Although extreme, it is possible that the US government resorts to nationalizing private savings plans because, as the bank robber Willy Sutton said "that is where the money is!" 401k plans hold about $3.5 Trillion of assets http://www.ici.org/policy/retirement/plan/401k/faqs_401k Nationalization would hit Mitt Romney hard. His infamous 401k plan has over $20M in assets. http://www.reuters.com/article/2012/01/24/us-usa-campaign-romney-ira-idUSTRE80N04E20120124
On the other side of the spectrum, 27.6% of 401k owners have borrowed against their plans. http://abcnews.go.com/Business/401k-loan-defaults-skyrocket/story?id=16957307 Presumably they would be in default as soon as the government confiscated this collateral.
$3.5 Trillion is not what is used to be! Recent years' deficits have been over $1T, so all the 401k assets wouldn't even cover a presidential terms worth of deficit spending.
There is much more to know before we can really understand the situation in Poland, for example:
- Are withdraws from the private plans currently blocked? Otherwise, the owners would take their money and run.
- Will friends-of-the-president be able to withdraw their savings before the transfers are implemented? Refer to the Cyprus bank bail-in for a best practice.
- Why only bonds and not equity? And, is it just polish government bonds that will be confiscated? What about other governments' bonds and corporate bonds?
- How do the private funds work? The article states that "private funds within the state guaranteed system would have their bond holdings transferred . . ." What exactly is the state guarantee for a private fund? If the state happens to be guaranteeing returns or benefits then the plans are not so private after all.
Other governments must be watching this situation in Poland very closely. Savers need to watch out as well.
Here's a link to an overview by the IRS of what expense may be paid from 401k and IRA assets without incurring the 10% early withdraw penalty. http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics---Tax-on-Early-Distributions Of course, income tax would still be due on withdraws.