75.....

the mix is horrible.....they dont have the cash.....they dont have the income.....they dont have much by age 75....never mind 95.....

now lets suppose they are in an Ira.......roth or otherwise......for the regular IRA they need income to be good......and taxes and inflation to keep at reasonable levels......for the roth Ira they need income to be good, but they have no taxes.......

god bless my hypothetical run of the mill one or two or three million dollar healthy couple.....it aint always easy to be green....

Dave

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Author: notehound Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385531 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/15/2012 7:44 AM
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...if a hypothetical couple retires this year with one million dollars and a house bought and paid for, they can barely afford to retire.

their returns on bonds? suck.
money markets? zero.
stocks after 65? yep that is the only long term ticket, but most dont understand or trust long term imvesting.

....add insult to injury lets suppose capital gains taxes will go north of 30% within a decade...when they hit age 75.....


Dave,

For those who are not retiring this year, but perhaps not so long in the future, they also have to be prepared for "means testing" that will mean their modest $1 Million nest egg denies them Social Security and Medicare.

Such folks, who have been modestly successful, responsible savers and model citizens, will be the future's biggest losers: too poor to support themselves in retirement yet too "rich" to qualify for the "safety net."

No one will shed a tear for them, though. After all, they're millionaires.

:-o

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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385532 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/15/2012 7:46 AM
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1) Making people professional money managers and charging them with complex financial decisions is not sound policy.

Of course, making the government a professional money manager and charging it with complex financial decisions is not working out so great either.

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Author: steve203 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385544 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/15/2012 11:12 AM
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For those who are not retiring this year, but perhaps not so long in the future, they also have to be prepared for "means testing" that will mean their modest $1 Million nest egg denies them Social Security and Medicare.

There will be a "means test", but it will be designed to snag the most people, so it will be based on income, to snag people with a defined benefit pension or who rolled their IRA or 401K over to an annuity, and I expect the financial industry to get a law passed forcing roll over to annuity. This is already the case as the tax exclusion of SS is phased out based on total income, not assets

Those with millions in assets, either in financial assets in a cash account, or real property, will skate.

Steve

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Author: VUCommodore Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385580 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/15/2012 4:39 PM
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"It is clear that savers do not represent a large enough political class to prevent their being singled out for financial repression. That being the case, Roth IRA holders would seem an easy mark. "

Yet again, this argument applies equally to Roth IRAs and regular IRAs. "Savers" are the sole owners of both types of tax-advantaged retirement accounts. So why would that make me think I should choose an IRA over a Roth IRA?

The dominant difference is still that -- under current law -- Roth IRAs pay today's tax rates, and regular IRAs pay tomorrows. I know I'm expecting higher tax rates in the future. Are you?

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Author: wittgenstein Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 385755 of 465374
Subject: Re: The giant sucking sound is your assets. . . Date: 2/18/2012 11:07 AM
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It is clear that savers do not represent a large enough political class to prevent their being singled out for financial repression. That being the case, Roth IRA holders would seem an easy mark.

A government that institutes a program whereby retirement plan contributions are immediately taxed in return for tax exemption of the income from them and then changes the rules without grandfathering the assets of those who availed themselves of the program in good faith would be guilty of the kind of dishonesty coupled with after the fact confiscation that makes a plan of holding alternative citizenship available a good one.

The IRS provides helpful advice re. moving assets form regular IRAs to Roths, and people should feel free to use it IMO. There may come a day when new Roths or contributions to existing ones will not be allowed (perfecrly comparable to tax policies over past years) but that is a different level of regulation, not outright and deceitful confiscation.

jz

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