Planning to take a loan on my 403b, buy gold/silver but I have tax questions

[masonade]

Long time reader of these forums, but this is my first post - hope that's okay!

I'm young (28), was laid off in 2008 during the financial crisis and was lucky enough to find a job shortly thereafter working for a university. At age 30, it's mandatory that you put 5% of your income into a 403b and they match two dollars for every one dollar you put in.

I am convinced that I will never see any of this money. It will be confiscated when the dollar dies, will be eaten by inflation or have it's value deteriorated greatly as the stock and bond markets (the only things you can put your money in, in the 403b) gyrate, or some combination of the three.

Because I believe the financial world is headed for utter catastrophe, I want to take a loan on my 403b, buy gold and silver and then default. I know that doing so will incur a 10% tax penalty right off the top, which I am willing to pay. I also know I will have to report the loan as income on my taxes. What I do not know, is how to calculate exactly what my tax bill will be. I want to take the money out, pay the 10% penalty for early withdrawal, pay whatever tax I'll owe as a result of having higher income, and then purchase my gold and silver.

Are there any accountants out there that can help me figure out how much I would need to hold back for taxes? I make about 44k right now, have no dependents and no real tax deductions.

Thanks in advance for any reply's!

RON PAUL 2012!!!!

 

[pauljmccain]

Well right now for the time being, without worrying about any tax/legality, you can put the money into Gold ETFs, which are funds like stocks designed to track the price of gold. Sorry, I'm not sure how you'd go about determining an opyimal loan amount. You'll get hit pretty hard either way.

 

[The Goat]

yet another reason I love being self employed. I control my money.

 

[Zippyjuan]

Borrowing to invest is usually a bad idea. Let us try some rough numbers. You borrow $100 and pay a $10% penalty so you have $90. (you are allowed to borrow up to 50% of what you have in it). If you don't pay the money back within five years it will be taxed as income. http://www.ehow.com/how_6508529_borrow-403b.html

Then you have to include any costs of buying and selling your metals. Let us use a rough figure of five percent. So we took $90 and can buy $85 worth of gold with it. At this point you need the price of gold to go up by about 17% to break even. Add in another five percent and it has to go up by closer to 20%. Higher costs mean you need an even higher return. If you don't pay off the loan within five years you will be hit with income taxes on top of that so you really need gold to go up a lot before you even make any money.

Meanwhile if you put $90 into your 403b account, you will get another $180 in matching funds (since as you say they offer $2 match for every one you put in) or have a total of $270. I doubt you can get that sort of return long term by investing in metals (or anything else for that matter!). Historically it hasn't happened. Gold would have to more than triple (when you add in costs) to offer you the same return as the 403b account. The price of gold peaked at $1900 an ounce back in August and has been slowly moving down since then.

I would stick with the 403b myself.

 

[jbauer]

just so we're clear...

You're getting 2 dollars for every 1 invested off the top (from tax payers) and you don't think this works?

To the gold etf guy, I can almost guarantee that he can't buy any etf let alone a gold one. H'es going to be highly restricted in what he can buy based on the 403b he's in. You might however be able to buy commodity funds, tip funds or floating rate funds within your 403b. That will hedge against some of your worries, but ultimatley you wont be able to pack up and run with your statment in hand like you would with gold.

Frankly if the dollar is going to collapse, gold is only worth what someone is willing to pay you for it. I can tell you if I'm hungery, thirsty and unshelterd I don't give a damn about how much of a shinny rock you have.

 

[CaptainAmerica]

Don't take out a loan.

 

[row row fight da powah]

Frankly if the dollar is going to collapse, gold is only worth what someone is willing to pay you for it. I can tell you if I'm hungery, thirsty and unshelterd I don't give a damn about how much of a shinny rock you have.

Yup. That's why Ron is for allowing competing currencies (not just gold/silver) and a purely free market. The people will determine the worth something is to them just fine. It's a basic bartering system. How can any other alternative possibly be more fair?

 

[brandon]

You know you could just withdraw the money and pay the penalty. Getting a loan and then defaulting is superfluous. Keep in mind you may not be vested in your company match and won't be able to withdraw or get a loan on that money. Also keep in mind pulling all your money out to buy gold is probably a terrible idea you will regret in the future.

 

[jbauer]

Not unless the plan allows for in-service withdrawls, some of the 403b's get very messy because the employer writes the rules.

You know you could just withdraw the money and pay the penalty. Getting a loan and then defaulting is superfluous. Keep in mind you may not be vested in your company match and won't be able to withdraw or get a loan on that money. Also keep in mind pulling all your money out to buy gold is probably a terrible idea you will regret in the future.

 

[brandon]

Ahh okay I assumed withdrawal was the same as with 401ks

 

[jbauer]

Competing currencies is a nice way of saying getting rid of the dollar. Why woud you want a $ if you can have a asset backed $. Its also like saying get rid of the IRS. Something that would be wonderful if it happened but doesn't have a snowballs chance in he!! of happening. We would be much better served fighting for realistic goals like auditing the FED.

Yup. That's why Ron is for allowing competing currencies (not just gold/silver) and a purely free market. The people will determine the worth something is to them just fine. It's a basic bartering system. How can any other alternative possibly be more fair?

 

[jbauer]

Shoot, on 403bs the employer has to sign off on you changing the investment within your OWN investment, say from cash to large cap stock. Although I've never really heard of them not signing off on it. But reguardless you NEED their signature to make any changes.

Ahh okay I assumed withdrawal was the same as with 401ks

 

[jbauer]

..

 

[rpwi]

Not an expert on 403b's...but with 401s you can rollover them over into a private IRA (even while still working) using a brokerage account like scottrade and then inside of the IRA you are golden to purchase whatever (no need to borrow and no tax issues).

Anybody know if you can roll 403bs into individual IRA's?

masonade....you might do some googling on '403 rollovers'

http://www.irs.gov/publications/p571/ch08.html#en_US_2011_publink1000239748

...has some info on 403 rollovers...but you probably don't want to follow that blindly without getting personal tax advice from an expert though.

 

[pauljmccain]

Frankly if the dollar is going to collapse, gold is only worth what someone is willing to pay you for it. I can tell you if I'm hungery, thirsty and unshelterd I don't give a damn about how much of a shinny rock you have.

I don't think you understand the purpose of money.

 

[DEGuy]

I'm actually an advocate for taking loans out from 401Ks/403b when it's appropriate. The interest rate is usually extremely low, and I'm bearish on the limited investments that are usually available in the retirement account. Defaulting is probably a bad idea because of the combined tax penalty of 10% + another 15% or 25% (based on roughly 44K income). If you are very optimistic on gold prices raising at a rate faster than the loan interest rate + the return you would have received in the 403B, why not take out the loan and pay it back gradually in FRN?

Keep in mind though. Even if you are bullish on gold prices, the central banks collude to drive the price of gold down on the world market. The "Spot price" of gold is hardly the true market value that would occur if people were only trading physical gold. The central banks know gold bullion is their primary competition, so they use gold contracts and paper gold to purposely manipulate the market price.

 

[Arklatex]

We humans here have created such complicated life! Yet 98% have no idea WHERE we are, WHAT we are and WHY. Good portion doesn't care(nobody knows they say), they'd rather spend time studying complex tax law and create more jobs! Don't understand anything but we just need more jobs! Slave us please. Who here still hasn't read Atlas Shrugged?


/rant


Say one goes against common advice and withdrew both my 401k and my IRA before I was 28. Despite the penalty I more than doubled the money after I took it out by buying Silver bullion. Guess it was a good idea?

I've since turned it into over 5 acres of clean pure mountain river property in pristine forest. It is clear to me what one should do with their money, get it out of the fake system that is fake and killing you slowly, and put it into what improves your life and world and creates real value and joy.

River fishing, skinny dipping, canoeing, owning land, goats, pecans and planting fruit brings me joy, IRA and 401k statements... not so much. I call it a no brainier. Big illusion of a world we are living in. Follow the bread crumbs that have been left.

 

[jbauer]

Most 401k do not allow in service rollovers (haven't quit your job yet). The ones that do, ussually restrict it to 55+. If your 401k allows in service rollovers you are in the minority. I've yet to hear of a 403b that allows in service rollovers.

Not an expert on 403b's...but with 401s you can rollover them over into a private IRA (even while still working) using a brokerage account like scottrade and then inside of the IRA you are golden to purchase whatever (no need to borrow and no tax issues).

Anybody know if you can roll 403bs into individual IRA's?

masonade....you might do some googling on '403 rollovers'

http://www.irs.gov/publications/p571/ch08.html#en_US_2011_publink1000239748

...has some info on 403 rollovers...but you probably don't want to follow that blindly without getting personal tax advice from an expert though.

 

[rpwi]

jbauer...not an expert on this subject, but our company does allow in-service non-hardship rollovers... There was a relatively recently law passed (TIPRA) that says employees can now do in-service non-hardship withdrawals from 401(k), 403(b) and 457 plans to traditional IRAs and Roth IRAs before age 59½. When I asked our 'financial planner' about this...he said it was 'our money' and that a transfer to a roth or traditional IRA would be fine (roths are bad choices for this as they are complex). It could be that administrators still do have the power to block withdrawals...if so that is stupid.

It certainly is attractive for most individuals on company 401k plans. You usually get a selection of 5-10 'risk balanced' portfolios to choose from (some choice!). You end up paying the financial planner a big fee (1% a year in our case). The mutal funds they buy get their fee (varies but can be in the 1% range) and the brokerage firms that act as an in-between for the financial planners and the mutual funds get their cut. And this doesn't even count the time HR puts into setting up these 401ks (an indirect cost to you the employee). All in all very bad for the investor.

The government certainly has created a mess with all this retirement fund nonsense. Retirement investments should be taxed the same as regular investments. It's simple, easy, flexible and makes sense. Should be no stupid gimmicky games that you have to go through to save on taxes.