Posted on 03/20/2013 8:22:44 AM PDT by mikelets456
Okay, I don't want to get into it too much but I feel I've been doing all I can to prepare for the impending collapse except a safe and effective way to pull out 1/2 my money from my 401K. However, I'm concerned about: A) The penalties and taxes. B) This will kick me up to "millionaire" status if I pull out half. C) I want to put most of that to get my Mortgage down and pay off any other debt and buy some more "tangibles"
What is the best way to do this? I've already maxed out on my 401K loan.
I really feel that the money in the market will either be gone by the time I retire (20 years) or be worthless. I really want to put most into my house and get my Mortgage to the point where I could work at McDonald's to pay it off. However, I'm concerned about the points above...any suggestions how, why and what's the best advice?
Just turn 10% into cash, that way it is easier for the Feds to confiscate their FAIR share.
Actually its:
“Turn on, tune in, drop out”
What was proposed in Cyprus was more of a bankruptcy settlement than a “tax”, the use of the term “tax” was unfortunate, and ill-advised. I suppose someone imagines that it somehow instills confidence in the banking system to attribute losses to a mysterious and unfair tax than to mismanagement on the part of the banks and laxity and incompetence on the part of bank regulators. Easier to call it a tax than to say “boy did we screw up”.
Cypriot banks are insolvent, Cypriot deposit insurance is inadequate to cover the losses. The government of Cyprus is either unwilling or unable to cover the difference. Under the proposed settlement the losses would be spread 10-7-6, with foreign governments accounting for 10 parts in 23 of the loss, the Cypriot government 7 parts in 23 and the depositors 6 parts in 23. (Actually 5.8 in 22.8). The depositors and Cypriot government balked, so they may only be getting something like the seven billion Euros promised by the Cypriot government. For good or ill, the Cypriot government cannot just print Euros, so that’s were they are.
The argument is made that “ordinary people” are “not sophisticated enough” (i.e., too stupid) to make judgments about the solvency of a bank. Especially when they expect the German taxpayers to bail them out. The whole mess should appropriately be laid at the feet of Bwaney Fwank and Chris Dodd and the power mad Eurocrats.
This has little to nothing to do with 401k’s, though I suppose if the Government of Cyprus appeared to be getting away with the “seizure” of bank accounts, then Democrats would see a precedent for retroactively taxing 401k’s. Unless your 401k is with Madoff & Sons, it’s more or less certain that it has the assets it claims to have. These assets are not insured, and if the value of the assets falls, you are SOL.
Be wary of dollar denominated assets, especially long term bonds. The value of a bond can vary as much or more than the value of a stock if interest rates change, and they WILL change. That’s why you can refinance your mortgage taken out in 2005 for about 50 cents on the dollar in terms your payment. By repaying the old mortgage and taking out a new mortgage at a lower interest rate, you are effectively forcing the bank to sell its asset (your mortgage) at about 50 cents on the dollar. Which is why banks are in trouble.
OK....now that you have 40 different answers,”What cha gona do bad boy bad boy”.
Please let us know!
So....
You are willing to pay a 10% penalty to take your money out of your 401(k), to avoid a potential Cyprus-like 10% “levy” on your 401(k).
Perhaps to avoid a “levy” that is larger than 10% by hiding whats left of your 401(k) in a place where it won’t be taxed, while the Fed devalues it with a psedo-levy by printing wads of fiat cash.
Or perhaps to buy gold/silver to retain as much original value, praying that Obama doesn’t go FDR on us and make private ownership of precious metals a crime, so that you have to sell it back to the Fed at a loss.
Am I missing something, or are you about to make a donation to the Feds because you are panicing?
Yeah, I know ... but I edited it for what I would do today, if it was me.
Cash out and take the penalties at least you will end up with more before the feds take full control of it.
If he turns it into cash, that may protect him from market fluctuations but it doesn’t protect him from a currency devaluation or government theft.
You have limited options. If you take a withdrawal, you’ll pay both income-taxes AND the 10% penalty (assuming you’re not turning 59-1/2 this year).
Within your 401k, see if the company it’s with allows you do open up a brokerage account as an option (mine is with Vanguard, as an example). If you can do so, you can fund this within the 401k and buy listed stocks, bonds, ETF’s, etc. (note that any such investments legally stay within the “umbrella” of the 401k). Some ETF’s are specific to gold, silver, or other commodities. Purchasing them could hedge you against calamities in common stocks or corporate and government bonds.
If you are no longer with the employer that is the “sponsor” of the 401k, you can do a direct roll-over to an IRA with the broker, bank, or mutual fund of your choice. This might give you more control over the investment of the assets than the 401k allows, BUT you loose the ability to borrow from it, as you’ve done with the 401k.
If you’re afraid that the Feds are trying to come up with a Cyprus-like seizure of some percentage of your existing 401k account (I fear this), I don’t know of a way to avoid this other than through the voting booth. Our elected representatives need to know that they would face Z-E-R-O chance of re-election if they attempted such a thing.
“What do you have a 401K for anyway?”
For myself, and I think I speak for most people with a 401k, the main reason for having them is the employer-matching funds. So, for example, if I put 1 dollar in my 401k, my employer puts 30 cents in as well. That’s a 30% profit from the starting line, if you are fully vested. Some employers give even better deals, 50% matching, or 100% matching even.
“Or perhaps to buy gold/silver to retain as much original value, praying that Obama doesn’t go FDR on us and make private ownership of precious metals a crime, so that you have to sell it back to the Fed at a loss.”
Once the metal is in your hands, you don’t HAVE to sell it back to anyone. They can pass a law saying that you do, but oops, that gold all got stolen in a burglary last year, can’t sell it back now!
I no longer have a 401, but when I did, I had it for the money (the answer to my question)
Yeah, I know, matching funds, vested and etc., but before I retired, I had need of my 401, so I took the 10% hit and used THE MONEY for ____________ (what I needed)
Now again ... why do you have a 401K plan ?
Like I said, for the matching funds. I wouldn’t put a penny in there if I wasn’t getting 30% profit right out the gate. I already have the rest of the money, so why would I put it into a 401K if I just wanted my own money? I want more of someone else’s money :)
I see only two avenues ... use money systematically (pay bills, buy off gov't agents, buy food, gas, etc.) for X amount of years until you die (after retirement),
or
purchase what you will need/want at whatever time in your life you choose to "quit" and live from what you invested in.
FreepeRs all OVER the place here own land and home and guns and generators and root cellars and ...
We can survive and live on the investment we used money for .. in the past .. to purchase.So the SHTF and one has a million dollars .. in NYC
And another has 3 or 4 .. or 10 ... or 100 ... acres of NM, or Idaho ... or WV ... or (pick a spot), and a trailer bought and paid for, with a garden and a wife that loves to cook and can ...
That's the gist of my question ... what do you want the money FOR ?
It is ALL in the future ... the money of the real estate ... so right now ... what do you want money for ?
FReepers are a money management brain trust. I wish they were more eager teachers, though. In these matters each answer seemingly raises a new question.
Whether an IRA or a 401k, if you have funds that you don’t need for a VERY long time, the trade-off between immediate access to after-tax dollars vs. delayed access to pre-tax dollars is a good one - and regardless of employer matching funds.
When you put pre-tax money in either vehicle, your investment rate of return is based on the whole dollar. A $10,000 pre-tax investment growing 10% in a year gets you a $1,000 return. Of course, you later have to pay tax on the monies you withdrawal, but you’re growing and compounding your return based on the WHOLE pre-tax dollars invested - whether your own, or matched by your employer.
When you invest after tax, that same $1.00 of earnings might only leave you with $0.65 to invest. So, instead of earning 10% on $10,000, you’re earning it on $6,500. You get $650 instead of $1,000, AND you have to pay tax on that return in the year earned. (assuming you realize the gain).
So, yes, you have immediate access to your cash, but there’s less working for you in normal times.
http://www.forbes.com/sites/advisor/2012/02/13/the-72t-early-distribution-from-your-ira/
The 72t Early Distribution From Your IRA
Jim Blankenship, CFP, EA Jim Blankenship, CFP, EA, Contributor
HINT: Don’t make any financial decisions based on a small island nation in the Mediterranean...especially when most of its business is Russian and Muslim deposits.
You were shocked - SHOCKED, you say - at the very idea that the government of Cyprus would order banks to seize 10% of every bank account and hand the money over the government? Well … excuse me for being rude, but maybe if you had been spending a better part of the last 20 years paying attention to the atrocities that happen with nauseating regularity in Washington, instead of going into an annual swoon over March Madness and/or the Oscars, or blindly tuning in to Entertainment Tonight every evening rather than an actual newscast, you might have seen this money grab coming. I’m no rocket surgeon, and I saw it coming (in America, not Cyprus) and I been warning the listeners to my talk show from 1993 right up until my retirement two months ago.
It’s simple. Taxing your income is simply not enough. The left is coming after your wealth. They’ll be satisfied with some of your retirement funds … for now.
If you haven’t been paying attention to the Cyprus story, here’s your short version: Cyprus is in financial trouble. The Cypriot government is led by communists. Trade unions are fighting austerity programs needed to erase huge deficits. Sound familiar? That is similar to the situation in the United States in more ways that you might imagine. So Cyprus did what every other troubled Eurozone country is doing: went to the Eurozone finance commissioners for a bailout. The commissioners said fine, but as a condition of the bailout Cyprus must levy a 10% tax against the outstanding balance in all depository accounts in Cyprus banks. Call it a tax. Or call it stealing. Either way, every Cypriot depositor loses 10% of their account. The government screws up, the people pay. Again, it sounds so very familiar.
Oddly enough, the people of Cyprus weren’t particularly elated over this move, nor were investors and citizens throughout the Eurozone. Imagine that! Cypriots immediately grabbed their ATM cards and started to withdraw as much money as they could from their accounts. Cash in their hands wouldn’t be hit for 10%. It was clear there would be a run on the banks as soon as they reopened. Now the plan to simply seize individual wealth is being delayed, though not abandoned.
Could it happen here? Well certainly it could. Congress could pass and the President could sign legislation calling for the seizure of 10% of every checking and savings account in every bank in America. This might finally be enough to cause a resurrection, but they could do it. So in America the wealth seizure has to be just a bit more selective and subtle. And that brings us to the warning I’ve been voicing for 20 years.
Go back to 1993. Bill Clinton has just been sworn in. The Democrats are running the show. They’ve passed a nice little tax increase – retroactive, mind you – and they feel encouraged. Along comes a lady by the name of Alicia Munnell. She’s been appointed by Clinton to be an Assistant Treasury Secretary for Economic Development. Munnell proposes a plan to come up with some cash to shore up Social Security. Not everyone, it seems, is “fortunate” enough to have a nice little IRA or 401k retirement account. Why this just isn’t fair! Everyone should have a comfortable retirement, not just the people who actually planned and worked for one! So Munnell proposed to Clinton an idea! Let’s just go out there and seize 15% of the outstanding balance of every IRA and 401k. Seize that money and pump it into the Social Security system. As it turns out, Munnell and Clinton never really had the chance to put their plan into action since the very next year the Republicans took control of the House and the Senate in the voter revolution of 1994. Munnell hasn’t gone away though. She now hatches her wealth seizure and redistribution schemes as the Director of the Center for Retirement Research at Boston College.
Never fear .. the idea is alive. House and Senate Democrats are even now toying with various plots to seize retirement and pension plans and pour them into some grand new government operated and controlled pension system .. a system that would be “fair” to everyone. This is just a perfect scenario for Obamian class warfare. “Those rich people are enjoying their fat-cat retirements with the money that should have been used to pay workers a living wage. They steal a comfortable retirement from the middle class and laugh at them from their yachts and private jets.” Yeah … that works. And as you should know, the government would certainly do a better job providing for American’s retirements than could free people interacting in a system of economic liberty.
Cyprus? I hope you enjoy that spectacle as it unfolds. Shake your heads and tsk tsk all you like. Just remember … the Democrat party is watching this episode and celebrating. You’re next.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.