401(k) Investors Can’t Get Money
Looks like I started kicking myself too soon.
A few weeks ago I explained why I’m going to have to spend the next few years as an indentured servant to the feds to pay the taxes and penalty on my 401(k) withdrawal…but if I hadn’t done it when I did, I may never have seen that money again.
The Wall Street Journal reports that 401(k) investors are finding that they can’t get their money.
“When Ed Dursky was laid off from his job at a manufacturing company in March, he couldn’t withdraw $40,000 from his 401(k) retirement account…”
“I hate to be whiny,” said Mr. Dursky, “ but it is my money,”
Turns out that the money you put into the 401(k) can be locked up a lot longer than you’d like. Most plans allow investors to borrow from their own accounts and some even allow outright withdrawal of matched funds—with the requisite 10% penalty and income tax. The only way to get all of it, however, has been to terminate employment…but now even that’s not good enough.
Of course if you’re the kind who pays attention to things like history and human nature, you’d have noticed the funny smell around the defined contribution plan a long time ago. And you would have seen this coming.
Here at Whiskey Bar we never stop casting a suspicious eye at the government and we turn our noses at their offers for help. We regret that this time around the feds aren’t the ones keeping voluntary and involuntary retirees from their cash.
Still, if the entire mess hasn’t filled you with fear and loathing, then I’ll have what you’re having.
General economic collapse means that fund managers are finding it in their best interests to limit reallocation and withdrawal by 401(k) investors. It doesn’t matter if you’re a 69-year-old recent retiree or a laid-off schlimazel who was counting on the money you’d saved to see you through a few months of unemployment.
Folks are starting to catch on to how important it is to own gold. We harp about that every day in these pages. Not a one of you reading this doubts for a moment that the value of little green pieces of paper that so many others take for granted is only good as a politician’s promise.
So what escapes me is why anyone smart enough to save in gold and silver would still tuck money away in a defined benefits plan. The circumstances concerning retrieval have always been extreme. We were assured this was for our own good. After all, this was supposed to be retirement money; the rules had to discourage us from getting at it ahead of time!
But the whole set up smacked of the sort of paternalism that really should have raised our hackles.
And now we discover that fund managers can keep our retirement funds…even after we’ve retired…or been separated from the payroll under less pleasant circumstances. Looks like in some cases, some folks may never see that retirement money. The value of their locked investments may dwindle to nothing or they may die of old age before things are sorted out in the courts.
I remember years ago when I began my working life and didn’t know enough to be wary of the state’s siren songs about financial security. I thought the 401(k) such a wonderful idea. As suspicion toward leviathan grew I still harbored a child’s hope that at least this whole “invest pre-tax and get a company match” thing wasn’t a trap. Of course, turns out it was…
The federal government itself hasn’t yet taken a turn at freezing 401(k) accounts, but this sudden if inevitable betrayal by fund managers should serve as a warning.
Please don’t let this happen to you. No matter how the feds try to lure you with tax-deferrals, no matter how tempting the company match is, don’t fall for it.
Granted, money you deposit anywhere besides your mattress can be nationalized or misappropriated, but putting funds into something like a 401(k) is akin to forcing your head into the mouth of the lion.
So what can you do?
Well, you don’t have to bind your retirement money with government red tape.
Fellow editor Jim Nelson sits just a few feet from the Whiskey Bar and in response to my outraged cussing over this news about 401(k) freezes he’s offered to share his own strategy for building retirement wealth.
And this is money that can’t be penalized by the feds for early withdrawal, or kept from you by callous fund managers…
Be sure to be reading when Jim Nelson stops by tomorrow to tend the bar.
Regards,
Gary Gibson
Managing Editor, Whiskey & Gunpowder
May 11, 2009
Gary Gibson
Gary Gibson is the managing editor for Whiskey and Gunpowder. He joins the Whiskey staff as a long-time fan and reader of both Whiskey and Gunpowder and the Daily Reckoning. A graduate of Fordham University, Gary now spends his days reading about and writing on limited government, sound money, personal responsibility and resource investing.
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Here’s an amusing little missive from someone who objects to James Howard Kunstler’s strong language…and who surmises from it that I’m a low down darkie…
“‘Sir,’ and I use the term loosely, I was somewhat surprised by your response, I expressed an opinion that his language was CRUDE to say the least. Civilized human beings do not speak in that manner. You said that you “shoot straight and sometimes a little hard.” But it seems that when others also shoot straight and sometimes hard, it is unacceptable as far as you are concerned. “You unsubscribed me”. I was puzzled until I saw a picture of you, I then understood. You were probably raised in a neighborhood where foul language and criminal behavior was accepted as the norm. I was born and raised in Irvington, New Jersey, in the 1940’s and the 1950’s. Irvington bordered Newark, New Jersey. Newark had a high percentage of blacks. Irvington was 95 % white. We could walk the streets at midnight and not have to worry about crime. Now Irvington is the most violent city in New Jersey, with their drugs and high murder rate.
“We should have picked our own cotton! I also shoot straight and a little hard. By the way if I really wanted to, I can easily check out your website, but I could care less, I already have much too much to read on a daily basis. Happy Hanukah.”
James Howard Kunstler used the term “pissed off”…plus he has a naughty word in the title of his website…plus Gary Gibson is black…so add it up and this obviously makes Gary Gibson a low class darkie from a low class darkie neighborhood.
Thanks for clearing that one up.
I’m not going to apologize for the language that appears in Whiskey. If you don’t like it, you don’t have to read it. I’ll even give you your money back.
I do take exception to his assumptions about my upbringing, but I try my best to remember what my father taught me about people who say this sort of thing. What they say has nothing to do with the truth about me, just the truth about them.
Here’s a bit of encouragement from a happy Shooter who sees things in a very different light:
“Gary, I am almost 58 years of age and in the process of evolving (and at times, revolving) into my 4th career. Although educated in the formal sciences, two of the four career paths I took in those tender years did not yield the kind of financial security I had hoped. This fourth (and God willing, the last) occupation involves finance and trading and I need to tell you that reading your articles and others, endorsed by yourself, has helped me immensely. Understanding the world of economics as impacted by geography and politics is not easy for someone with my background. You guys are truly gifted, ALL of you, and the ability for you to see the BIG PICTURE, and the language conveyed to best explain it to us readers, is an endeavor that I, for one, truly appreciate.
“Thanks for all your great work, good Sir!”
Thank you very, very much. We take our mission very seriously and it does me good to hear that all the shots we send your way are doing some good.
If you’d like to meet me along with some of our most frequent contributors, then join us in Vancouver at the Whiskey Bar. To find out more, just click here…
Yep. Economics, geography, politics…we know they meet up somewhere. Central banks, fiat currency, credit bubbles, bank bailouts, major industry nationalization…those of us who’ve paid any attention to history saw all these things coming a country mile away.
Now begins the outright theft of the citizenry’s funds in the low-hanging fruit that is the 401(k). I expect the contents will eventually be nationalized and at some point private gold ownership will be outlawed.
We all know what’s coming. Stick with us as we try to keep one step ahead.
Regards,
Gary Gibson
Managing Editor, Whiskey & Gunpowder
In the interest of accuracy; aren’t 401-K plans considered defined -contribution rather than defined -benefit?
If I am not mistaken, traditional company-paid pension plans are usually described as defined -benefit.
As one who has retired and became disabled by industrial poisoning , I
think I could safely say that an individual should not invest in any 401k plan. The main reason for 401k’s is to help employers from having to invest in “defined benefits plans”. Having been there and done that for 30+ yrs, I can tell you that deferred benefits cost more at any later date.IMHO taxes will never go down unless the economy is tanked long enough to force most people into living within their means. The” American dream ” can really be a violent nightmare if one assumes that the government will provide anyone with comfort or support. The Congress is only composed of lawyers with the usual inclination of stealing by legal means that only lawyers would understand!!!!!!
Remember a person is only as dependable as his/her integrity. In 60+ years of watching, I can say that lawyers in DC have become undesirables to most honest people. Capitolism cannot endure in a nation with dishonest, self-serving congressman.The difference in the founding fathers and our present government is integrity. Today’s government is rife with outright theft and moral decline. Such are practical
present characteristics in Biblical prophecy. “A word to the wise should be sufficient”
I am a 51 year old accountant and I remember when 401K’s and IRA’s were being promoted and heralded as the best way to prepare for retirement. I saw thru the BS from the get go. Congress enacted legislation in order to help the multinational corporations get off the hook for pensions. Pensions have since disappeared and most working Americans have been suckered into these traps. Of course you can only invest in stocks and some bonds hence Wall Street also has benefited greatly. The government changes the rules constantly so it really is no longer your money once you turn it over to them. Congress has looted Social Security and the Federal Pensions. Why would any thinking American not assume that IRA’s and 401K’s would be treated any differently. I had several thousand dollars in a 401K back in the mid 1990′s. I cashed it out and bought gold. It was worth the penalty. Americans have forgotten what PRIVACY means. No corporation, Bank or Government has any legitimate reason to spy on your finances. Only criminals act in such a way. So who are the real criminals in this country?
Gary,
Excellent article! Knowledge should be the impetus for all things. It knows not race or sex or age. I commend you and your mission to ‘wake up’ those asleep in the American Dream.
Mr. Gibson, what an excellent piece! My sister got a copy forwarded to her email: she refused to withdraw from her 401K until I nagged her daily for two weeks. This was last November. The answer to why people don’t own gold: lemming psychology. People flow along the same stupid lines of thinking and refuse to focus and personally access their own finances; the people are taught to only follow the advice of ‘experts’. Unfortunately, the experts are tied up into the money-making racket and look after the best interests of their constituents in crime, not the plebian investor. But my sister listened!
[...] Turns out that the money you put into the 401(k) can be locked up a lot longer than you’d like. Most plans allow investors to borrow from their own accounts and some even allow outright withdrawal of matched funds—with the requisite 10% penalty and income tax. The only way to get all of it, however, has been to terminate employment…but now even that’s not good enough. Read the full article [...]
“Turns out that the money you put into the 401(k) can be locked up a lot longer than you’d like. Most plans allow investors to borrow from their own accounts and some even allow outright withdrawal of matched funds—with the requisite 10% penalty and income tax. The only way to get all of it, however, has been to terminate employment…but now even that’s not good enough.”
True and not true. If you separate from your employer you either have to roll that money into an IRA (including all funds you borrowed) or you pay the 10% penalty and taxes on it. Even when you retire, you still have to pay income taxes on any amount you withdraw .We closed our 401k in 2000 and paid the tax and penalty only because my husband left that employer and the new employer didn’t offer a 401k. We had borrowed against that 401k(cancer medical bills) and since we didn’t have the funds to replace that borrowed money if we rolled, we just said forget it. I never did like big brother telling me when and if I could have my own money! Glad we did that!
You can roll your 401K into an IRA and take the money out about 1 week later. Don’t believe this article and let your money sit in your tension fund. As far as gold goes, you can’t eat gold! If you are looking for short term investments try buying food. Food is increasing in value as a percentage faster than metals. In a 3 month time frame, you would have made (or saved) 30%! Plus, if the SHTF, you can always trade food. What are you going to do with a 5oz bar of gold? Give up your life defending it?
Thanks for the input.
I stand by my point. Do not put your money into any of these things.
And you can’t eat cash either.
Regarding this: ” “We should have picked our own cotton! I also shoot straight and a little hard. By the way if I really wanted to, I can easily check out your website, but I could care less, I already have much too much to read on a daily basis. Happy Hanukah.”
I need to know why this man from 95% white Irvington, NJ, “back in the day” cannot use proper English and say, “I COULDN’T CARE LESS” instead of the annoyingly incorrect “I could care less.” Could it be that, because he did not pick his own cotton, he failed to understand the importance of speaking English well in America? Could he have missed the day his English teacher taught that “I could care less” implies that he does indeed care? Sheesh! And he’s Jewish? Double sheesh. Sheesh !!
[...] own accounts and some even allow outright withdrawal of matched funds—with the requisite 10% penalty and income tax. The only way to get all of it, however, has been to terminate employment…but now even that’s not good enough. Read the full article [...]
[...] own accounts and some even allow outright withdrawal of matched funds—with the requisite 10% penalty and income tax. The only way to get all of it, however, has been to terminate employment…but now even that’s not good enough. Read the full article [...]
[...] own accounts and some even allow outright withdrawal of matched funds—with the requisite 10% penalty and income tax. The only way to get all of it, however, has been to terminate employment…but now even that’s not good enough. Read the full article [...]
Your credibility was just flushed down the toilet. You inveigh against ‘defined benefit’ plans, but then discuss 401(k)s. Since these two are different, to which are you referring? 401(k)s are ‘defined contribution’ plans. How do you expect readers to believe your writings if you do not write correctly?
Sorry, Butch. I meant to change that.
I’ve been saying this all along: it’s only a matter of time before they figure out how much there’s sitting in retirement accounts and devise a scheme to get their hands on it. Now that SS is gone, this is a reality more than ever. Truly sickening realization to see that first, we’re robbed out of money from our paychecks before we even see it with the excuse of our retirement. Then, they blow that money on wars, bailouts and all kinds of payola. Since that isn’t enough, they talk us into saving more in separate accounts so they can figure out a way to get their stinking dirty paws on that too. And by Galee, they’ve figured it out and the day is here!
From one low class whitey who’s been picking his own cotton all his life, I”d like to thank you Gary for the great post about how our jack-booted gubmint thugs are planning to heist our retirement $$$$$. I know that personally I’ve worked too hard for the little I have to donate it to these bastards for their worthless bonds, I have found that your missives contain a great bit of wisdom and that your thinking parallels my own-and my IRA (formerly 401K) is going to be cashed out forthwith and invested in real assets. The idea that these fascist corpgov creeps are even thinking about grabbing retirement accounts is the last straw for me. Please keep up the great work. This message needs to reach the sheeple in mass!
From reading all the posts, I come away with the impression that most folks don’t know jack crap about what they are investing in or how to attain their desired goals. We all rely, and trust too much in the intregity of our employers and government.
Gary itches the source of our pain but far too few have a back scratcher to reach the area that needs attention.
I enjoy Gary’s writings and missives because they cause us all to think about things that would otherwise not be thunk about. Keep up the chatter Gary; soooner or later we’ll decide to get involved in our finances! If not, we all know who wins.