Another braintrust question

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docmims's picture
docmims
Status: Platinum Member (Offline)
Joined: Jun 17 2009
Posts: 644
Another braintrust question

I, along with many others, it seems, am on the brink of withdrawing my 401k money this year and paying the taxes and 10 percent penalty.  This trickle of redemptions could turn into a landslide if the administration starts requiring a percentage of funds be invested in govt bonds.

I was just thinking that the combination of required govt debt financing by retirement plan owners along with the absolute tax windfall

 to the govt from early withdrawal might just allow Obama and Bernanke to kick this can down the road a couple years.

Thoughts?   Tell me I'm full of BS,  I can take it.Smile

Johnny Oxygen's picture
Johnny Oxygen
Status: Diamond Member (Offline)
Joined: Sep 9 2009
Posts: 1443
Re: Another braintrust question

The government needs more buyers for their bond scam. If people won't voluntarily buy in then they need to make people buy in. Ask yourself these questions:

Is the government going to force you to put part of your 401K into bonds?

Is the bond market a safe place to have your money?

Will you lose money?

I think the answers are obvious.

Davos's picture
Davos
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Joined: Sep 17 2008
Posts: 3620
Re: Another braintrust question
docmims wrote:

I, along with many others, it seems, am on the brink of withdrawing my 401k money this year and paying the taxes and 10 percent penalty.  This trickle of redemptions could turn into a landslide if the administration starts requiring a percentage of funds be invested in govt bonds.

I was just thinking that the combination of required govt debt financing by retirement plan owners along with the absolute tax windfall

 to the govt from early withdrawal might just allow Obama and Bernanke to kick this can down the road a couple years.

Thoughts?   Tell me I'm full of BS,  I can take it.Smile

I can't predict the future but I got out of all of our 401k's IRA' s.

I do know that desperate people do desperate things. Desperate by definition: 1.) 106 trillion in unfunded liabilities and 12-14 trillion of on the books debt.  2.) As insolvent as Enron.

Something is going to give:

  1. Out of desperation they could seize 401ks and IRAs and buy debt because no one else wants to purchase this [email protected]
  2. They could default on the "unfunded" (previously looted long since spent public bribes to get re-elected) liabilities
  3. They could default on some/all/most of their debt
  4. They could devalue the dollar (intentionally or by absolute stupidity) (With Bernake I'd seriously expect the later)

Personally, I can't think of any positive merit to holding paper especially restrictive paper. In other words I think 1-4 will - all very negatively - impact that paper. The only savior I see that could kick the 1-4 can down the road would be some new energy development. They haven't even formed a special tribunal to look at energy, that energy is spent instead on figuring out what caused the collapse of 08. Any idiot could spend 6 hours on the better blogs and figure that out. 

Personally, they made me desperate in the sense that I was willing to give them a chunk, a huge chunk in order to have something left when this all shakes out. Something in my mind is better than nothing. I also cashed out of all real estate and downsized into a new self built residence. We paid capitol gains on property that I bought for x and sold for 3 times x making six figures in 3 months. It hurt. A lot! Especially during the closures of the restrictive paper accounts.

To answer your kick the can down the road question. I truly "dunknow. " Not to sound stupid, but this thing has managed to give the appearance that it is holding together a lot longer than I ever expected. Gravity has to kick in sooner not later. All Americans together hold almost 60 trillion of wealth (and it ain't all in 401ks and IRAs). That still leaves a 60 trillion pit. But you'd have to have someone like CM or John Williams calculate how much cash they could steal to service debt.

In my simple mind, debt can be outrageous for a very long time. The rubber hits the road when the debt can't be serviced. The rubber hit the road the instant the moron hit the QE button.

Also using GAAP a 24 billion a day deficit is going to demonstrate just how smart Dr. Al is when he says his bit about people and exponential math.

Sorry I don't have a better answer, but I think if I was where you my question would be put simpler (for my simpleton mentality). If they rob my 401k, by mandate it's investment portfolio will I ever be able to get my grubby paws back on it?  

Do I trust my knowledge of investing or their knowledge of investing? Social Security formed 1935, 74 years later - insolvent 17.5 trillion dollar deficit. Fannie Mae, 71 years later - insolvent. 1970 Freddie Mac, 39 years later - insolvent. Medicare 74 trillion + of insolvency.

 

Mike Pilat's picture
Mike Pilat
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 929
Re: Another braintrust question

I absolutely think that the govt is going to do something to confiscate the value of 401ks in the future. Either raise retirement / withdrawal ages, increase or add taxes where there weren't supposed to be any, or require investment in US Treasuries.

It depends on where you are in life and how far you are away from retirement. I'm young, and I only put money in my 401k that I can get matched 50% on. Above that, nada. And I don't view the 401k really as a retirement fund. I just think it's a prudent investment where I can get an instant 50% return. But in order to get the 50% return, I must be willing to liquidate and pay the 10% penalty, AND I am subjected to the risk that the govt tries to pull a fast one, so it is not a total freebie there either.

Just my take.

Aaron M's picture
Aaron M
Status: Diamond Member (Offline)
Joined: Oct 22 2008
Posts: 2373
Re: Another braintrust question

Docmims,

My thoughts on this matter are all centered around Davos's quote:
"Also using GAAP a 24 billion a day deficit is going to demonstrate just how smart Dr. Al is when he says his bit about people and exponential math." 

The Principles Doc Bartlett outlines all me to identify the forest, even if I can't tell you which tree is which, so I'm certainly not part of the braintrust, but I think the situation in general can be looked at like this:

1. The monster is unsustainably large
2. The indicators are, that despite their talk, most citizens will leave their 401k alone "hoping" it'll grow again.
3. It won't.
4. Those who stay in it will get skunked - as we all will.

Though it would seem like you're tossing a treat to the Obamanation and his toadies, that tax money - even if everyone pulled all their funds out and paid the tax - wouldn't be enough to keep the beast alive for long.

Whether or not its incremental  or not I think matters less.
Do what makes more sense for you. If you can make those FRN's work to better you, your family and your community through better preparedness, Na Zdrovye!

The gound is shifting, and despite reassurances to "be calm" by middle management, it's still wise to ignore protocol and get out of the building.

Cheers!

Aaron

Saffron's picture
Saffron
Status: Gold Member (Offline)
Joined: Aug 29 2009
Posts: 250
Re: Another braintrust question

I've done the above (closed the IRA) and now find myself in the unusual position of having a check and no place to deposit it! My working capital is in BofA which I dislike and don't want to give them any more than the minimum to pay my bills. My credit union is not highly rated, so it feels risky depositing more there. I had another credit union in mind that had good ratings on the site that was recommended in another thread, but I just found out that is for military, which we are not. All the other credit unions in my hometown are rated poorly, yikes!!! 

Now what?

There was a site to check on banks in that same thread, but I cannot find it now .... anyone know how I can find a well-rated bank?

Wish I knew someone selling a farm ... cheap

docmims's picture
docmims
Status: Platinum Member (Offline)
Joined: Jun 17 2009
Posts: 644
Re: Another braintrust question

Try the military one they usually accept other area businesses, and you could get your business to sign up.  They will usually find a way to qualify you.  they are not in the business of keeping people out. Smile

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