Got a 401k or an IRA?

“Watch money. Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion-when you see that in order to produce, you need to obtain permission from men who produce nothing-when you see that money is flowing to those who deal, not in goods, but in favors-when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you-when you see corruption being rewarded and honesty becoming a self-sacrifice-you may know that your society is doomed.”

Ayn Rand via Francisco d’Anconia from Atlas Shrugged-1957

If you have a 401k or an IRA, you are going to want to pay attention to this. Ireland has announced plans to tax pension capital over the next 4 years to create jobs. The plan is to tax the entire amount of capital in their retirement accounts, not just the gains. Then they are going to redistribute the wealth in another scheme to “create jobs.” At least they didn’t say, “but, but it is for the children…”

From the press release:

“The various tax reduction and additional expenditure measures which I am announcing today will be funded by way of a temporary levy on funded pension schemes and personal pension plans. I propose that the levy will apply at a rate of 0.6% to the capital value of assets under management in pension funds established in the State.

It will apply for a period of 4 years commencing this year and is intended to raise about €470 million in each of those years. The levy will not apply to pension funds established here and providing services and benefits solely to non-resident employers and members. Further details regarding the proposed application of the levy are set out in the Summary of Initiative Measures.”

This is what happens when governments cannot raise capital in the bond markets because of surging interest rates. Or when governments cannot raise taxes in a faltering economy. They go after the fat, free money sitting in retirement accounts. If that was just the end of the thieving that would be one thing, but it never stops there. When Argentina went through their hyper-inflation, they froze all accounts and then devalued and inflated away the currency. People could only take out small amounts of money out of the bank while the majority of their assets turned to nothing.

Think this won’t happen here? Almost a year ago the Department for Labor floated a trial balloon about “annuitizing their 401(k)s.” The plan was to get rid of those pesky and risky managed retirement plans and put the savings in safe and secure Treasury Bonds. We get to the point where China, Japan, and the rest of the world refuses to buy any more debt. The Federal Reserve is now buying 80% of the new debt and is even now balking about QE3. And people wonder who in the world is going to buy the biggest bubble in the world? Well the answer might just be your retirement account.

There is something like $4 trillion of debt that needs to be rolled over in the next 2 years and the choices are not good. The Government can massively raise taxes and cut spending which would destroy the already weak economy. The Fed can buy more debt and continue printing money which would cause more nations to dump the dollar adding to the inflationary fire in the US. The government can confiscate your retirement savings and that would kick the can down the road for a while. Or America can just default on the debt and we will see massive upheaval in every aspect of our lives. As you can see there are no good choices and if you fear paying a 10% penalty tax, how about a 100% confiscation/inflation tax? You need to get ahead of the curve if you are going to survive this paradigm shift into a post-dollar world.

Got silver?


31 comments to Got a 401k or an IRA?

  • How does one protect their 401k/ IRA from this possible taxation/ confiscation?

    If you cash out of it you will pay a huge tax penalty. Is this the answer? Is the logic that on say a 200K IRA its better to take the 60% or wahtever it is less taxes and buy metals?

    This seems extreme.


    • Silver Shield

      There is only a 10% penalty for early withdrawal.
      The other tax is tax that you did not pay when you put the money in there.
      We were lucky that the Bush Tax Cuts got extended, taxes might never be this low again… ever.

  • Scout

    When I awoke sufficiently to not trust Wall Street and the government with my Roth IRA, regular IRA, or any funds, just before the 2008 debacle, I cashed them in and created my own private retirement account in physical PMs and a retreat, now well stocked. Fortunately, I was aware and I did prepare. I am so grateful for the divine guidance which led me here. This site is providing you with the same sort of guidance, thanks to the wisdom, dedication and hard work by Silver Shield. Please consider a sustaining donation to support the cause of Liberty.

  • Sharps

    I have been hearing about this and reading about it for years now, and have been prepping for as long.
    The only thing I have not done is cash out my 401k and my company defined pension plan. I am almost 58 years old and was hoping to make it to 59 1/2 so I could avoid the 10% penalty.
    After looking long and hard at the economic state of affairs, not only nationally but globally, it seems that time is very short and that the most prudent thing to do is to retire and take the tax and penalty, to
    salvage what will be left of my fiat dollars to buy more precious metals and enjoy what time we have left. I am sure that most who visit this site are prepared as well and any insight on the best way to go about this whole cash out process would be much appreciated.

    • Silver Shield

      It was a easy thing for me to bail at 37 but you are sooo close…
      This is something where you are going to have to weigh your options how long does the fiat game go for and what kind of purchasing power will those dollars have when you get them out.

      With PMs on sale 10% is not hard to make up.

  • Jeremy

    I did the same as Scout in 2008 before the crash. I’m only 39 – it was worth taking the 10% hit now before confiscation and massive tax increases. It takes a lot of courage and insight to go against conventional wisdom …

  • Jerry

    This is truly an eye opener and has been a concern of mine.

    Recently, my wife and I both tried to cash in our 401k. However, both of our employers refused stating that because we are still current employees we were not allowed to cash it in. We even asked if we could transfer our funds to an IRA outside of the employer plan. I was hoping to be able transfer it, then cash it in, but they refused this as well. Is there anything we can do? It makes me sick to think we are going to lose this money.

    Also, I just wanted to thank you for the amazing site. You are doing an incredible service for everyone who will listen. Thank you!!!

  • ib12541

    To Jerry – maybe you could quit, transfer your funds out, then rehire. Work with your company, i know some folks who did this and it worked.

    To all with 401k’s – I would check your plan documentation to see if you can or can not transfer to an IRA. A lot of times people don’t know and are just assuming that you can’t do a transfer when really you can. Folks at my company said the same – I checked the paper work and it said you can but you lose the company match for 6 months – big deal! Check the paper work!

    To all who have IRA’s – check out the feasibility of transferring to a Simple IRA. Establish yourself as a business and I believe you can take possession of your IRA while keeping it intact.


  • Jerry

    Thanks for your input, ib12541!

    I appreciate your advice. I will definitely be checking out our plan’s documentation and hoping for the best!

    Thanks again!

  • Larry

    @ Jerry

    Most plans do not allow you to cash out while still employed at the same place that provided you the plan. Almost all of them do allow loans of around 50% of your total. Any interest you pay is paid to your retirement account and repayment plans can be spread out to many years causing you minimal loss to your take home pay. If you lose your job while the loan is in place and do not repay it immediately, they will use the remaining balance to assess the taxes and penalties and send you the rest.

  • Jerry

    Thanks for the input, Larry!

    If I have no other options, I may consider taking a loan out. I will certainly look into it. Thanks again!

  • Bradley

    I have taken a loan from my 401k and invested it in silver last year before the big run up in silver and I am so glad I did. I also cashed out what I could after the fact. Again I bought silver and I have no regrets even after the 10% penalty and tax payment. I wish I would have done this 5 years ago. I also was not able to cash out all of my 401K for the reason’s stated already. But I was told after cashing out I could wait 9 months and take more. I will again attempt to in August. By then I will have more money in my account from me making my loan payments to myself. Everybody has a different situation but as for me, I sleep better at night. I think most of you will also. None of this 10 percent penalty will mean anything when silver is over $100 per ounce. For me, I am already ahead of that penalty than if I sat on my 401k and did nothing. Silver is the best investment I have ever made in my life so far. God Bless!!

  • sharon

    what about people already on Soc Sec..cashing our IRA’s or 401’s out, affects our taxes as well as their soc security. I’ve been told that soc sec can penalize us by taking a certain percentage back… How do we circumvent that, please?

  • Bob

    When obama got elected my wife told me dump your ira and 401k which I did and made other investments which to this date most have tripled.

  • Judy

    I am 69 yrs old and make approx $32000. I have some costly dental expenses coming up and am considering cashing in a 401k to pay for the work. I know nothing as to if this is a good idea or what other alternative I have.

    • Silver Shield

      I think there are ways to pay from the 401k medical expenses at a tax advantaged way. Check with your 401k to see.

  • Steve

    What if you are already in a precious metals IRA? Ride it out for a while (and hope it starts a steady climb upwards) or pull it out, sell enough to cover penalties and taxes and hold the rest; then hope it takes off so you can make it back up in the long haul?

  • john rod

    I think you should be careful withdrawing your whole 401k based on an opinion.
    What if the author is wrong?

    What if they just tax a percentage of the gain, remember, many wealthy people have 401ks of significant wealth like congressman, I’m not convinced that they are going to allow a wholesale conversion into Tbills or whatever. To me the likelihood is they start with a tax on the principal or gains.
    For example, if you have a 200,000 precious metals ira (mine is all in silver),
    the numbers look like this based on my tax rate assuming silver goes to 400 like James Turk says (10 fold increase):
    Scenario 1:
    Cash out 200,000: 30% fed, 9% state, 10% penalty = 49% tax leaves 102,000.
    102,000 x 10 (potential gain) is 1.02 million.
    Scenario 2:
    Keep 200,000 in precious metal ira 200,000 x 10 = 2 million.
    Now assume a 10% tax on 401k principal to fund the national debt:
    Scenario 1 leaves you 1.02 million, scenario 2 leaves you 1.8 million
    (leaves you an extra 800,000 compared to cashing out). This of course decreases with a higher tax rate but you are gambling either way by cashing out or holding.

    Also, it usually takes time for congress to pass anything (just look at the debt ceiling deadlocked congress) so there should be time to pull out the IRA before a tax increase.

    My view is why give the govt an extra tax upfront by cashing out and shorting yourself 800,000 in the process?

    My opinion is put your self-directed IRA into a precious metals IRA via someone like Entrust and put half in and buy coins with the other half in a depository like first state and ride out the first wave at least until end of 2012.
    Congress has already locked in the low tax rates until 2012 (1.5 year away) so why not take a wait and see attitude instead of selling on fear.

    Another way to diversify the risk is to cash out half and keep half to hedge your
    bets but put it into a precious metals ira.

    It took me 20 years to build that nest egg. I’m not going to throw it away so quickly. The US has been able to run a fiat currency for 40 years, trying to time
    the demise, especially on fear, is a mistake.

  • 60-and-Worried

    I think I read recently (Possibly in that Congresswoman Lois Capps Santa Barbara, CA Former Speaker of the House, Pelosi, and a few other powerful Democrats have inserted rules in many of recently passed financial laws that among other things will levy a new 8% tax on retirement distributions from IRAs and 401Ks. This is on top of the deferred income taxes we’re all going to have to pay for getting a tax break on our retirement savings in the first place. We all know what happens when a tax start off at 8%. You wake up one day and it 32%. Then 64%. Then 95%. They wouldn’t dare take it all. Sounds just like Ireland to me. Has anyone seen anything concrete about the “CAPPS LAWS”. Will they be going into effect next year or is it a few more years down the road? I think I can borrow 50% of my 401K up to $100,000, but I can’t cash out.

    60 and worried.

  • Chris

    My 401k is with Fidelity and they allow what is called an “in-service withdrawal”. I was able to withdraw about 2/3 of my 401k. I doubt that Fidelity is the only custodian that allows this.

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