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Anyone taking the 10% penalty and cashing out 401k or IRA?

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  • Wed, Mar 04, 2009 - 10:41pm

    #1
    stevvot

    stevvot

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    Anyone taking the 10% penalty and cashing out 401k or IRA?

I don’t have a whole lot in it, and had already moved the balance into cash from mutual funds anyway, but now I’m wondering if I should go ahead and make the full withdrawal and buy the preparation gear/guns/ammo and physical gold with what’s leftover.

 Anyone else already done similar or thinking about it?

  • Wed, Mar 04, 2009 - 10:48pm

    #2
    Peak Prosperity Admin

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    Re: Anyone taking the 10% penalty and cashing out 401k or …

I did- $20,000 just before the markets tanked (to pay off our debts).  I doubt we’ll ever consider investing in 401k again.  Why would I want to gamble with my hard-earned money?

  • Wed, Mar 04, 2009 - 10:54pm

    #3
    Peak Prosperity Admin

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    Re: Anyone taking the 10% penalty and cashing out 401k or …

Yes, I took everything out in 07 and am glad I listed to Jim Sinclair. The markets are going much lower. However, you might want to consider investing your 401K in to a Gold mutual fund (like TGDLX, etc). It is a great way to get back some of what you may have lost. Other then that, get out, stay liquid, buy gold, to heck with your FICO score, and prepare for what is coming.

  • Wed, Mar 04, 2009 - 11:59pm

    #4
    Peak Prosperity Admin

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    Re: Anyone taking the 10% penalty and cashing out 401k or …

[quote=stevvot]

Anyone else already done similar or thinking about it?

[/quote]

We closed out every single one of our Roth IRA funds in 2003.  When I retired from the Navy in 2003 I didn’t bother to start a 401k with my new employer.  My wife and I have been privately trading and investing in the market, and after a year of practice trading we have been averaging between 40 and 60% returns since late 2006.

Ask yourself this question:

What do you think is the worst scenario that could result?  If you think you are going to have to prepare for the "end of the world", then you probably have answered your question. 

  • Thu, Mar 05, 2009 - 12:39am

    #5
    Peak Prosperity Admin

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    Is the Fail-Safe portfolio too dangerous now?

I use Harry Browne’s "Fail-Safe" portfolio form my small IRAs, but now I wonder whether even that model is too dangerous.

Rather than trying to predict the market, Harry recommended rebalancing investments once a year into four categories:

1.  25% aggressive stocks in case the market takes off.

2.  25% Treasury long bonds in case the market takes off and in case of depression.

3.  25% T-bills in case of depression.

4.  25% physical gold in case of inflation.  (I don’t have money outside of IRA, so I use gold ETF instead.)

Since the early 70s through 2007, this ultradiversified strategy never lost money.  When one or more categories were down, other categories more than compensated for losses.  Last year was the one exception when gold was down along with stocks and bonds. 

Is it too dangerous to maintain IRAs now, even if they are ultradiversified like this?  What happens to my money if Scottrade fails?

  • Thu, Mar 05, 2009 - 12:53am

    #6
    Peak Prosperity Admin

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    Re: Anyone taking the 10% penalty and cashing out 401k or …

We did. Taxes were cheaper than what we would have lost. Sad testament. We also took capitol gains on land we sold – again cheaper than letting it tank in the real estate market.

Hindsight: Even all this at once was better than the loss we would have incurred.

Somehting is better than nothing. 

 

  • Thu, Mar 05, 2009 - 01:22am

    #7
    Peak Prosperity Admin

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    Re: Anyone taking the 10% penalty and cashing out 401k or …

I did. I can’t invest in an Uncle Sam sponsored program when I don’t trust Uncle Sam. As Chris has hinted, retirement accounts could very well be a target when the government gets desperate. Our government will get desperate because it is insolvent. I want to have as much control over my savings as possible.

  • Thu, Mar 05, 2009 - 02:02am

    #8
    Peak Prosperity Admin

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    Re: Anyone taking the 10% penalty and cashing out 401k or …

 

Me, too . . .I’m currently on the verge of cashing in an annuity in to pay for the removal of mercury amalgams and some other extensive proactive dental work.  I feel the return on investment will be higher on getting the mercury out of our systems and preventing future dental/health problems than the return on the limited choices in the annuity.  Yes, the tax hit will hurt, but not as much as the devastation to our annuity if we stay invested in stocks/bonds/dollars.

 

 

  • Thu, Mar 05, 2009 - 02:20am

    #9
    Peak Prosperity Admin

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    Re: Anyone taking the 10% penalty and cashing out 401k or …

Now they just stick it in vacines and flu shots

  • Thu, Mar 05, 2009 - 03:11am

    #10
    Peak Prosperity Admin

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    Re: Is the Fail-Safe portfolio too dangerous now?

[quote=1440 minutes]

1.  25% aggressive stocks in case the market takes off.

2.  25% Treasury long bonds in case the market takes off and in case of depression.

3.  25% T-bills in case of depression.

4.  25% physical gold in case of inflation.  (I don’t have money outside of IRA, so I use gold ETF instead.)

[/quote]

At this point, though, wouldn’t you just break even in the end?  I mean, to me, it kind of seems senseless.  Am I just confused on this?

I mean;

If #1 then loss on #2-4

If #2/3 then loss on #1&4

If #4 then loss on #1 (maybe #1-3)

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