Wednesday, October 14, 2009

ERISA Laws and Your Retirement.

Aren't you glad that you have a strong 401 k, or IRA so you don't have to depend on Social Security? Do you have a strong one? Do you really? Have you considered how the ERISA laws are going to effect your retirement plan? Are you aware of them?

In 1973 when tax deferred savings plans were begun with 401 k, IRA, Keogh's, etc. were first approved, the IRS wanted to know when they would get their tax money. The deal was that when you turn 70.5 years old, by law you must start cashing in 8% of your retirement fund in each year.

Our society has been greatly effected by each stage of the baby boomers moving through our economy at each life stage. Now we get to start seeing the impact on retirement. In 2012 the first birth year of baby boomers turns 70.5 years old and will be law start cashing in 8% of their retirements, that is 2.5 million people! Not all will have investments to cash in, but each year after that will have another 2.5 million turning 70.5 years old and start cashing out as well.

What happens to investments when more people are cashing out than are putting in? That's right, it goes down in value. If it keeps going down in value, how long will the young worker keep investing in a program that is losing value? If they quit putting money in, your retirement savings free falls.

We, members of the baby boomer generation need to be aware of this math so we can take steps to protect our resources. With the obvious coming massive inflation that must come when the government monetizes all the deficits they are spending, we need to be in commodities and Real Estate. With current Real Estate values it could be our ticket out.

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