Government seizure of savings is unlikely

Q: I’ve been hearing rumors from some of my colleagues that the government may seize individual retirement savings. True or false?

A: Almost certainly false. But it is not an irrational concern, because some lawmakers regard the pool of untaxed pension dollars as a potential source of government revenue. But changing the rules after so long is unlikely to gain support among lawmakers.

Some retirement experts believe that our pension system is broken. They note that the use of defined benefit plans (which guarantee a pension for life based on your salary and years of work) has been declining and is being replaced by defined contribution plans, such as 401(k) plans and individual retirement accounts. These plans depend on workers saving and investing for themselves. The results have not been good due to inadequate individual savings, flat stock market returns, and low interest rates.

So policymakers in Washington are talking about changing the system. It is increasingly common to hear the opinion that pretax contributions to retirement accounts should be limited. Doing so, however, likely would result in many physicians terminating their practices’ retirement plans. The resulting loss of their employees’ ability to save effectively for retirement will probably temper enthusiasm for this approach.

So I think your retirement plan savings are safe for now. In the meantime, those plans remain among the best way for physicians to build wealth.

The author is principal of Wealth Care LLC in Merritt Island, Florida. Send your practice finance-related questions to medec@advanstar.com. Also engage at www.twitter.com/MedEconomics and www.facebook.com/MedicalEconomics.