Should I open a Retirement Account?

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JohnH123
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Should I open a Retirement Account?

[Ed. note: Personal information redacted at the request of the poster.]

I would like to hear opinions on the pluses and minuses to putting money in a retirement account vs. not doing so. I have thought about it alot, and cannot as of yet draw a clear conclusion.

Thanks!

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Re: Should I open a Retirement Account?

Hopefully Davos will chime in here as he is much more eloquent than I.

My answer is CERTAINLY NOT in any vehicle your financial planner or government can offer.

If I had control over my better half's 401k, it would be zeroed out and kept in a mix of cash and PMs with a portion of it spent on consumables that we currently use that store well. I'd be ready to plunk the cash into whatever form I thought would protect my family the longest if I saw Greek style point spreads happening in our bond markets.

Sounds like you are already where I want to be. I'm 47, self employed, have debt and I've never saved much living the lie. My saving grace will hopefully be my, skills, planning, small network of like-minded folks, an arable acre I'm actively planting and a place to go if social unrest or taxation drives me from my current residence.

You were just fishing for compliments, righ?Wink

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Re: Should I open a Retirement Account?

I would open one.  Your investment can grow tax deferred plus you get a tax deduction on your retirement contribution.  Don't forget, when you sell your gold and silver, you will pay a 28% tax on any capital gains.  With a retirement account, you can trade in and out of various investment vehicles, including physical or paper precious metals, without having to pay any capital gains tax.  If they "confiscate" retirement accounts, they're not going to take your money away outirght, they'll just compel you to invest in certain instruments such as Treasuries.  If you have a non-retirement "cushion" (which you do), you should be OK.  Right now with only 200K and owing 140K on your house, your net worth is only 60K so you're way behind the curve in terms of saving for retirement as a self employed person at age 47.  It will be difficult to catch up.  You need to get going now and you can grow your money faster in a retirement account.  When you begin making withdrawals from your retirement acccount, taxes may be higher but no one knows for sure.  Make sure to plan in the here and now and not just speculate as to what will occur in the future.

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Re: Should I open a Retirement Account?

ao certainly has more faith in the long term outlook of the Federal Reserve Note than I. I'll be surprised if it lasts 'til I'm 50, much less 59 1/2 or whatever age it gets bumped to. 

In the past 20 years, my retirement accounts grew and fell, grew and fell and ended up barely keeping pace with the cost of vehicle or home prices. Had I kept my 1990 Chevy truck and my first house, I'd be doing good, but all in all, the gains made in my retirement accounts did not keep up with inflation or my taxes.

Do you think the cost of real goods (not some variable basket of goods) will be out paced by any investment vehicle? Do you think your taxes will remain remotely where they are now?

Not a bet I'm willing to take.

Nancy is, and that's her choice. I think she's blind, ao probably thinks I'm paranoid.

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Re: Should I open a Retirement Account?

I can't give advice.

I can ask some questions and offer some observations.

First, with a 140k mortgage I'm going to assume you put a lot down and have a lot of equity in your house and that your net worth is better?

Second, are your coins bullion or numismatic?

Third: Your 100k (of the 200k saved) is it cash or did you put it down on your home?

Also is your debt fixed or variable?

Lastly: The government has 120 trillion in off balance liabilities, 12 trillion (18 trillion if you count the GSE debt on the Fed's balance sheet) in federal debt, and it has a GAAP deficit of 9 trillion a year. It earns 2 trillion, which covers the interest on it's debt, but the pathetic reality is it can't even borrow what it needs to stay open and without the insane counterfeiter in the basement of the Fed devaluing our dollar the music would have stopped.

Argentina took the savers retirement accounts, there has been talk in the US of them going after 2-5 trillion in 401's and IRA's. My question would then be: Why do you trust ANY paper? Do you think with 22% unemployment consumers are going to consume? That the market will continue it's trajectory to 36k?

Do you think that 8 million homes past 90 days is going to be another shock of foreclosures? Think about it, in 2008 there were 1.8 million foreclosures and in 2009 2 million. 1.5 trillion in subprime made a mess, we have another 1.5 trillion in Alt A's and Option Arms, and we have an economy on the ropes. If anything near 8 million hits foreclosures what do you think that is going to be like?

Also, CRE is going over the cliff. We have 3.5 - 5 trillion in it. 2988 banks that hold the bulk of it are regional banks, Elizabeth Warren is (rightfully) concerned that the other 6,000 regional banks are going to be put at risk. The FDIC can't even fund the closing of 700 banks on the troubled bank list, what good will they be? 

Welcome to the site. I find your post interesting.

Interesting, to say the least.

Usually questions like this arise from one spouse figuring it out, while the other spouse listens to the Bernanke's, Summers, Romers, Geithners, and the CNBS's of the airwaves and is insistent on learning the hard way while hoping that a country with 138 trillion in debt and not enough cash to service it's debt has some chance in h*ll of things working out okay.

Should the banks close and should they re-issue a currency are you stocked up enough to weather a bank holiday storm? I think some on this site would advocate an investment in things you could and will buy during the year. Myself - I just ordered another cow. 1500 in meat and another freezer means I can sleep at night. If I'm wrong my cholesterol will be higher but I still gotta eat in 2010. 

 

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Re: Should I open a Retirement Account?
ao wrote:

I would open one.  Your investment can grow tax deferred plus you get a tax deduction on your retirement contribution.  Don't forget, when you sell your gold and silver, you will pay a 28% tax on any capital gains.  With a retirement account, you can trade in and out of various investment vehicles, including physical or paper precious metals, without having to pay any capital gains tax.  If they "confiscate" retirement accounts, they're not going to take your money away outirght, they'll just compel you to invest in certain instruments such as Treasuries.  If you have a non-retirement "cushion" (which you do), you should be OK.  Right now with only 200K and owing 140K on your house, your net worth is only 60K so you're way behind the curve in terms of saving for retirement as a self employed person at age 47.  It will be difficult to catch up.  You need to get going now and you can grow your money faster in a retirement account.  When you begin making withdrawals from your retirement acccount, taxes may be higher but no one knows for sure.  Make sure to plan in the here and now and not just speculate as to what will occur in the future.

Let me add a wrinkle or two to this line of thinking, especially as regards the idea of "trading in and out."  Besides the fact that trading is for pros, or at least people who can approach it with the dedication it deserves, one has to consider that short term and long term gains are treated very differently in the tax codes.  Short-term gains, defined as resulting from securities held for less than one year, are treated as ordinary income.

So while collectibles have a 28% gain rate, the tax rate on short term gains can exceed that depending on your income level.  Also, long-term capital gains are set to rise next year to 20%.  So the tax disadvantage of precious metals is shrinking.

I have personally opted to keep very little of my total net worth in a retirement account...currently about 8%.  I am mentally prepared to have that money disappear via increased tax rates, inflation, or some combination of both.  It's also possible that money could simply be seized via a one time special tax or maybe something like Argentina is evaluating.  Who knows?

More immediately, until we get some sort of massive overhaul of the regulatory system such that regular investors are protected from Wall Street's shenanigans, I am not even remotely tempted ot toss my money into that arena.  For now, the billions of dollars of "trading gains" reported by JPM and GS this quarter tell me all I need to know about that game. 

But it's a tough decision and I respect the difficulty in trying to guess what sorts of regulatory and tax changes might impact your hard-won savings in the nebulous future.  It's a mess and, frankly, a complete shame that ordinary workers have to even take such matters under consideration before they've decided where to invest the first dollar.

 

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Re: Should I open a Retirement Account?
cmartenson wrote:

It's a mess and, frankly, a complete shame that ordinary workers have to even take such matters under consideration before they've decided where to invest the first dollar.

 

That is EXACTLY what it is, an utter and absolute mess & messes get mopped up eventually, personally I have to intention of having anything light enough to get caught in the mop.

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Re: Should I open a Retirement Account?

I am 25 years old and pondered the same question, of whether to invest in a 401k for the tax benefits and then I quickly came to the conclusion that I couldn't touch this money for at least forty years without taking a huge penalty.  What is the point of saving money in an account that you can't use till you are 65-701/2, and who knows how the rules will change in the next 40 years.  Also your investments/trades are limited to what they deem acceptable, who knows you could easily die before you even reach this age, old age is promised to no one.  I quickly surmised that I would rather keep my money closer to me so that I could use it for whatever and whenever I want.  This was more important to me than sending some extra money to uncle sam.  There are far better ways to shelter your income from taxes, corporations and non-profit insurance companies are some of my favorite vehicles for my investments to grow with as little tax as possible.

 

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Re: Should I open a Retirement Account?llo
Tycer wrote:

ao certainly has more faith in the long term outlook of the Federal Reserve Note than I. I'll be surprised if it lasts 'til I'm 50, much less 59 1/2 or whatever age it gets bumped to. 

ao probably thinks I'm paranoid.

Tycer,

Actually, I don't have much faith in the FRN which is why a good chunk of my retirement accounts are in physical gold and silver at the present time.  Retirement accounts have served me well in the past and I've been fortunate enough to have them grow far beyond what I put in.  Nevertheless, this is the first year I won't be funding them simply because I'm comfortable with what I have in the retirement accounts and want to increase the size of my non-retirement holdings.  I always believe in hedging my bets and I'm positioned both for collapse and for continuation of the status quo (which TPTB seem to have a vested interest in maintaining, with some modification).  JohnH123 has no money in retirement accounts and therefore, he may want to consider the possibility that the status quo will continue and hedge that bet.

 

CM,

I think the odds are heavily in favor of increasing tax burdens as you point out but I think the odds are at least the same or even greater that TPTB will increase the burden on holders of precious metals even more.  Who do they hate more, Mr. and Mrs. John Average Public or the folks like us who are trying to sidestep the deteriorating mess with PMs?  As a result, I'm split more down the middle than you between retirement and non-retirement holdings.  I think they may penalize PM holders even more those with retirement accounts.  With government sanctioned market manipulation at this early stage of the game, I'm sure they have more in store with us as the situation progresses (or should I say regresses) further.

 

Davos,

I agree that it is an unprecedented mess of galactic magnitude yet it's amazing how things continue to chug along anyway.  You know the saying about the markets staying irrational longer than one can stay solvent.  Quite frankly, I'd like to see a rapid collapse so we can get it the heck over with but I just don't think that's going to happen that way.  I think it's going to be more of a slow, grinding away along the lines of Lenin describing the crushing of the bourgeoisie between the millstones of taxation and inflation.        

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Re: Should I open a Retirement Account?

[Ed. note: Personal information redacted at the request of the poster.]

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Re: Should I open a Retirement Account?

AO, I don't know how it is going to go down. The military is calling post peak oil for 2015 - hopefully they will create a Manhattan Project for new fuel, but given history this entire thing could end up in a freaking ugly militaristic mess. I myself doubt it won't go down fast, but I wouldn't bet against your point of view. Time will tell.

John, I don't rust paper given the precarious situation we are in, but even folks like Puplava would likely tell me I'm nuts - I just think diversification is for indecisive people. I may be wrong, but I'm decisive about it! You might contact PFS Group, they have a wealth preservation fund, Sprott up in Canada does. Sprott is almost all in gold and oil. I'm not the only nut out there, LOL!

Good luck with whatever you decide.

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Re: Should I open a Retirement Account?

I waited until today to decide whether to contribute to my Roth IRA for Tax Year 2009. I did not contribute. I would rather take that money and put it into something productive, like a house with good land, among other things. I'll re-evaluate next year for Tax Year 2010, but there's too much market uncertainty for me right now.

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Re: Should I open a Retirement Account?

Some questions I have (and I favored AO's suggestion that an IRA might be worth looking at).

First...how on earth is The Man going to collect his 28% PM tax when he has no idea when you bought the PMs or what you paid for them? You could have bought them yesterday, or in 1999.

Second, to me the Roth IRA looks pretty attractive. The money you put in is after tax, grows tax free and is never (unless they change the rules) taxed again. This very nicely seems to sidestep any concerns about any capital gains, be they short term, long term or precious metals. Also, as I understand it, after one has had a ROTH IRA for 5 years, you can make withdrawals of the principal for qualified purchases such as home, medical and college. I realize that it's likely that in the future The Man will realize what a tax loophole the ROTH IRA is and change the rules, but unless he grandfathers in the existing account holders under the present rules he will have a very nasty situation on his hands.

I think that in order to hedge your bets, a ROTH IRA looks like an attractive option.

Mike

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Re: Should I open a Retirement Account?

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Re: Should I open a Retirement Account?

I'm going to post a excerpts of my responses to a previous thread, in the hopes that it might do some good to others, and that I might benefit from any insights that others might provide...

You might want to look into a self-directed IRA or 401K. The self-directed 401K would only work if you are the owner of your business and have no regular employees (spouse is okay as an employee, and contract workers are okay). Otherwise, a self-directed IRA (either pre-tax or post-tax) would be available. A self-directed IRA or 401K allows you multiple investment options, to include precious metals that can be kept in your possession. There are some caveats, to include restricted persons and transactions, but these seem to be a much more flexible investment strategy than a traditional IRA or 401K. I have been looking at this for a while, and decided just yesterday to begin the process. After doing some checking (online, discussion with an investment guy, etc.), I decided to go with IRA Club as the facilitator (the one who sets up the account, essentially) and IRA services as the custodian. Once opened, I'll roll in an old IRA and my current 401K, closing the later, and go from there. Both are certified by the Better Business Bureau and have A ratings with no history of complaints. I wish I could tell you more, especially that I have had success with this venture, but I'm just getting started. Still, you might want to check it out. Here are some links to get you started:

Facilitators:

http://www.iraclub.org/

http://www.nabers.com/

Custodians:

https://www.iraservices.com/

By the way, you don't need a facilitator, but the custodians won't start up an account without the help of either a facilitator or an attorney. I chose the former, as it seemed simpler and perhaps less expensive. Dennis, the owner of IRA Club, has an offer to set up one account for full price (just under $2000), and a second spousal account for half price.

If anyone has any negative experiences with self-directed IRA or 401K, I'd certainly appreciate hearing about them, before I get too far along!

Chris

Chris,

Are you sure about having a self-directed IRA that allows you to some how keep the precious  metals in your possesion?  I had such an account with Sterling Trust and the PM had to be kept with a custodian. When I took possession of the PM it was a distribution and became a taxable event. I checked other companies besides Sterling Trust and they all worked the same way.

Tell us how you can have an IRA and have possession of the PM

Thanks,

Ken

Ken,

My understanding is that is the case, and I have heard the same from several sources. It is apparently different with these self-directed IRAs and 401Ks. For the ones that I tentatively plan to set up (one for me, and one for my wife), an LLC will be formed, the funds will be deposited in the banking institution of my choice, and I will have checkbook control of the funds. The funds can be invested in typical securities, real estate, business ventures, precious metals, etc. The caveats are essentially that any investing I do in the "now" can only benefit "future me" (in retirement), and transactions with close family members are prohibited. As for precious metals, it is my understanding that I can take possession, or have them held on my behalf, but if I were to sell them at a later date, the proceeds from the sale must go directly back into the LLC account. The same would apply to rental properties; rental income would go back into the LLC account.

I looked at IRAs through Sterling (and, I think, another group), and you are correct, that in that case (since they are essentially a typical IRA), you cannot take possession of precious metals.

From what I have researched, this certainly seems legit. However, as I mentioned, I am new to this concept, and would appreciate hearing from any who have other viewpoints!

We (my wife and I) just filled out the applications to establish our respective LLCs and IRAs. We haven't yet transfered funds from our existing IRAs and 401Ks, but that would be the next step. Personally, I plan to put much of my LLC savings into further PM purchases, but will also look into some other investment options. Any thoughts and/or experience on this?

Chris

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Re: Should I open a Retirement Account?
joemanc wrote:

I waited until today to decide whether to contribute to my Roth IRA for Tax Year 2009. I did not contribute. I would rather take that money and put it into something productive, like a house with good land, among other things. I'll re-evaluate next year for Tax Year 2010, but there's too much market uncertainty for me right now.

Joe,

I am of a similar mindset. Pay the taxes today and invest the remainder in something productive and put an amount in a long term store of wealth. IMHO, anything the government can see they will at some point begin drooling over and possible consider their own. The future of our economic system is far too uncertain to trust that a long term investment would pan out.

Coop

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Re: Should I open a Retirement Account?

+1 to Joe & Coop,

Forget the gold and the IRA....invest in a sustainable way of life. No matter what happens (or doesn't happen), its the best investment you can make.

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Re: Should I open a Retirement Account?

You might want to watch this video with Sprott. First Maria 'I Have An Annoying Voice" Bartawhatshername.

The stupid moron does a lead in saying, from the man who called the housing bubble and about 2 or 3 other disasters --- and I'm thinking and where was CNBS? Isn't that THEIR job?

Anyway Sprott is starting a new gold fund, you might listen to how he is invested, makes me sound equally nutty. Don't know what his hedge fund mins are but I will tell you this, if I had 100k in cash it would be on its way to Sprott to manage or I'd be doing a micro farm.

Link

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Re: Should I open a Retirement Account?

msdavi said "Roth IRA looks pretty attractive. The money you put in is after tax, grows tax free"

How does anyone know that whatever is put into that Roth IRA, is really going to grow? Perhaps there are some who who can tell a 'winner' investment from a 'loser' investment. But not me. And in the future, how does anyone know that the GOV might change the rules, and confiscate that IRA with the 'promise' you will get it back in an annuity?

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Re: Should I open a Retirement Account?
JAG wrote:

Forget the gold and the IRA....invest in a sustainable way of life. No matter what happens (or doesn't happen), its the best investment you can make.

Jeff,

Just to play devil's advocate here, let's say we eschew PMs and cash and put our time and money exclusively into developing our skills and into a nice little self-sufficient homestead with woodlot, grazing areas, cultivatable fields, etc.  We have our heat source, we have some animals, and we're growing our crops and maybe even making our own fuel for our motor vehicles.  All of these actions require a sound mind and body and a regular input of significant amounts of labor.

So what happens if we're hit by one of the three Is; illness, injury, or infirmity?  How do we cut the wood, plant the crops, till the crops, harvest the crops, tend the animals, butcher the animals, maintain equipment, and do all the rest of the considerable labor associated with running such an enterprise?  Without significant amounts of cash and/or PMs to fall back on, if we don't have our ability to labor or a sizeable family for back-up, we're going to be in a pickle.  Just something to ponder.

   

 

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Re: Should I open a Retirement Account?
ao wrote:
JAG wrote:

Forget the gold and the IRA....invest in a sustainable way of life. No matter what happens (or doesn't happen), its the best investment you can make.

Jeff,

Just to play devil's advocate here, let's say we eschew PMs and cash and put our time and money exclusively into developing our skills and into a nice little self-sufficient homestead with woodlot, grazing areas, cultivatable fields, etc.  We have our heat source, we have some animals, and we're growing our crops and maybe even making our own fuel for our motor vehicles.  All of these actions require a sound mind and body and a regular input of significant amounts of labor.

So what happens if we're hit by one of the three Is; illness, injury, or infirmity?  How do we cut the wood, plant the crops, till the crops, harvest the crops, tend the animals, butcher the animals, maintain equipment, and do all the rest of the considerable labor associated with running such an enterprise?  Without significant amounts of cash and/or PMs to fall back on, if we don't have our ability to labor or a sizeable family for back-up, we're going to be in a pickle.  Just something to ponder.

 

 

In addition to all of that we know that taxes will not end tomorrow. So you will need to have some way of paying the property tax on all that you have created or the gov. (Fed, State , Local) will take it away. A significant stash of PM will go a long way in paying property taxes over a long  period of time.

Ken

 

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Re: Should I open a Retirement Account?

Here is a question- If you are going to have money in a brokerage account (or bank), would you rather have it in the vehicle of a retirement account, with it's potential tax advantages, or just in a regular brokerage account without the restrictions of a reirement account? Please say why you believe whatever option you choose is best.

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Re: Should I open a Retirement Account?

I will put in my 2 cents (actually worth a bit more in old copper pennies..) as I reconsider this every year. This year I contributed the max to two Roths, mine and my wife's. At age 61, I have numerous retirement accounts of all types...SEP, Roth, Traditional...not that they have lots of money in them, though they do have a bunch of natural resource and speculative stocks.  Unless you think that the U.S. is going to fall off a cliff so suddenly that a call to your broker couldn't  liquidate everything that isn't cash and get it wired to you, I'd start the IRA, a Roth if you can. I follow Ferfal in Argentina intently but the U.S. is NOT Argentina. Would people grab their pitchforks and Glocks if TSHTF with predatory seizure rules in the U.S.? A big question but, as noted, the U.S. (to reframe the statement) can stay irrational for a long time. Taking advantage of whatever meager shelters such as a Roth,  some cash at home, gold, food, firearms, and friends until the future reveals itself is, IMHO, the most flexible approach to a future fraught with uncertainty, both short and long term.

 

SG

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Re: Should I open a Retirement Account?
capesurvivor wrote:

I follow Ferfal in Argentina intently but the U.S. is NOT Argentina. Would people grab their pitchforks and Glocks if TSHTF with predatory seizure rules in the U.S.? A big question but, as noted, the U.S. (to reframe the statement) can stay irrational for a long time. 

I think the "bailouts" were 300:1? I didn't see any pitchforks, Brown did get elected.

Just an observation. If I recall the opposition to a government takeover of these funds is 700:1.

I don't see pitchforks.

If people can't get their money out of a bank and there are food shortages I see Katrina looting and then off to the Super-dome (read:FEMA camps). With this debt their only solution is a re-denomination of the currency and I think h*ll will have to break out (read: currency crisis, looting and so on) before they feel they can do what they need to do in the first place.

Argentina or not, in a time of crisis they have stolen before (gold, reneged on bonds for gold and so on) and if there aren't enough buyers and QE cooks Uncle Buck I certainly see them going after 401K's and IRA's.

Just my 2 cents.

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Re: Should I open a Retirement Account?

capesurvivor said "Unless you think that the U.S. is going to fall off a cliff so suddenly that a call to your broker couldn't liquidate everything that isn't cash and get it wired to you, I'd start the IRA, a Roth if you can."

 

Are you aware that the SEC can freeze money market mutual funds, at any time? From ZeroHedge...

 

1/27/10 Zero Hedge discussed a month ago the disastrous prospects of what would happen if the new proposal contemplated by the SEC, which would allow the suspension of redemptions from Money Market Funds, were to pass. Well, in a nearly unanimous vote, Money Market Funds now have the ability to suspend redemptions, courtesy of the SEC's just passed 4-1 vote.  Should there be another meltdown, money market investors will not, repeat not, be able to withdraw their money purely on the whim of Mary Schapiro. As the SEC noted: "We understand that suspending redemptions may impose hardships on investors who rely on their ability to redeem shares." Too bad investors' hardships considerations ended up being completely irrelevant.

 

http://www.zerohedge.com/article/suspending-money-market-redemptions-now...

 

and here's another interesting item from ZeroHedge...

 

2/1/10 The Treasury Is Soliciting Your Feedback Regarding The Proposed Annuitization Of 401(k)

Yes, slowly but surely it is happening. In a federal notice filed earlier, the DOL and Treasury are soliciting a response on what has been on many investors' mind, namely the process of converting 401(k)s into annuity-like products.

 

http://www.zerohedge.com/article/treasury-soliciting-your-feedback-regar...

 

and lastly, there is precedence in Ohio that there could be limits on the amount of withdrawals from financial institutions...

 

March 15, 1985 - Ohio Governor Richard Celeste temporarily halted business at all of state's ailing thrifts;

March 21, 1985 - allowed to reopen with $750 cap on withdrawals (designed to prevent all-out assault on deposits)

http://www.kipnotes.com/SavingsLoans.htm

 

Personally, I wouldn't be so sure that when SHTF, that we would be able to liquidate anything, quickly.

 

 

 

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Re: Should I open a Retirement Account?
bluebird wrote:

Personally, I wouldn't be so sure that when SHTF, that we would be able to liquidate anything, quickly.

+1

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Re: Should I open a Retirement Account?

Thanks for info;was not aware of that pernicious SEC ruling. For a number of reasons, I'm still going to have to stay in MM, though I have other backups.

SG

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Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Should I open a Retirement Account?
capesurvivor wrote:

Thanks for info;was not aware of that pernicious SEC ruling. For a number of reasons, I'm still going to have to stay in MM, though I have other backups.

SG

FSN had a good show this weekend, one guy advocated lifeboat investing. 

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