Money Matters: Who owns your retirement account?

Most of us have some kind of retirement account, either an employer-sponsored account such as a 401(k) or 403(b), etc., or a privately managed account like a traditional IRA. Some of us even have pensions that we have earned through the years, and most of us who worked will have a Social Security benefit. The problem with all these retirement programs? Every single one is controlled or owned by someone else.

Don’t believe me? Let’s start with the most obvious, Social Security. Social Security is entirely managed by the U.S. government, from top to bottom. The government determines who gets benefits, how they are taxed, when they can start, how much you will get, etc. And the big problem here is the cost. With Congress busy funneling our money to the top .001 percent of wealthiest individuals, it is looking for places to save. More and more members are calling for reductions in “entitlement programs,” you know, those things like Social Security and Medicare, for which you have been paying your entire working life.

Less obvious are defined benefit pension plans. You work and earn credits to accrue an amount you will be paid each year in retirement, and the benefits are stated and purportedly “guaranteed.” Perhaps you even contribute to the fund with a payroll deduction. However, once again, all decisions are made by someone else. How long must you work to be vested? How much will you be paid if you elect life only? Life with period certain? Joint and survivor? How is the fund invested? How much will actually be funded? All of these things are controlled by other people. Even whether or not to raid the fund is controlled by other people. And worst of all, if you and any named spousal beneficiary die before your individual account runs out, your money is absorbed by the pension fund, and your children and other heirs will never see a nickel of the money you worked a lifetime to accrue.

Even less obvious are the employer-sponsored defined contribution plans. Surely these are owned and controlled by us. But, sadly, that’s not true. First let’s look at the attributes of ownership. Think of any item you own. What can you do with it? You can sell it. You can borrow against it. You can give it away. You can spend it, if money. You can keep it. You can control how it’s managed. You can access it at any time. None of these things, except borrowing against it, are true of these plans. First, you can’t ever access the money unless the plan lets you, or until you leave your job. While IRS (another interested party) allows these to be accessed with certain restrictions at age 55 and with no restrictions (other than the huge tax you will pay) at 59 ½, the plan charter can overrule that. There are some companies which allow no access at all (with the exceptions of those hardship and loan provisions mandated by law) until you leave your employment.

Finally, there are those which you do (ostensibly) control: the private traditional IRAs and the like. Certainly, these accounts are owned and controlled by us? Well, not exactly. Looking at the list of ownership rights in the above paragraph, with an IRA you cannot do any of those things. You cannot access it, sell it, keep it, give it away, borrow against it, or spend it without penalties if under 59 ½ and taxes at any time. No, these funds are first and foremost reserved for Uncle Sam, and then you.

To gauge the true seriousness of that statement, consider this. We currently have a national debt of $20 trillion. To get a handle on how much that is, a trillion seconds ago was 31,688 years ago. That was about the time dogs emerged as a species and rock paintings started in India. And our debt is 20 times that, which would put us at the time humans and Neanderthals branched off from each other.

Remember, we are talking seconds, here.

Now, consider that there is currently $24 trillion in untaxed retirement funds in the United States. $20 trillion in debt, and $24 trillion untaxed. And Congress in charge. How does that make you sleep at night?

But the problem runs much deeper than Uncle Sam just wanting his taxes. There are lots of other stakeholders, too. For example, the financial industry is purported to take around $480 billion per year out of our retirement accounts, whether in IRAs, Roth IRAs, 401(k)s, pension funds, etc. Jack Bogle, founder of Vanguard, famously said: “You the investor put up 100 percent of the capital, took 100 percent of the risk, and only received 30 percent of the gain. Meanwhile, the financial industry put up 0 percent of the capital, took 0 percent of the risk, and received 70 percent of the gain.” How apt do you think the financial industry is to give that up? In large part, it’s the collusion between Wall Street, plan administrators, and the federal government that has resulted in near complete lack of access to employer-sponsored plans, and a bit less so on individual plans.

Finally, there is one more hurdle (I am sure there are many more, but this column must end someplace). to accessing and getting to use your money, and that’s extracting it from the market. After paying out all those fees and taxes and taking all that risk for all those years, in order to actually own your retirement accounts, you first have to be able to sell them. One of the things that often eludes holders of these accounts is that to sell something, you must first have a buyer. So the question becomes, if you were a buyer of these assets, would you be inclined to purchase them now, when the market is at historic highs, or would you be inclined to wait until they declined in value? That’s not much of a problem today, because we are still on the very front end of the Boomer Bust as I like to call the retirement of 60 million Boomers. Once that gets into full swing and millions are retiring every year, what do you think is going to happen to the value of your retirement accounts?

Stephen Kelley is a recognized leader in retirement income planning. Located in Nashua, NH, he services Greater Boston and the New England areas. He is author of five books, including “Tell Me When You’re Going to Die,” which deals with the problem unknown lifespans create for retirement planning. It and his other books are available on He can be heard every weekend on the “Free to Retire” radio show on WCAP and WFEA, and he conducts planning workshops at his New England Adult Learning Center, located in Nashua. Initial consultations are always free. You can reach Steve at 603-881-8811 or at