Skip to comments.Cyprus. Now what...I have a 401K. What is the best way to get OUT?
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 some into cash, but leave it in the account.....
Assuming you are not contributing any NEW money to the 401(k), correct? I do not think there is a good way to avoid the taxes and penalties on a withdrawal. As you know, that would be quite costly.
This make no sense to me. How do you do this?
401k is with your current employer?
depends on who your account is with.......
or roll it.....
Whatever you do, the government has purposely made all of your choices painful. You are going to lose a portion of it no matter what you do. Sorry. That is the truth.
Converting a portion of it to cash and letting it sit is no good either. It could still be confiscated directly. If not that, then planned inflation will eat away at it.
You need to bite the bullet and convert it into a form that you can physically hold in your hand. Everything else depends upon trusting someone else. When the SHTF, all normal trust relationships will jump ship.
If you cannot hold it in your hand, you do not have wealth.
You have to get past the normal mental resistance to losing a small percentage of it to protect the rest of it.
Recorded savings are now subject to confiscation.
Capital formation is dead.
The End Is Near.
keep going .......
This is something I just heard about recently. Supposedly you can take money out each year without the penalty but it needs to be a consistent amount each year. I’m very sketchy on the details.
Here is a site with details: http://retireearlyhomepage.com/wdraw59.html
This from the web site:
Fortunately, there is a loophole known as a “72(t) exception”. Under current tax law (Internal Revenue Service Code Section 72(t)(2)(a)(iv)) you can avoid the 10% penalty tax if you take “substantially equal periodic payments.” The Internal Revenue Service 1989 Cumulative Bulletin (Notice 89-25 on Page 666) tells you how to calculate what it considers to be “substantially equal periodic payments”. IRS Revenue Ruling 2002-62 adds additional details and clarifies some issues pertaining to IRA early withdrawals. All of these engrossing volumes are very likely available at your local law library
He means to rebalance your 401(k) account to invest primarily in money market funds. Per the Labor Dept's guidelines for investment choices, you should have at least one.
There's another article that was posted earlier, in which a guy who claims to have predicted the dot.com collapse is getting nervous. He doesn't have much faith in money market funds, and his financial advisor has convinced him that the inflation-protected treasury bonds (also known as TIPS) are the answer.
There are bond funds that specialize in these, and you might have one in your 401(k). I have half my 401(k) assets in one, and the other half in a corporate bond fund. You may think that's too conservative, but I have long-term equity investments in other accounts (i.e. Roth IRA) to balance it out.
bump for later
Many are saying that this will never happen here, but Obama through the Fed and big banks have already stolen millions of dollars from senior citizens who have Certificate of Deposit (CD)savings accounts which have received no interest due to the policies of Obama and the Democrats.
These millions of seniors were expecting to live off of the savings rate interest in retirement, but now they are draining away all of their hard earned savings just to live day to day.
Letter: Zero-interest policy by Federal Reserve is war on America’s seniors
Friday, March 15, 2013
Don W. Edwards, Hobe Sound
Letter: Zero-interest policy by Fed is war on Americas seniors
The fiscal crisis (the bursting of the housing bubble) has allowed the Federal Reserve to begin its epic cutting of the interest rates from 5.7 percent in 2007, effectively to zero in 2008, and has remained there ever since and as a result, there has been a catastrophic shortfall of retirement savings in America ever since.
There may be many other causes, but mainly it is a liberal political policy that is very hostile to investment. This zero-interest policy engineered by Fed Chairman Ben Bernanke and his majesty, our president, offers retirees and near-retirees no interest on savings held in their bank accounts, Treasury bills, or money market funds thus pulling money out of the pockets of millions or senior retirees.
The rationale for this anti-senior policy was a political policy spurred by Barack Obama to get re-elected, to keep unemployment low and to spur our economy.
By many measures these liberal policies have failed to achieve its goals, and our U.S. economy is worse off when compared to any normal interest rate environment.
So, the victims of these failed policies are retirees, who are penalized for doing everything right. They worked and saved their money, stayed out of debt and now are punished by these politically inspired zero interest rates.
America is ready and willing to provide its savings to fuel investment and growth all they ask is for a stable currency, positive returns and a friendlier investment climate by this administration.
These failed policies of money printing and zero returns are anathema to investment and growth.
Until this war on savers by Obama is ended, income security for retirees will be an illusion.
Are you saying your 401k is with a Cypriot bank?
Do you intend to pay your way into your grave or live life into the grave?
I don't think there is any money making plans worth having (I'm no financial wizard ... if anything, I wouldn't listen to my own financial advice ...)
You can live quite well in an out of the way piece of flyover, with good friends and likeminded neighbors, growing food, making wine and smoking pot all from your own doing.
If you're youngish (30-40) .. look for that piece of paradise and buy it ... dig a well, install sewage, then pull a Timothy Leary ... tune out, drop out and have a good life.
If you want to live in a burb ... IMO ... you'll never make it work as a Conservative without serious compromises .... and that would be madness
I like TIP's also, but a word of caution: many TIP funds have relatively long maturities. So if interest rates rise, those funds will take a price hit (bond prices tend to move in the opposite direct of interest rates).
The perfect storm for these TIP's would be if the Fed raised interest rates, but still claimed that inflation is low. Your TIP's price per share would go down, and you wouldn't get a decent inflation adjustment.
So if you think that perfect storm is possible, look at some short-term TIP funds. Some funds like that are being rolled out now.
I think any 100% short term treasury fund will achive a retreat from a market dump.
If so I would/have one inside my 401k incase I needed to move evrything real quick or the fund gets closed to new money in the future.
Check out VIPSX its 99.5% treas although intermedite term vs short.
401K loan last resort for $$.
1.If you lose your job, you will have to repay the loan within 60 days or it will be considered an unqualified withdrawal. This means you lose any future tax advantages on that amount, and you will be subject to income tax plus a 10% penalty on the amount. This would boost your effective interest rate dramatically.
2.401(k) funds are protected from creditors, even in the event of bankruptcy. If you borrowed money on a credit card and dont pay it back, your credit score will tank but nobody will take money out of your hands. Just like how home equity loans can be dangerous because you are risking your home, unsecured debt is always better than secured debt. If something is so bad that you need to sacrifice your retirement savings, then bankruptcy may not be that far-fetched. Is this a one-time need, or are you just putting off the inevitable?
3.Some 401k loans do not allow new contributions if you have loan outstanding. So you could be losing out on some 401k matching contributions. This loss would also drive up the effective cost of a 401k loan.
If you get laid off or leave that plan thet loan is due NOW.