An excellent question these days, with the Obama administration opening a glorified Q & A session on whether 401(k) participants should be forced into government treasuries.

Listen up folks...

Qualified retirement plans are Government-created assets pursuant to Internal Revenue Code (“IRC”) section 401(a) and are held in trust pursuant to IRC §501(a ) and the Employee Retirement Income Security Act (“ERISA”) §403(a). This means that while you can direct the money in your account, there are many restrictions on what you can do with the money because it is being held for the benefit of your future retirement. It's not technically your money just yet.

Ordinarily, trust accounts don't represent a real problem, because the trust is a contract that lays out all of the rules of the trust. If you are the contract owner, then at the very least, you know that you have legal control over what happens to the money.

This is not the case with government sponsored retirement plans. Yes, there is a trust account, but there's not really any sort of real contract in place. Instead, what you have are various sections of law. The basis of all of your retirement accounts can be found here:

"Sec. 1103. Establishment of trust

(a) Benefit plan assets to be held in trust; authority of trustees

 Except as provided in subsection (b) of this section, all assets of 
an employee benefit plan shall be held in trust by one or more trustees. 
Such trustee or trustees shall be either named in the trust instrument 
or in the plan instrument described in section 1102(a) of this title or 
appointed by a person who is a named fiduciary, and upon acceptance of 
being named or appointed, the trustee or trustees shall have exclusive 
authority and discretion to manage and control the assets of the plan"

The only real exception(s) to the rule(s) are life insurance contracts and individual retirement accounts (IRA accounts), but of these, IRA accounts are governed by similar rules. They too, are trust accounts with various restrictive rules and more "for the benefit of" wording. So of these, you are only get true ownership when investing your money into a private insurance contract.

You are still restricted by a few of the rules while holding an insurance contract inside of a government sponsored retirement plan, but at least-for now-you have the last word on how the money is invested.

If the government decides that it is in your best interest to move your money into an annuity-like contract, just remember the word "like". While it is entirely possible that the government could force you to buy a private annuity contract, it is more likely that the government would want to prop up the U.S. dollar by forcing you to buy something that looks like an annuity but actually functions like Social Security.

In fact, this could be the perfect "out" for the government when it comes to solving the problem of Social Security-steal your money (and it would be stealing it), and force it into government securities that pay a rate similar to what Social Security pays, and then phase out the failed Social Security system. It could even continue the new annuity-like system by forcing you to contribute a certain percentage of your income, just like it does now with FICA taxes, to fund your future retirement for you. 

If this happens, it will be yet another demonstration that the politicians in Washington think that you are too stupid to run your own life.

The bottom line is, whenever you use a government sponsored retirement plan, you are giving up most-nearly all-of the control over your money for no clear benefit other than the potential to receive some of that money at some point in the future. I say some, instead of all, because that money can easily be wiped out due to a stock market correction, and then, of course, there are taxes to pay on the benefits. So, either way, you're not getting it all back. 

As painful as it would be, I think the only way to prevent this from happening, short of a change of heart in Washington, is for Americans to yank the rug out from under the government by withdrawing their 4019k) and IRA balances. Yes, it would sting a little to pay the penalty and taxes now...but then, perhaps it would serve as a valuable lesson to not accept government favors in the future.