Withdrawing from Roth 401k

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Augustine's picture
Augustine
Status: Bronze Member (Offline)
Joined: Oct 13 2009
Posts: 37
Withdrawing from Roth 401k

It's been in the back of my head that the US might puill an Argentina on savers and virtually confiscate my rertirement savings.  After all, the government has already confiscated the Social Security funds by trading actual funds with treasury notes that will be paid via taxes again.  But I digress.

The fact is that France, Ireland and Hungary have already pulled an Argentina on their savers at the tune of €75 billion (http://www.efinancialnews.com/story/2010-11-29/france-seizes-euro-36bn-o...).  How long will it be until America pulls the same?

Well, I don't want to wait until it's too late.  For the past 3 years, I've been making my employer-matched 401k contributions to a Roth 401k and I'm considering withdrawing part or all of the portion under the Roth 401k.  So my question is how should I do it and what issues  might I find?

Additionally, depending on how things progress, even the traditional 401k portion might be at significant risk of confiscation at some point, when the taxes and penalties would be acceptable.  So I repeat the question above about withdrawing from the traditional 401k as well.

I friend of mine withdrew all of his traditional 401k when he was laid of and invested in precious metals over 2 years ago and more than made up for the taxes and penalties.  Of course, that was then and timing such moves successfully depend more on chance than information.

Anyways, I'd appreciate your views on this subject.

Thanks and merry Christmas.

 

bluestone's picture
bluestone
Status: Gold Member (Offline)
Joined: Dec 29 2008
Posts: 263
Re: Withdrawing from Roth 401k

  Augustine

I have a rollover IRA and a roth IRA from prior employment.  I have just in the past couple weeks done the paperwork to close my rollover IRA.  I believe that some form of restriction or confiscation of retirement accounts is highly likely.  Of course it won't be pitched that way.  I think that the 401k will be the first target.   Not quite sure about the roth IRAs and roth/401ks since the taxes have been paid up front. 

You know the old saying, "a bird in the hand is worth two in the bush". 

Psychologically it is very hard to close these accounts, but the more control you have over your wealth the better, IMO.

Brian  

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1891
Re: Withdrawing from Roth 401k

 

Now excuse me if I'm thinking too obtusely here, but... Wouldn't it make sense to at least wait until there is some kind of pending legislation that would threaten retirement savings plans?

Besides, any such plans in Congress would seriously spook the markets and lead to a crash as everyone tries to cash out before the legislation takes effect. No one in Congress would dare risk the ire of their friends and relatives who happen to be depending on their retirement savings plans that are supposed to save them from having to depend solely on Social Security.

I think we're more likely to see means testing for Social Security benefits as a "back door confiscation" - which itself would be highly controversial.

Poet

 

Augustine's picture
Augustine
Status: Bronze Member (Offline)
Joined: Oct 13 2009
Posts: 37
Re: Withdrawing from Roth 401k

Then, again the president could invoke some obscure emergency power and do that overnight.  Call me paranoid, but, if anything, the Constitution poses no threat to our form of government. 

Regardless, I intend to increase my investments in precious metals and the Roth 401k funds would be perfect for that.

Thanks.

Carl Veritas's picture
Carl Veritas
Status: Gold Member (Offline)
Joined: Oct 23 2008
Posts: 294
Re: Withdrawing from Roth 401k

We might be better off hiding our assets in plain sight ------ a taxable account with  refutable private firm.      Social Security, Public Pensions, IRAs and 401k's will never be treated as private property by politicians.

nickbert's picture
nickbert
Status: Diamond Member (Offline)
Joined: Jan 14 2009
Posts: 1207
Re: Withdrawing from Roth 401k

I'm planning to withdraw mine as soon as my employment ends in 4 months.  I'm not necessarily worried that increased taxation or nationalization of 401k/IRA's will be very imminent, but I do find it highly likely sometime in the next 10 years.  Or at least before I would hypothetically retire sometime in the 2040's.

The thing that DOES concern me more in the near term, though, is any new rules or legislation that creates more withdrawal restrictions.  If we see a panic where many are trying to pull their money out, I find it easy to imagine the government changing the rules quickly to 'stabilize the system', similar to a bank holiday for bank accounts.  Perhaps if one is retired you might continue to receive your normal distribution, but everyone else (even if newly unemployed) may find their money out of reach until retirement under the rationale of keeping the system solvent.  They might even say it's temporary until things turn around for the better, but once they have that control how likely is it that they would relinquish it?  And so sometime after that as a response to the deepening fiscal crisis we'll probably see a reduction in tax benefits for these accounts, and then some time after that we'll probably see some form of nationalization.  It's that first step, the partial or complete loss of control of the money, that I watch for.  At that point I would consider my 401k as essentially dead and gone, same as the money I've paid into Social Security.  I'm not sure how much warning we might have for something like this though... if it's in response to an urgent insolvency crisis with retirement accounts, they might push new rules out in a matter of a few days or weeks.  And in the chaos leading up to that, a quick cashout may be impossible.  So I would say IF one has decided to cash out the whole thing eventually, better sooner than later. 

The date that I can cash out is only 4 months away, but even so I'm concerned that might be too late... 

- Nickbert

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