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Thread: Should I rape my own 401K?

  1. #1

    Default Should I rape my own 401K?

    As of today, my 401k plan through my employer will allow me to withdraw (not borrow) around 60,000 of my total 401k.

    I will take a bit of a hit on taxes but I really want to get the hell as much as I can out of my company's 401k plan. I would like to maybe use half to do some home improvements (I know this is not an investment) and invest the rest in overseas markets, commodities, etc...

    Thoughts?



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  3. #2

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    Quote Originally Posted by Yukon Cornelius View Post
    As of today, my 401k plan through my employer will allow me to withdraw (not borrow) around 60,000 of my total 401k.

    I will take a bit of a hit on taxes but I really want to get the hell as much as I can out of my company's 401k plan. I would like to maybe use half to do some home improvements (I know this is not an investment) and invest the rest in overseas markets, commodities, etc...

    Thoughts?
    Yes do it. And yes a home improvement is an investment, particularly if you are adding in quality work/items/in demand improvements. That and you will likely enjoy the house more if it is something you will use a lot.

    If you are ALLOWED to withdraw YOUR money without much of a penalty, do it. Just do your research and invest it wisely and you'll be ok.
    "Like an army falling, one by one by one" - Linkin Park

  4. #3

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    Depends on your age. If you're younger than 40 I wouldn't do it.

  5. #4

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    Not knowing your tax bracket , but lets say taxes take 25% ( 15k ) , i think there is a 10% goverment penalty ( 6k ) , or $21,000 total , you net 39k. You lose > 30%.

    You may take 10-15 years to recap the 30% even if you are right in your investments.

    Also you would be losing the return of the $21,000 if you leave it in the 401K.

    Its a tough choice. With home values forcast to drop another 10%. Also if you buy gold/silver , you have to store it somewhere. Starting 2012 all gold sales/buys over $600 must be reported.

    I would buy farm land.

  6. #5

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    Quote Originally Posted by brandon View Post
    Depends on your age. If you're younger than 40 I wouldn't do it.
    What was the avergae (approximately) loss of 401k's and retirement savings plan in the USA for 2008? 25-50%?
    "Like an army falling, one by one by one" - Linkin Park

  7. #6

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    Quote Originally Posted by Seraphim View Post
    What was the avergae (approximately) loss of 401k's and retirement savings plan in the USA for 2008? 25-50%?
    Something like that. Your point?

  8. #7

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    Do it in the following way:

    Take the max loan you can take

    Stretch out the term as long as possible (20+ years?) to minimize payments

    When you leave your job you'll have to pay it off or pat the penalties and taxes that year

    But put off paying that stuff as far into the future as possible

  9. #8

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    Quote Originally Posted by Seraphim View Post
    What was the avergae (approximately) loss of 401k's and retirement savings plan in the USA for 2008? 25-50%?
    What was the average (approximate) loss for silver in the USA for 1980? (Since you appear to recommend silver in every thread you post.) Oh, how about the average (approximate) loss for homes in the USA from 2007-2008?

    Cherry picking one year to define an investment strategy is pathetic. It just goes to show that your input is based more on fear and irrational decision-making than it is facts and evidence.
    Last edited by Jordan; 08-10-2010 at 09:17 AM.



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  11. #9

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    Quote Originally Posted by brandon View Post
    Something like that. Your point?
    My point is this:

    Retirement savings plans are general investments into a market that is inherently rigged against the little guy.

    Typically these retirement plans consist of 10-30% BONDS. People seem to often be closer to the 30% level. The reason why you get a tax break for (labelled as non taxable income) putting money in these accounts is that in doing so you are pruchasing a substantial amount of the Govt's debt. Without your RRSP's and 401K's the Govt's GOES BANKRUPT.

    So for those of you who preach END THE FED (or Central Banking in general). Take your money OUT OF THE 401K's AND RRSP's. By putting your money there you prop up the very system you abhor.
    Last edited by Seraphim; 08-10-2010 at 09:27 AM.
    "Like an army falling, one by one by one" - Linkin Park

  12. #10

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    Before you do anything like raping your 401k, I'd strongly recommend you read the book "The Lies about Money" by Ric Edelman.
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  13. #11

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    Quote Originally Posted by Jordan View Post
    What was the average (approximate) loss for silver in the USA for 1980? (Since you appear to recommend silver in every thread you post.) Oh, how about the average (approximate) loss for homes in the USA from 2007-2008?

    Cherry picking one year to define an investment strategy is pathetic. It just goes to show that your input is based more on fear and irrational decision-making than it is facts and evidence.
    No I was making a point. Look at those very same investments now? They are barely back to where they were before. Adjust for inflation: Substantially lower. Gold? and Gold mining stocks? Very quickly recovered and went to nominal all time highs.

    Read my post that I typed out as you posted this one.
    "Like an army falling, one by one by one" - Linkin Park

  14. #12

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    Quote Originally Posted by Seraphim View Post
    My point is this:

    Retirement savings plans are general investments into a market that is inherently rigged against the little guy.

    Typically these retirement plans consist of 10-30% BONDS. People seem to often be closer to the 30% level. The reason why you get a tax break for (labelled as non taxable income) putting money in these accounts is that in doing so you are pruchasing a substantial amount of the Govt's debt. Without your RRSP's and 401K's the Govt's GOES BANKRUPT.

    So for those of you who preach END THE FEB (or Central Banking in general). Take your money OUT OF THE 401K's AND RRSP's. By putting your moeny there you prop up the very system you abhor.
    More ill informed nonsense.

    You can say that short term trading is rigged against the little guy, but buy and hold investment strategies have provided far more winners than losers. Broad market investments perform quite well in both generating an income from dividends and providing capital gains as businesses grow.

    A 401k can be invested in whatever you want. You can have a 100% stock 401k, if you'd like. Oh, and a slight majority of funds offer a trading window which allow you to buy any stock/fund/etf that your heart desires. Leave out the conspiracy theories and you'll find that the taxing system for 401ks is entirely rational. 401ks allow tax free compounding of returns, and give the US government a stake in the performance of the financial markets.

    As long as the average return of a US retirement fund is greater than the cost to borrow through treasuries, it makes sense for the US government to want taxes later, instead of up front.

    How does a 401k support the system that we abhor? I'd love to hear your explanation for that one.

  15. #13

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    before everyone is screaming to cash out your 401k and convert it to gold do you mind if i ask what is your 401k in? if its agriculture or energy keep your 401k
    Last edited by psi2941; 08-10-2010 at 09:32 AM.

  16. #14

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    [QUOTE=Jordan;2834053]More ill informed nonsense.

    You can say that short term trading is rigged against the little guy, but buy and hold investment strategies have provided far more winners than losers. Broad market investments perform quite well in both generating an income from dividends and providing capital gains as businesses grow.

    A 401k can be invested in whatever you want. You can have a 100% stock 401k, if you'd like. Oh, and a slight majority of funds offer a trading window which allow you to buy any stock/fund/etf that your heart desires. Leave out the conspiracy theories and you'll find that the taxing system for 401ks is entirely rational. 401ks allow tax free compounding of returns, and give the US government a stake in the performance of the financial markets.

    As long as the average return of a US retirement fund is greater than the cost to borrow through treasuries, it makes sense for the US government to want taxes later, instead of up front.

    How does a 401k support the system that we abhor? I'd love to hear your explanation for that one.[/QUOTE]

    I did mention the "cookie cutter" plans that are heavily bond invested, did I not?
    "Like an army falling, one by one by one" - Linkin Park

  17. #15

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    Quote Originally Posted by Seraphim View Post
    No I was making a point. Look at those very same investments now? They are barely back to where they were before. Adjust for inflation: Substantially lower. Gold? and Gold mining stocks? Very quickly recovered and went to nominal all time highs.

    Read my post that I typed out as you posted this one.
    Silver is as high as it was in 1980? Gold? When adjusted for inflation, you would've lost over the last thirty years. Nevermind the fact that neither gold nor silver generate an income, so what you see is what you get.

    Gold and silver are driven by fear, so it is only reasonable that they would appreciate in the economic climate we have today. However, how long that fear will persist is anyone's guess.

  18. #16

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    Quote Originally Posted by Seraphim View Post

    I did mention the "cookie cutter" plans that are heavily bond invested, did I not?
    Most people should have some exposure to bonds. The typical recommendation is to take 100, subtract your age, and that is how much you should have invested in stocks. Your age as a number is how much you should have in fixed income.



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  20. #17

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    Quote Originally Posted by Yukon Cornelius View Post
    As of today, my 401k plan through my employer will allow me to withdraw (not borrow) around 60,000 of my total 401k.

    I will take a bit of a hit on taxes but I really want to get the hell as much as I can out of my company's 401k plan. I would like to maybe use half to do some home improvements (I know this is not an investment) and invest the rest in overseas markets, commodities, etc...

    Thoughts?
    If you roll it directly over into a qualified IRA, then you don't have to pay the penalty or taxes. Or maybe a Roth IRA if you are young, but then you might have to pay some taxes first (but after that everything is tax-free). Use a discount brokerage like ScotTrade or TD Ameritrade and you can invest the money in almost anything you want.
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  21. #18

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    I would suggest rather than taping into the 401K , you said you would put money into your home, it sounds like you have equity in your home and not under water , i don't think you would put money into a home that was under water.

    With 30 year mtg at about 4.6% , i would look at a refi and pull all the cash out i could.

    If the SHTF just mail them the keys.

  22. #19

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    Quote Originally Posted by Jordan View Post
    Silver is as high as it was in 1980? Gold? When adjusted for inflation, you would've lost over the last thirty years. Nevermind the fact that neither gold nor silver generate an income, so what you see is what you get.
    Gold and silver are driven by fear, so it is only reasonable that they would appreciate in the economic climate we have today. However, how long that fear will persist is anyone's guess.
    Sure if you bought and held and did not realize silver was in a ludicrous bubble.

    There is also the fact that Central banks for 22 years were NET SELLERS of PM's. Now they are net buyers and that will likely continue. Combine that with wikedly supressed PM prices due to paper gold/silver satisfying a large % of the demand and voila you have prices that are lower then they "should" be.

    I've never once said you will make a ton of money in gold and silver. They are very safe savings plans, that short of buying at a market top of a mania, you are probably ok.
    "Like an army falling, one by one by one" - Linkin Park

  23. #20

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    Quote Originally Posted by Seraphim View Post
    Sure if you bought and held and did not realize silver was in a ludicrous bubble.

    There is also the fact that Central banks for 22 years were NET SELLERS of PM's. Now they are net buyers and that will likely continue. Combine that with wikedly supressed PM prices due to paper gold/silver satisfying a large % of the demand and voila you have prices that are lower then they "should" be.

    I've never once said you will make a ton of money in gold and silver. They are very safe savings plans, that short of buying at a market top of a mania, you are probably ok.
    So are my common stock holdings suppressed because of the option market? Futures?

    This argument (in bold) never gets old. I think it has been repeated 439058093440 times by people who don't understand that "paper" elements exist for practically every market.

    For example, the derivatives market has leveraged the value of practically everything to a point where it may be worth as much as $500 trillion. Does that mean that if we got rid of it, that everything on this planet would be worth 10-20 times more? No, obviously not.

  24. #21

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    Quote Originally Posted by Jordan View Post
    So are my common stock holdings suppressed because of the option market? Futures?

    This argument (in bold) never gets old. I think it has been repeated 439058093440 times by people who don't understand that "paper" elements exist for practically every market.

    For example, the derivatives market has leveraged the value of practically everything to a point where it may be worth as much as $500 trillion. Does that mean that if we got rid of it, that everything on this planet would be worth 10-20 times more? No, obviously not.

    And this makes it right?


    Derivatives are just bets man. Place a bet with another corporation, and as often is the case, the bet value is worth more then the profits you'll earn from your clients, so bet against your clients and profit from it. That is EXACTLY what Goldman Sachs did (among others). The derivatives also hid debts from current and potential investors. They did NOT supress the value of their companies. THEY INFLATED THEM.
    Last edited by Seraphim; 08-10-2010 at 09:59 AM.
    "Like an army falling, one by one by one" - Linkin Park

  25. #22

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    Quote Originally Posted by Seraphim View Post
    And this makes it right?


    Derivatives are just bets man. Place a bet with another corporation, and as often is the case, the bet value is worth more then the profits you'll earn from your clients, so bet against your clients and profit from it. That is EXACTLY what Goldman Sachs did (among others). The derivatives also hid debts from current and potential investors. They did supress the value of their companies. THEY INFLATED THEM.
    I don't know why it isn't right for someone to make a contractual bet with someone else.

    If I wanted to bet you $10,000 that gold would be worth $1500 or more by December 2010, why couldn't I? Why should that be illegal?

    These MBS were not sold to individual investors, they were sold to investment banks and hedge funds that aren't exactly dumb enough to buy whatever crosses their trading desks. All parties new what was in the deal, and didn't have to buy the products being offered.

    Derivatives hid debts? They suppressed the value of their companies?

    I'd love to hear how this works.

  26. #23

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    I will jump into this to say some derivative's are good , like-- airlines hedgeing oil--miners selling forward their metals-- when i had a farm ( 200a , 160 tillable ) i always sold the crops forward, i knew my costs, waited until the crops were going to be ok , went to the local elevator and sold 75% of what i figgered what the fields would yield in corn, soybeans, wheat, then just delivered the crops to the elevator , they were covering themselfs by selling contracts on the Chicago Board of Trade.

    The big banks- headge funds like goldmansucks-jp morgan made a mess of the Derivatives mkt.

    I will say i own gold/silver and some small miners. I think of PM'S as a insurance policy.
    Last edited by ILUVRP; 08-10-2010 at 10:12 AM.

  27. #24

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    Quote Originally Posted by Jordan View Post
    I don't know why it isn't right for someone to make a contractual bet with someone else.

    If I wanted to bet you $10,000 that gold would be worth $1500 or more by December 2010, why couldn't I? Why should that be illegal?

    These MBS were not sold to individual investors, they were sold to investment banks and hedge funds that aren't exactly dumb enough to buy whatever crosses their trading desks. All parties new what was in the deal, and didn't have to buy the products being offered.

    Derivatives hid debts? They suppressed the value of their companies?

    I'd love to hear how this works.
    Dude the derivatives market has many aspects. Why do you think Lehman Brother's almost collpased the system? They were trading virtually valueless assets for their huge debt obligations to hide teh debts on their quarterly reports. This kept their investors from knowing what was going on and NEW investors were not scared off.

    And did you seriously just defend a company making bets that go against their own investors? Are you that morally corrupt or did you just not read what I said?

    Companies like Goldman Sachs were making bets with other companies that in simplified form was "I'll bet you 300B dollars our investments will drop 200B in the coming weeks". With their gigantic stake in the market, companies like that can and DO cause wild fluctuations in prices. Goldman gets 300B$ and their investors lose. NO PROBLEMS THERE?

    Do you not see the conflict of interest or did you just skim over what I said and missed that tid bit?
    "Like an army falling, one by one by one" - Linkin Park



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  29. #25

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    Quote Originally Posted by Seraphim View Post
    Dude the derivatives market has many aspects. Why do you think Lehman Brother's almost collpased the system? They were trading virtually valueless assets for their huge debt obligations to hide teh debts on their quarterly reports. This kept their investors from knowing what was going on and NEW investors were not scared off.
    They almost collapsed the system because the derivatives market is a highly leveraged marketplace.

    Leverage, through the theory of large numbers, allows risk management and arbitrage algorithms to turn tiny (fraction of a percentage point) profits to be large enough to attract interest. A .02% return is a waste of time, leverage it up 100 times and exit within a half year, and (according to the sharpe ratio) it is a suitable investment and an area where capital should be deployed.

    And did you seriously just defend a company making bets that go against their own investors? Are you that morally corrupt or did you just not read what I said?
    Would it be wrong for a bookie (that's what a market maker is, FYI) to take a bet from someone else and balance it out with another bet from another person, taking the spread as a profit?

    Companies like Goldman Sachs were making bets with other companies that in simplified form was "I'll bet you 300B dollars our investments will drop 200B in the coming weeks". With their gigantic stake in the market, companies like that can and DO cause wild fluctuations in prices. Goldman gets 300B$ and their investors lose. NO PROBLEMS THERE?
    No, there are no problems there.

    The corporations, hedge funds, and investment banks, that bought these MBS packages were bullish on MB securities. Goldman Sachs, at the time these products were sold, was equally bullish.

    It wasn't until later that Goldman switched from net long, to market neutral, then eventually net short in its positions. See my comment above. This is an industry standard, it is not inherently immoral, and it is absolutely not fraudulent. Every bet must be met with a counterparty, and that counterparty could be someone else, or if Goldman saw an opportunity for profit, itself.

    Do you not see the conflict of interest or did you just skim over what I said and missed that tid bit?
    Would it be a conflict of interest for me to make a bet with you, then make the opposite bet with someone else, hoping to profit regardless of the outcome? No, that is the job of a market marker, broker, and in gambling, a bookie.

  30. #26

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    Quote Originally Posted by Yukon Cornelius View Post
    As of today, my 401k plan through my employer will allow me to withdraw (not borrow) around 60,000 of my total 401k.

    I will take a bit of a hit on taxes but I really want to get the hell as much as I can out of my company's 401k plan. I would like to maybe use half to do some home improvements (I know this is not an investment) and invest the rest in overseas markets, commodities, etc...

    Thoughts?
    home improvements ARE investments if it's a way to avoid higher costs later in repairs, or a way to charge more on rent in the future.

  31. #27

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    Quote Originally Posted by Seraphim View Post
    And this makes it right?


    Derivatives are just bets man. Place a bet with another corporation, and as often is the case, the bet value is worth more then the profits you'll earn from your clients, so bet against your clients and profit from it. That is EXACTLY what Goldman Sachs did (among others). The derivatives also hid debts from current and potential investors. They did NOT supress the value of their companies. THEY INFLATED THEM.
    who cares if it's right?

    they exist, and they're enforceable.

    sure, you might not be paid if the money source isn't coming, but you can't ignore that they exist and have their properties (and people still depend on them)

  32. #28

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    Quote Originally Posted by Seraphim View Post

    And did you seriously just defend a company making bets that go against their own investors? Are you that morally corrupt or did you just not read what I said?
    if they did the opposite you'd complain that they selfishly care only of themselves with no regard to other people.
    Last edited by WaltM; 08-10-2010 at 02:22 PM.

  33. #29

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    Quote Originally Posted by WaltM View Post
    if they did the opposite you'd complain that they selfishless care only of themselves with no regard to other people.
    Lol, what?
    "Like an army falling, one by one by one" - Linkin Park

  34. #30

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