401k/IRA Screw Job Coming?

Market Ticker ^ | 01/08/2009 | Karl Denninger

[oblomov]

No need to pay the penalty if you can wait five years.

If you convert a regular IRA to a Roth this year, you will pay income taxes, but no penalty.

After a Roth contribution is in the account for five years, you may withdraw your original contribution tax free.

Withdrawing amounts above the basis would be subject to the penalty if you are younger than 59-1/2.

So... convert the regular IRA assets to a Roth this year, pay the tax, wait five years, then withdraw the assets and put the money into a taxable brokerage account where the funds will be unencumbered.

[Travis McGee]

Another benefit of the “loose small bills” plan is similar to the point that FerFAL makes about junk gold (rings etc) being better than gold coins.

You walk into a post-SHTF black market with Krugerrands or $50 bills, and you’re hanging a sign around your neck announcing, “Rich guy! Follow me home! Kidnap me! Do a home invasion!”

You walk in and trade “your” wedding band, or pay with crumpled ones and fives, and you’re just another ordinary Joe, paying with his last stash of valuables or cash.

[Travis McGee]

Not that you’re not already more prepped than 99.99999%, but I do recommend FerFAL’s book “The Modern Survival Manual.”

[Travis McGee]

I really do recommend FerFAL’s book from the Argentine monetary collapse POV. The dollar might collapse but not disappear. Say, it does a 4-1 devaluation against the Euro and the Yuan, and the banks are closed for months and then currency withdrawal restrictions are in place. You’ll still need paper dollars at home for that period. Stores won’t take credit cards or checks or silver dimes. They’ll still want paper dollars in most cases. Your silver will be useful to trade for paper dollars on the black market, but that comes later. Initially, you still may need cash to meet your daily needs. I can’t recommend FerFAL’s book enough.

[Aldebert]

For anyone who wants to know the facts about this proposal, which does not simply involve investments in Treasuries, but includes elimination of 401(k)s in favor of a gov’t run and owned system, inability to pass the full value to your heirs, and of course shifting the cost to “higher income” workers, just google the name Professor “Teresa Ghilarducci”.

She wrote a book entitled “When I'm Sixty-Four ...” which details this plan. I read it. Tax-the-rich, gov’t.-should-run-your-life socialism.

[April Lexington]

My thoughts... if the Federal government “forces” 401k and IRA conversion into annuities to create demand for Federal bonds, they will, inadvertently or, perhaps, advertently cause a massive sell-off of equities. Most 401k and IRA plans offer a plethora of equity funds (most of which are crap). Forcing the divestiture of these funds will force the funds to sell the underlying stocks to raise cash to honor the redemption. This will send the equity markets into the toilette! SO... is the stock market about to crash as the Federal government forces the conversion of that luscious pot of money into “demand” for treasuries? Frankly, I wouldn't put it past Geithner & Co. to think this crazy scheme would work. In any event... once again, the “little guy” will get screwed and Goldman will get rich administering this nightmare!

[April Lexington]

If you are currently unemployed, your income tax rate is low or zero. It may make sense to cash in the 401k/IRA, pay the 10% penalty and zero % tax and hide your money offshore, in gold, land, valuable tangibles or cash or any other legitimate non-tax benefit investment. Then, when they grab... your money is out of the system and “safe.” Until... they figure out how to grab your non-differed cash next...

[April Lexington]

What’s worse is that even if they don’t end up doing anything, the mere whisper of this will hurt the markets. Once people (like me) hear of this, they’ll STOP CONTRIBUTING TO THEIR 401k PLAN, and if possible, PULL MONEY OUT. Once again, the unitended consequences of policies penned by ignorant bureaucrats will screw us all.

Welcome to Gault's Gulch! We stopped doing this in November of 2008. Trust Obama and the Democrats? BWAHAHHHAHAHAH! Ask any American Indian you happen to meet. He/she will tell you what happens when you trust the Great White(ish) Father!

[April Lexington]

My final gripe, in general, is with putting my money into an account that has strings attached. This is true of all these retirement accounts. I would rather pay my taxes and have my money be free and clear of all the rules.

This is VERY prudent advice. Earn your money, render unto Caesar, invest the rest. DON'T TRUST UNCLE SAM over a 40 year career. If Jesse Jackson wants your 401k money, EVERYONE in Washington wants it and they have the power to get to it. Stay private and protect your wealth. Read. Learn. Understand. Act to protect yourself from tyranny!

[April Lexington]

I think Japan has basically done this by not allowing its serfs to invest outside of their country, then using this money to fund and out of control government spending.

I hate to break it to you like this, but... try investing your money offshore these days. The average Working Joe American is in exactly the same situation. Even the sophisticates are having a bit of trouble finding safe offshore investments these days...

[junta]

I always compare America to the former Yugoslavia, wealth and power transfer from the majority (Serbs) to the various factions of ethnicities to buy them off. But now throw in the debasing of the buck maybe “Mad Max with nukes.”

[Travis McGee]

Bosnia1992 X Argnetina2002 = America2012?

I sure hope not.

[April Lexington]

You walk in and trade “your” wedding band, or pay with crumpled ones and fives, and you’re just another ordinary Joe, paying with his last stash of valuables or cash.

Spot on... Need a loaf of bread? Try getting change for your Krugerand!

[screaminsunshine]

Unless you cancel the 401k and grab whatever cash you have. Soon there will be none. I would only leave matching funds and buy metal with the rest.

[Chuckster]

...and you can't even take your cash out and stash it under the mattress because mere possession of "Too much" cash is considered evidence of a crime and subject to confiscation.

[Centurion2000]

I think you could be right. I won't allow the government to steal my 401K money and I believe there are millions more like me.

The you better be ready to or already have a plan HOW to stop them because they are coming for it like it or not.

[jwalsh07]

The current plan is in place and progressing nicely. That plan is totake back the COngress from the marxists.

[The FIGHTIN Illini]

For a later read

[Edgewood Pilot]

“And Miller wasn’t the only one...”floating” that scheme.”

I believe our Jim McDermott- representative out of Seattle
- was involved to..

[Centurion2000]

The current plan is in place and progressing nicely

Ah yes, like that plan stopped the healthcare. Immigration reform is up next.

These guy are not playing by the regular rules. Democrats are playing by rules in which they think their revolution is already over. They have stuff planned for 2010 and your 401K is just a start.