The Great 401K Expirement

Come Feb 2012 I will be taking the hit and pulling my money out. Reason is I am waiting is for my 401k to be fully vested (5 year mark). I stopped putting in contributions several months ago and using that money to buy PMs on occasion. I'd rather put that extra contribution into my pay check now rather than risk any more in the market. With the money I have in the account, I'm trading AGQ, TZA, miners, and some other things to keep it afloat. Although, I must say I'm thinking more and more about moving to cash because I'm not timing the markets as best as I'd like.

When I pull the money out, I will likely buy more gold than silver.

Too bad you'll take all of your 401k as income, PLUS an extra 10% penalty. That REALLY sucks....

Pondering that very move myself.

With a real inflation rate approaching 10% and the hard reality of tax increases in the near future that 10% penalty has much less sting than it once did.

On top of this, my company's 401k does not provide the flexibility to trade my balance as I'd wish to. In the main the choices are stock and bond funds, both very poor investments in today's environment.

And finally, although it borders on 'tin hat' thinking, I have to believe that with the national debt as insurmountable as it is, the $10 trillion in private retirement accounts will increasingly entice to our 'public servants' to confiscate it for our own protection.

Pax

Why not take the money out and put it in another IRA or do some research on trusts where the government can't touch it? If you have your money in a 401K in the market and we have, which everybody is bracing for, a 2008 like event than you may have wished that you took the money out even with the penalty. How many people made their money back in 401 K's after 2008? If the next one is as big as some people think, it could just wipe people out. If you pull out, I wouldn't be investing right away, I'd put most of it into a cash account so when the SHTF, you can buy, buy, buy!

I'm also thinking about doing the same thing. One thing to remember: What you pull out will be counted as income and can push your income bracket to the next tax level (i.e. %27 to %31). This would make your tax hit even larger. I'm thinking of pulling enough out to not step over to that next tax bracket. Then Jan 1st, i'll pull out the next amount.

Withdraw enough to buy in stages what you consider to be an adequate core position in physical gold and silver, and enough cash for emergencies. Convert retirement accounts into self directed accounts so you can take advantage of the increased leverage mining stocks will provide to higher gold and silver prices.

We discuss these options often at our house. My wife's plan at work gives us access to every mutual fund in the US via Fidelity's "Mutual Fund Window," so I am able to add metals and non $US currency protection via funds like Merk Hard Currency Fund, Permanent Portfolio, First Eagle Gold Fund, Tocqueville Gold Fund, and a short stocks fund or two. If it weren't for those options she would be out of her plan ASAP.

I'm trying a different strategy. It's risky, but it could pay off huge FRN$s.

I opened up a PM IRA. I bought ONLY ASE and GSEs. These are legal currency.

Now.. the question is, when I receive a distribution-in-kind... say... 500 ASEs. Do they mark $500 on the 1099, or do they mark $500*Spot? There's a HUGE difference. I wouldn't mind at all paying FRN$50 (+ change) to the IRS as an early distribution penalty of 10% (+ income tax on the $500).

The coins are valued at market going in and out.

I don't think it is taxed if you roll it over in 60 days?? I don't remember exactly. The only penalty I remember is not being able to participate in the silly plan. It's been awhile since I had a 401k

Remember that if you are 55 years old or older and separated from the employer attached to the 401K you may cash out without penalty. You would still have to pay the taxes.

In that situation I decided to take half of my 401K in cash (to buy PMs) and rolled the remainder into an IRA (now mostly in closed end Canadian PM funds). That kept me from too many tax bracket jumps.

just taking a loan against it instead? I believe you will avoid the penalties and can still protect yourself and your hard earned money. Just a thought...

Last year, I considered taking IRA money out and converting to gold, but I didn't. By 2009, I had missed a 8 years of the bull market and thought the 40% hit was too high. I can buy gold stocks and physical ETFs from within the plan. Some people have very limited choices and might come to a different conclusion.

So, I trade within the IRA and will stay long gold until the time comes to cash out. Timing is a bitch.

My strategy so far has been to barbell physical metals with quality corporate bonds. It's done pretty well so far. The bonds would be trashed if the system dies.

Green Lantern wrote:

How many people made their money back in 401 K's after 2008? If the next one is as big as some people think, it could just wipe people out. If you pull out, I wouldn't be investing right away, I'd put most of it into a cash account so when the SHTF, you can buy, buy, buy!

Exactly.

I went all in in early 2009 and rode my investments up almost 100% on a few (avg 73%) and sold everything and went cash in April.

The best thing you can do is just sit in cash as it will obviously not get slammed. I see people completely freaking out on these blogs like Owebummer is going to come to their house and hold them hostage for their 401k money. Stay calm people and have a game plan if push comes to shove. Yea, we're broke...I get it...but don't let the hysteria mess with your mind.

"The Great 401k expirement" It will expire and it will hurt, I can promise you that. I quit a high paying job last year, in part to get out of my 401k lock-in in addition to jumping on some opportunities elsewhere for a while. I didn't close out the 401k, but I did convert it to an IRA and bought some inflation hedges focused on miners and physical gold and silver. SLV and GLD are _NOT_ things to hold in a retirement plan... they do not have the physical to back claims upon it. Its simple fact.

I have every intention of cashing out the IRA on or before January 2nd 2011 (first business day without a hangover of the year). I'm debating it because I know my federal taxes will be greatly reduced next year in comparison with the current year. Its a tough decision and I'm not sure exactly when the IRA will be closed, but it will be closed soon. I have no intention of holding FRNs longer than needed to pay taxes and expenditures that I must have.

I encourage everyone to get out of the dollar for wealth savings as soon as you can. And there is absolutely no reason why you should have a dollar denominated retirement plan. Even if the stock market soars during inflation, it will still lag the depreciating value of the currency. This pattern has repeated throughout the last 100 years for every country that suffered bouts of inflation and hyperinflation. The US will be likely be different of course, its likely to be far more dramatic and painful for the savers.

M5 wrote:

The coins are valued at market going in and out.

Yes.... but WHO says that? Which law or regulation says you must fill out market value on the 1099?

If it's an IRS _regulation_, isn't that TRUMPED by the CONGRESSIONAL LAW stating inequivically:
5132.2: [emphasis mine]

(A) <<snip>>

(B) Notwithstanding any other provision of law, for purposes of this paragraph—

(C) All coins minted under this paragraph shall be considered to be—

(ii)legal tender, as provided in section 5103.

Source: https://www.law.cornell.edu/uscode/31/usc_sec_31_00005132----000-.html

A dollar is a dollar, LEGALLY, then. Whether it's a SILVER dollar or a Federal Reserve "dollar".

Still funding the 401K. Buying PSLV, PHYS and CEF with the pretax self directed PCRA Schwab account. 2 years to go for retirement!

Got my physical already.

Gov't everywhere are desperate to fill their hungry maws with any money out there.... I went all in on pms by taking our IRAs and putting them in a IRA savings account at our credit union that has instant access to the funds by a visit and signing forms last year. So far I have taken money out last December and again in January to minimize the tax hurt and put it in PMs. Come Jan next year the last will be gone. This has saved us money by keeping us below the next tax bracket and so far knock on wood, has returned enough to pay the tax/penalty hit.

...there are only a few ways that anyone under 59 1/2 may access their 401k. One is by leaving your employment. Those of us fortunate enough to have jobs aren't likely to do that anytime soon. The second is to take out a loan against it. IIRC, you're limited to a maximum of $50,000 or a percentage of your total balance if you have under a certain amount, and it has to be paid back at market rates over three years, or five years if being used for a residence or RE. The next two ways are hardship. One is for medical bills not covered by your employers health plan, and must be fully documented. The other is foreclosure of your primary residence, which must also be fully documented.

401ks are essentially money traps. I stopped contributing to mine the first time that I heard Theresa Ghillarducci testify in front of George Miller's (D-CA) subcommittee on labor and pensions in October 2008. Since then the Senate has had hearings on switching 401k's to GRA's, and there have been two NPRM sessions at both Treasury and Labor on how to implement this change. They WILL be confiscated eventually as the government gets more desperate for revenue. Just ask the .gov retirees who are having their pension plans raided by Treasury right now to fund ongoing .gov operations until the debt ceiling is raised.

If you're over 59 1/2. or if your employer allows you to switch to an IRA, I would recommend either cashing out in the former, or switching in the latter. IRA's will probably come under the gun eventually too, but they at least are much more liquid than a 401k. If I were able to do so, I would.