401k confiscation?

[The Freethinker]

I am researching. Some bloggers say it's a certainty and that they've already cashed out. Others say it's nuanced and not a wholesale nationalization of retirement accounts.

What do you know about this supposed confiscation and what steps if any have you taken?

The more I distrust paper money the greater the urge to cash it in, take the withdrawal penalty, and use most of the leftover money to buy PMs.

 

[xd9fan]

heres what I know for sure.....if this happens and bullets dont fly.......the country will quickly fold over and die.

 

[The Freethinker]

heres what I know for sure.....if this happens and bullets dont fly.......the country will quickly fold over and die.

Sad but true.

 

[Travlyr]

Doesn't Wall Street already have virtual control of 401k's?

 

[Original_Intent]

401 (k) is already confiscated. The only way you can access this money is to be fired or quit your job. You can take a loan out against it, but if you are terminated from your job the balance is due within 30 days or you pay STIFF penalties.

 

[Zippyjuan]

One person at a congressional hearing a couple years ago was reported to have suggested the idea which was quickly rejected by those on the panel. It is not going to happen.

http://www.factcheck.org/askfactche...democrats_talking_about_confiscating_ira.html

 

[Agorism]

Rich will get out of it by various means. Upper middle class and middle class will get eaten by the polis I'm sure.

 

[Acala]

false

401 (k) is already confiscated. The only way you can access this money is to be fired or quit your job. You can take a loan out against it, but if you are terminated from your job the balance is due within 30 days or you pay STIFF penalties.

You can take it all out at any time but you pay a 10% penalty plus it is taxable income. I did it a couple years ago and am very happy with the decision.

 

[Lovecraftian4Paul]

With these rumors, maybe it's better to go for a Roth IRA whether you have a 401K or not? I think the Roth principle you contribute can be withdrawn tax free if you're under a certain income level.

 

[Prester John]

With these rumors, maybe it's better to go for a Roth IRA whether you have a 401K or not? I think the Roth principle you contribute can be withdrawn tax free if you're under a certain income level.

In general you can always take the principal/original investment out of a Roth IRA tax free regardless of income; it's only the earnings that would be taxable as ordinary income (w/10% penalty) if you take it out prior to age 59-1/2.

You have to wait 5 years if your convert a traditional IRA to a Roth IRA before you can withdraw the principal tax free.

 

[Zippyjuan]

The difference between a Roth and a regular IRA or 401k is when you pay the taxes (yes, there are Roth versions of both). On the regular versions, your contributions this year are deductable from your taxable income for this year (ie not taxed on your elgible contributions- there are limits on how much you can put in depending on your income). You will pay taxes (if elgible for taxes then) when you withdraw the money from the standard versions- including taxes on whatever the assets in the account earned during the time you had the account. .

In a Roth version, the money you put in is not tax free but any money taken out later (including any returns earned on the investments within the account) are not taxed (unless the tax code on them gets changed later on).

Roth accounts have the same income thresholds as standard accounts. You can also spread money between the two but your total combined contributions of both cannot excede the amount you are limited to for just one. For example, if your income level this year allows you to make a $3000 IRA contribution this year, you can put $3000 into a Roth IRA (or 401) OR $3000 in a traditional IRA or some combination like say $2000 in one and $1000 in the other.

 

[Danke]

You can take it all out at any time but you pay a 10% penalty plus it is taxable income. I did it a couple years ago and am very happy with the decision.

There is probably some confusion between a 401k and company defined contribution plans. I have to leave my job to touch mine.

 

[Original_Intent]

You can take it all out at any time but you pay a 10% penalty plus it is taxable income. I did it a couple years ago and am very happy with the decision.

I tried taking all of mine out about a year and a half ago and they said the only way I could get it was to either file a hardship claim (i.e. proof that I was about to lose my house) or quit my job. They said I could take a loan against 50% of the "eligible balance", with the interest going back to the account.

I really should have dug into the legalese of the 401(k) agreement and determined if that was true or not. I am guessing I would have grounds for a lawsuit if it turned out not to be the case. Of course it would probably just be my word against theirs as I didn't record the call.

 

[Acala]

I may be wrong

I tried taking all of mine out about a year and a half ago and they said the only way I could get it was to either file a hardship claim (i.e. proof that I was about to lose my house) or quit my job. They said I could take a loan against 50% of the "eligible balance", with the interest going back to the account.

I really should have dug into the legalese of the 401(k) agreement and determined if that was true or not. I am guessing I would have grounds for a lawsuit if it turned out not to be the case. Of course it would probably just be my word against theirs as I didn't record the call.

I might be wrong about what I said. i had a 401k that I rolled into an IRA and then cashed out the IRA. But the rollover happened during a job change. So what I said applies to IRAs (Roth and traditional, alhough with Roth you only pay tax on the appreciation) but maybe not to 401k. Sorry.

 

[xd9fan]

gold would go to the moon..........

 

[Original_Intent]

I might be wrong about what I said. i had a 401k that I rolled into an IRA and then cashed out the IRA. But the rollover happened during a job change. So what I said applies to IRAs (Roth and traditional, alhough with Roth you only pay tax on the appreciation) but maybe not to 401k. Sorry.

Yeah that makes sense. On Roth you pay taxes on contributions, right? and the advantages are you can withdraw the principle at any time, but the earnings can;t be touched until retirement without penalty. However, if you do wait until retirment you are never taxed on the earnings....right?

 

[cjm]

My take on the 401k confiscation question is this -- if it will be done, it will be done incrementally. Just like the empowering of the executive branch, the spread of compulsory government schooling, and general restrictions on liberties.

Look for an increase in the early withdrawal penalty first -- a bump from 10% to 15% maybe? -- and then followed by some sort of reward for investing in US Treasuries. It won't be forced, but instead you'll be rewarded for feeding "tyrannosaurus debt" (as schoolhouse rock called it). Once rewards stop working, a small mandatory investment in treasuries will follow -- nothing great, maybe 1% of your 401k? as part of a trivial austerity measure. Lather, rinse, repeat. It will always be in your name, but it will be theirs.

 

[LibForestPaul]

Hopefully, everyone has their triggers for when the scopes come out.

 

[Acala]

Roth

Yeah that makes sense. On Roth you pay taxes on contributions, right? and the advantages are you can withdraw the principle at any time, but the earnings can;t be touched until retirement without penalty. However, if you do wait until retirment you are never taxed on the earnings....right?

The contributions to a Roth are post-tax so the principal has already been taxed and will not be taxed again nor will there be a penalty for early withdrawl. However, the interest WILL be taxed now or later and if you take it out early you also pay a penalty. So you WILL be taxed on the earnings eventually.

But I am no expert . . .

 

[Zippyjuan]

Earnings on a Roth IRA are not supposed to be taxed. As for early withdrawls, I believe you can only take out the amount you put in not the earned portion.