With Washington battling over what to do about its $16.4 trillion debt pile, rumors are swirling that the government will start taking 401(k) money to cure its fiscal ills.

There's plenty to take.

A study published by the Investment Company Institute in 2012 stated that U.S. retirement assets at the mid-point of the year totaled somewhere in the neighborhood of $18.5 trillion.

If you look specifically at what most Americans take advantage of - IRAs and 401(k) plans - they have amassed $3.5 trillion and $5.1 trillion, respectively.

These large sums of untaxed money are proving to be very tempting to an administration looking for revenue to help rein in our whopping national debt.

"The government is spending money like a drunken sailor, and they need to get their meat hooks into any cash stock pile they can," Money Morning Chief Investment Strategist Keith Fitz-Gerald explained in the accompanying video on why the government could start taking 401(k) money.

Here's why you should be alarmed.

Is the Government After 401(k) Money?

The idea of the government taking 401(k) money is part of a larger conversation happening in the financial community about retirement plans undergoing drastic changes.

Those rumored changes include limiting of deductions, retroactive taxation and a possible government takeover to force you to invest in U.S. Treasury bonds.

This call for reform didn't come out of nowhere - it has a track record dating back at least two years.

Here's what's been discussed in relation to 401(k) savings:

• Back in 2010, the President's National Commission on Fiscal Responsibility and Reform proposed lowering the cap on tax-deferred contribution limits for 401(k)s. The commission proposed limiting the annual cap on 401(k) employer/employee combined contributions to $20,000 from $49,000. That was the limit two years ago. Now the cap it is up to $51,000.
• The President's Economic Recovery Advisory Board suggested either cutting or ending the retirement tax deduction entirely. This would be done in order to pay for an expansion of the Saver's Credit that targets low-income workers.
• Also in 2010 Senators John Kerry, D-MA, and Jeff Bingaman, D-NM, recommended in meetings and public hearings at the Treasury and U.S. Labor Department that an "Automatic IRA" be established. Employers would be directed to contribute 3% of an employee's salary into a government retirement plan investing in Treasuries. The government would then guarantee a 3% return.
• In September 2011, the Senate Finance Committee held a hearing to discuss retirement plan reform. It mostly talked about cutting 401(k) tax deductions. One proposal put on the table - in which we should take particular note - was to get rid of the entire 401(k) tax deduction and replace it with a flat government match anywhere between 18% - 30%. William Gale of the Brookings Institute came up with the idea. He believes that the 18% mark would increase tax revenues by $458 billion over 10 years.

But is there reason for concern or is it all just political posturing?

The American Society of Pension Professionals and Actuaries (ASPPA) in November 2012 started a media campaign with the intent to inform both employers and workers that the government is considering an overhaul of tax benefits for retirement savings accounts.

With them entering the fray, it's a good time to start paying attention to this threat to your money.

Will the Government Really Start Taking 401(k) Money?

Probably over the next few years there will be a lot of discussion involving tax reform and tax expenditures will be on the table. Expenditures are all the breaks the government allows us through the tax code.

Dallas Salisbury, chief executive of the Employee Benefit Research Institute, a nonprofit think tank, stated, "Should the parties take the approach that both have discussed-that is, a dollar limit on itemized deductions or a maximum tax rate applied to deductions-then retirement incentives will likely be left where they are, or very close to it."

However, if there is no substantial overhaul of the tax code, he believes that Congress will attempt to boost tax revenue through cutting contribution limits around the year 2014.

This is a story to keep tabs on. How you plan for retirement going forward could definitely be affect - whichever way the government decides to start taking 401(k) money.