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70 million US taxpayers are set to retire in the next 19 years.  That’s over 10,000 retirement parties every single day.

This, along with the ongoing economic turmoil, leads to many dynamic changes to businesses and individual’s daily lives.  There is no doubt the baby boomer generation will shift their spending patterns creating a shift in the entire economy.

Health care is an obvious sector that is ripe for opportunity.

Another, believe it or not is, financials.

It’s not accidental that these are two of the top sectors on the mind of regulators.  You’ve seen over and over again the idea for health care for all and consumer protection from predatory financial firms.

You see, the regulators know what is on the mind of voters.  And these two topics create much uncertainty as these 70 million seek to enter retirement.

In many unfortunate ways, the mega-trend is toward increased regulation and limited options for your retirement.

This letter has discussed many of these upcoming regulations in detail, but we’re only at the beginning.  With over $4 trillion in Individual Retirement Accounts, and another $8 trillion ripe to be rolled over from employer sponsored retirement plans (401k, 457, 403b, etc), you can see why regulators are prepared to pounce.

Many individuals ask for frequent updates on the political posturing in Washington.  I often refer to an analogy of a cherry tree.

The coveted cherry tree

Lowest hanging fruit is pension plans and 401k plans. The money is centrally managed and investment mandates can be ‘easily’ implemented and enforced.  The almost 30 million people with these employer sponsored plans may end up with only 20,000 administrators making the decision to reallocate investments.

Here you would get a company wide email similar to a change in terms and conditions stating your new investment portfolio consists of Treasury bills.  You may not be happy, but you realize there’s nothing you can do anyway.

Middle of the tree are the conventional IRA structures in which the custodian plays the dual role of custodian and trading platform. Realize that to pass an investment mandate on this section of the tree, over 40 million people would literally need to login, determine assets to sell to replace with the mandated investment. Difficult to enforce and pass due to the number of people who would directly take action.

Ironic, it’s not that the lowest hanging fruit impacts less money, it’s just that account holders in centrally managed plans could still blame someone else for their compliance and miserable investment returns.  When you’ll have to take action themselves on investments you’ve purposely made for your retirement, you’re likely going to pay closer attention.

These two sections are all invested in equities and make up about 95% of qualified retirement assets. The top of the tree is the OO-IRA and other self-directed IRA investments.

Imagine having 100% of the IRA tied up in illiquid real estate or a 20-year private placement.  If Congress forced a liquidation, a case could be brought against the government for “undue harm” done to your investment portfolio.

Congress has recognized that this 5% is more difficult to interpret to figure out how to write laws that could comply.

In this case, being in the minority is in your favor. Now, all that said, this doesn’t prevent Congress from getting 300 signatures and cutting the tree down. Ireland’s surtax is an example. There is little escape from it. Ireland had two other steps targeting the lowest hanging fruit before they finally climbed their way toward the middle of the tree.

I wouldn’t be surprised to see similar events in the US, but doubt you’ll see a direct step to cut the tree down. Congress typically takes the easy way out, which putting 42 million people, mostly middle class savers, won’t be politically easy.

Putting yourself in the minority will likely be beneficial against this mega-trend toward regulation.  If anything, removing yourself from the managed company plans puts you in control of your own assets.

Terry Coxon’s Unleash Your IRA goes into detail about how to protect your IRA using alternative assets, including strategies to implement them profitably and efficiently.

The view from the top will allow you to maximize returns through investments the other 95% don’t know exist.

Good investing,
Passport IRA