29 yr old seeking 401K withdrawal to fund bullion purchase

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mr.glitch
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29 yr old seeking 401K withdrawal to fund bullion purchase

Hi everyone - Looking for advice.  Long time reader, first time poster :)

29 years old, single, gainfully employed with a stable job, currently debt free (aside from car lease payments), 50K or so of cash and liquid investments, have roughly 115K in my 401K and am contemplating withdrawing everything from the 401K and converting it to silver and gold bullion.

I know that "conventional" wisdom states to NEVER withdraw money early from a 401K as the penalties are substantial and create additional tax liability, but I am actually contemplating it if I change employers as I've been offered a new job with a competitor.

My 401K is not very diversified as I am invested in a blend of small cap, mid cap, and large growth funds along with some bond funds.  Thinking about what happens to 401K in the future, I'm not sure I want to leave this kind of money in the hands of a bank/financial institution given what I believe will happen in the future.

If I withdrew, I would be bumped up into the 33% tax bracket for 2011 and that means after 10% penalty ($11,500) and 33% tax ($34,155).  I would pocket $69,345 which would be used to go 70/30 towards gold/silver respectively since I would have roughly 1.9lbs of gold and 32lbs of silver if I allocated every dime of the 401K money to bullion.  I'm a big strong guy that could carry an 80 lb pack in case of emergencies, so I've determined roughly 45% of my capacity would be well served for bullion (35 lbs).

Now, in order for this investment to make sense financially, my targets of $2500 per oz of gold and $70 silver would need to be reached.  These prices seem entirely reasonable from my perspective and rather low in the grand scheme of things given where the US is headed.  

The taxes and fees I'd pay now are the premium for freedom and mobility in the case of calamity.  I am not a soothsayer, but I can't imagine banks will allow 401K withdrawals or loans in the future if all the chickens come to roost.

Am I crazy for thinking about doing this?  I want to have complete control over my life and mobility, and a bunch of fake dollars in a 401K that can't be touched for 40 years seems very foolish if those dollars are worthless.  Will the money be there in a decade? 2 decades? 3 decades when I'm set to "retire"?

Worrying about a bunch of money tied up in a 401K that I'm not going to touch for 30 years isn't something I want to do in the face of hyperinflation.  Yes, I lose out on "tax savings" and the growth of the account, but I don't want to chase gold and silver by waiting to accumulate slowly.  

Thoughts / advice / harsh words are welcome and appreciated.

Edited by admin on 11/08/2014 - 06:06
Aronnax
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Own experience, not advice

First, congrats on the nest egg @ 29. That's quite impressive.

I did/do not have the option to withdraw, unless I quit my job (which I can't, just yet). So I simply took half out as a loan, with minimum repayment amounts. This way I have at least half out, in bullion, am barely dripping a little money back in -- and as soon as I find another job, all of it is coming out -- unless new job's plan offers allocated physical investment option (but probably even then, I'd rather have it in hand).

Dollar cost average in over a reasonably short period of time. Try to avoid paper trail, if feasible - 10K per day every other day until Jackson Hole should do the trick. If you have time, consider 90% silver (from private sellers) vs. ASE or bars -- more Ag for your money. In any case, get smaller units and a variety of them as well. 

Look around/think seriously about other items you may need/want --- land, weapon, fuel/heat/generator, stable food, water supply, etc., besides the bullion -- as they say, you can't exactly eat it (at least not for nourishment) -- and all of the above necessities WILL increase in cost, even when measured in gold & silver. When scarcity hits, it ain't gonna be about FX or commodity price manipulation but merely supply & demand -- cheaper to buy now, for fiat, than later when there isn't any.

Good luck - perhaps look around in the forums for similar discussions, and either pose your question there, or link to this thread.

Aronnax
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Own experience, not advice

First, congrats on the nest egg @ 29. That's quite impressive.

I did/do not have the option to withdraw, unless I quit my job (which I can't, just yet). So I simply took half out as a loan, with minimum repayment amounts. This way I have at least half out, in bullion, am barely dripping a little money back in -- and as soon as I find another job, all of it is coming out -- unless new job's plan offers allocated physical investment option (but probably even then, I'd rather have it in hand).

Dollar cost average in over a reasonably short period of time. Try to avoid paper trail, if feasible - 10K per day every other day until Jackson Hole should do the trick. If you have time, consider 90% silver (from private sellers) vs. ASE or bars -- more Ag for your money. In any case, get smaller units and a variety of them as well. 

Look around/think seriously about other items you may need/want --- land, weapon, fuel/heat/generator, stable food, water supply, etc., besides the bullion -- as they say, you can't exactly eat it (at least not for nourishment) -- and all of the above necessities WILL increase in cost, even when measured in gold & silver. When scarcity hits, it ain't gonna be about FX or commodity price manipulation but merely supply & demand -- cheaper to buy now, for fiat, than later when there isn't any.

Good luck - perhaps look around in the forums for similar discussions, and either pose your question there, or link to this thread.

mr.glitch
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Other things I have

Thanks for the thoughts...I currently own 2 pistols and 1 rifle with a tactical setup, 10 magazines for the pistols, 4 magazines for the rifle, 1000 rounds of .45 ammo, and a few knives.  I have body armor and have had some rudimentary combat training through Krav Maga and BJJ.

For supplies I have a storage unit with bottled water and a few packs of food from efoodsdirect as the footprint is relatively small for enough fuel to fit in my vehicle and transport with the other necessities.

I don't have any fuel but I do have a strike anywhere flint to start fire and a wide assortment of technical gear from backcountry snowboarding that is both waterproof and warm.  I figure that being warm and comfortable with good outdoor gear is critical to survival. 

I don't have any target destination in the country or wilderness as I don't own land.  I always thought that with my supplies that I could barter my way into a group of like minded people when the time came, but I don't want to have these discussions prematurely as most people are critical and naive. 

I'm currently collecting all kinds of seeds since they are so cheap yet imperative to growing food. Spent this summer gardening and growing a few different kinds of fruits and veggies with slight success.

The bullion is just one more piece of the larger puzzle...I want to maximize all of my resources.

mdcromer
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Do it

yesterday. . .

BlackHawk
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Taxes on 401K withdrawal

I am three decades older than you and can withdraw my IRA in late August this year. Last March I started getting so worried that I withdrew about $15,000 + paid the 10% tax out of my IRA. The income tax hit is really what you want to avoid. In your case, maybe you could get some advise from an acct/lawyer to use those funds in a way that would be a tax write off. Possibly you could use it to buy some land in trust (for indigent disabled snowboarders or the like cool) or buy a rental property and look for maintenance and depreciation write offs. Good look to you and keep stacking.

ohiometalman
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Do it now!

Don't question your gut.  Pay the penalty and the tax and you will sleep better at night.  I had to leave my job to liquidate my 401k and planned for over a year for the transition.  It's BS the rules on 401k, In my opinion this program is designed to keep you in the system to feed the bankers on wall street.  My advice is agreeing with yours, get out, pay the penalty and stack the bullion (just make sure all your debts are gone first).  Take care!

HonorAndObey
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A fellow brother in similar circumstances.

I was 34 last year when I faced the same decision.  I had 66k in my 401k.  I decided to minimize income withholdings and not pay up front the 10% penalty so I could buy that much more silver and 'gamble' that my extra silver appreciation would more than cover my IRS bill. (which it did).  

I did run into an issue.  They would only let me withdraw 57k because that was my principle.  The rest was 'unearned gains' over 17 years in my 401k.  Choke me.  If you run into this, you might try taking some amount out in a loan first then the rest as a hardship. It took me 4 months to summon the nerve to classify myself as terminated and get the remainder. (I'm the 401k administrator for the company)

Hope that is some assistance for you Mr. Glitch.  God bless.

ouchtouch
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Halfway plan

If you are changing jobs anyway, you don't have to withdraw and take the tax hit.  Instead, after you leave the current employer, roll the 401k money over into an IRA (preferably a Roth IRA if you can pay the tax hit now) with a firm that offers self-directed IRA's.  You can buy metal from a dealer and have your IRA firm put it in a PM depository.  If you want ideas of good firms, check your favorite PM dealer and see what IRA firms and PM depositories they deal with.  Tulving (best prices for this volume of metal) had a page on his site addressing this.  It is a very simple transaction.  You just get a check from the 401k administrator, forward it to the IRA firm within 60 days with the paperwork to open the IRA.  Make sure that the IRA firm gets an account with your preferred PM depository.  Call Tulving when you are ready to buy, and they fax you the invoice so you can fax it to your IRA firm and tell them to pay Tulving.

You now own metal in a vault and there is no tax penalty.

If you want to maintain the option of closing the IRA before retirement and hiking into the woods with the metal, having paid the tax penalty then, you need to investigate Roth versus traditional IRA, because the rules for closing/early non-qualified distribution are different.

Ambrodel
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Bullion IRA Option

This does you little good if you are concerned about a SHTF scenario tomorrow, but when you leave a job, you can roll your former employers 401k plan into an IRA account.   There are several bullion companies that are IRA registered, meaning they put your bullion under lock and key but it qualifies as an IRA asset.  It is audited to ensure it is actually there, not like SLV "bullion".

This avoids losing 50k to taxes and penalties, but if you think the crash will be so severe that all institutions break down, then it is obviously no good since the metal is not in your hand and it is probably a long walk to wherever it is.

If you want to pay the tax, you can convert that account to a Roth IRA, then in 5 years you can withdraw the original conversion amount (not gains) without tax, which was already paid, and without penalties.

Really depends on what future scenario you see, but this offers an option for a scenario in which the dollar devalues but institutions remain intact.   Many on here are concerned about confiscation and this is not a good option if that is your fear as well. 

I happen to think we are headed down a dark road, but it will probably not come down to every man for himself.   That is just me.

Ambrodel
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Great Minds...

Ouchtouch, you just beat me to the punch!  :)

mr.glitch
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Thanks

Thanks for the insight, gents.

Leaving my current employer will be bittersweet, but being fortunate enough to get a nice signing bonus and some options will allow me to get some more ounces of metal if I leave.

I'll let you all know what I end up doing...I have to make a decision here fairly soon but am still weighing my options as I'd be moving from a great city/state with no income tax to one of the most expensive (California) if I take the job.

Very disruptive and stressful to have to move with little confidence in the system.

Homesteader
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mdcromer wrote: yesterday. .

mdcromer wrote:

yesterday. . .

Agree.

Did it in 03/04.  (Split over 2 tax years )  Age 50.  Paid tax/penalty, put it all in silver which was 6.50ish then, and gold was 450.   Gold now <4x, silver about 7x, and until silver gets to 16:1 ( or less ) with gold, I still think it has the better potential to appreciate, so I'd do the same thing today.

Oh yeah.....the crappy mutual funds I used to be in ?  Wouldn't have broken even yet.....much less a 7x gain.

Dr Durden
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I'm curious what your

I'm curious what your interest vs the actual principal on the account is. 

I'm considering doing the same with one of my accounts that has done well. I can sleep a bit better at night knowing I didn't touch the original principal. 

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