How Safe Is Your Money?

It seems every few years a rumor or myth gets going that takes a life of its own. That doesn’t mean there isn’t a semblance of truth to the original story, but rather it gets embellished.

I have had a couple people ask me how safe their money is in banks, not due to banks closing but from government seizures.

No one knows exactly where the story started that the government is coming for our bank accounts but I have a guess. It might have started from a Treasury Department inspection general’s report back in 2015.

Anti-laundering laws require special reporting for cash deposits over $10,000. This is well known by many. One way around that is called structuring. This is when multiple cash deposits are made under $10,000 but in sum total over that amount. The banking system has measures in place to catch these. Structuring is illegal.

From 2012-2015, the IRS implemented a “Quick Hit” strategy, based on leadership from the Justice Department, to seize the accounts of those who were structuring.

The problem with this is what they found is a high percentage of those cases, over 90%, ended up being from legal money, not laundered. Some people didn’t know what they were doing (structuring) was illegal, some knew but didn’t want to deal with the paperwork and in other cases, it was just the type of business a person ran, i.e., restaurants.

Bottom line, even though people were structuring their deposits, which is illegal, they weren’t depositing illegal money.  Under the Quick Hit era, the IRS shot first and then aimed later. They seized millions of dollars of legal money from bank accounts. It is important to point out, this is not IRA money. This was cash accounts and not done randomly but due to structuring. The IRS has stopped quick hits and have stated they aren’t targeting structuring in that manner any more. They also did settle with those who were structuring legal money. No records have been released so we don’t know how much was seized or returned.

Yes, the government and creditors can seize assets accumulated in cash accounts (savings, checking, non IRA investment accounts). IRA accounts are different. First, IRA and 401(k) accounts are protected against creditors (in Texas and most other states). The IRS can assign a levy against your IRA for unpaid taxes but they can’t just come seize it illegally.

The question becomes will the government come and just take our IRA and 401(k) accounts. Why would they do this?  What is the end game?  If the thought is to redistribute wealth, there could be drastic consequences. You could kill the economy because you break the financial backs of many Americans. Why not handle that by raising taxes? More importantly, at this point there are no proposed laws that even mentions seizing 401(k) assets. They would have to get this thru both the House of Representative and Senate, then past the Supreme Court when it is contested, if it is even passed.

If this law is proposed and gets serious traction in congress, how many Americans are going to sit by and wait to see if it is passed? How many will start pulling all their money out of their IRAs before it ever passes? The lack of trust this would create between citizens and the government could cause a major run on banks because of uncertainty on where they are going to stop.

This rumor is very dangerous because it could cause people to make rash decisions. I can’t even find where this rumor started. I have heard people talking about the government seizing IRAs but I can’t find any hard facts. I searched and searched on the internet for some background on this and all I found was an advertisement from an offshore banking company telling people to worry that the U.S. could seize their IRAs so move them offshore. Sound fishy to anyone else?  As if our assets can’t be seized in a different country. There is the story of FDR confiscating gold but that was when gold was tied to the dollar. There is no reason to do that today.

If the government wants to seize our IRAs and 401(k)s, taxing it is the most logical and safest way. No one can say taxes aren’t going up or there will not be a special tax on IRA amounts above a certain level. We shouldn’t worry about something we have no control over or react prematurely. We will have plenty of time to react if they implement a special tax.

We have real things to be concerned with, like inflation, increased taxes, and the employment trends. Let’s not let rumors or stories that have no real facts behind them add additional concerns.

Now that I have listed some concerns, let me make sure to qualify them with one important statement. The U.S. economy perseveres. We have seen high inflation before, and it is way too early to claim this is a long-term concern. We have seen higher taxes before. Longer-term the economy and stock market persevere and things work themselves out. Recall, I very much dislike the 4 words of “this time is different” in investing. This time isn’t different either. In my opinion the U.S. economy and the stock market will persevere long-term. We as individuals will persevere also if we continue to try to remove emotions from investing.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.