# 401K/IRA: if you haven't started one yet, would you?



## forluvofsmoke (Jan 27, 2012)

Here's a little picture of what can happen, though SEC laws were changed after this one, bleak and devastatingly costly event: anyone remember the crash and bankruptcy of Enron?

I worked for a company who was a general partner with Enron back in the day. Enron was our financial backer, securing our debts until payment was made for product we purchased, a necessary part of our operations, as we moved the largest quantity of product of any company of our kind in the industry, with monthly gross revenues reaching 9 digit figures, as I recall. I was with the company for almost 2 years, and about 30 days away from pulling the trigger and starting a 401K with my employer, tied into the Enron 401K program with stock options, when...KAAAAAAAAAABOOOOOOOOM! Never in my life was I so glad to not use a company sponsored program. I wasn't in the program for my life's savings, as many were...I didn't loose a cent. An example, was a co-worker who had been with the company long enough that he only needed to finish out the year and would have been set for retirement, personally investing over $800K over more than 19 years, along with company matched funds. When the dust settled, in his own words, he couldn't buy a new Chevy pickup, and retirement was not even an option. It turned his whole life upside-down, I'm sure.

As I stated earlier, the SEC laws have changed to prevent this particular scenario from happening again with publicly traded companies, however, even with a seemingly solid company offering 100% matching of your contributions up to 6% (max allowed by tax sheltering laws) of your income (while you can contribute up to 12%), would you step into that risk? And, yes, even if there are a variety of risk levels with non-company funds and money markets available to spread out your investments as there are for me, am I the only one who thinks that monetary investments are unwise with the current economic crisis and fears for deflated dollars and collapse of the US monetary system?

I won't do it myself, even though it's been a thought for many years, the growing distrust in our banking and exchange systems have me convinced not to step into that potential steaming hot pile of...well, for lack of a better word, dung. The thought of loosing my life's savings is a riveting feeling, to say the least. When we feel that last squeeze on the dollar before it all comes to a head, I don't want to be holding very many in my hand....less to be squeezed means less pain to be felt, IMHO. I'm putting my extra money to work on what I can see and control...preparedness.

Any thoughts or advice for someone thinking about going this route (401K/IRA), or someone wanting to pull-out and put their money to work on more tangible forms of assets, such as long-term preparedness?

***Please, do refrain from your bitterness towards the Enron scheme, as I didn't intend to dredge that up...water under the bridge, and this was a while back already...I only offered it as a realistic comparison as to what can happen to our investments, and what could have happened to mine.

Thanks, all!


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## AlabamaGal (Dec 27, 2011)

I contribute the maximum allowable from my salary to my 401k, which will be $17k in 2012. I also save in other ways, but the rest of them are not actively in the market. The 401k significantly reduces my taxes and is the only tax-deferred account I can qualify for.

But -- I don't have any debt and I also have other preps. For me, it's part of an overall, comprehensive risk management plan. (Well, I hope it's comprehensive.) If the zombies come, cash money in the bank won't be worth anything more than in a mutual fund somewhere, and if the zombies don't come, the mutual fund will be worth a lot more in 20 years. 

For someone just starting out, I would recommend prioritizing:
- Cash savings, at least 3 months living expenses
- Contributing to a 401k to the amount your company matches: instant 100% return. Provided of course someone else holds the money and you can choose where to put it, and it isn't just privately held stock. (Although my Dad's entire retirement is funded by stock options he purchased.)
- Eliminate non-mortgage debt
- Increase cash savings to your comfort zone (for me, a year); for some preppers all or a part of this may be in precious metals
- Eliminate mortgage
- Then decide if you want to save to buy a new property or large assets, or more in your retirement plans, or...?

Why 401k before debt? The sooner you invest the greater the returns, and the market pays disproportionately higher returns to those who invest when the market looks bad. 

But if the debt eats you up inside, pay all means the debt first. And if you just can't bring yourself to hold your nose and dive into the market, then don't. If anxiety over the market will prey on your peace of mind, find somewhere else to put your money. I know I wouldn't be putting money in my 401k if I didn't have bean insurance in the basement!


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## BillS (May 30, 2011)

Having a 401k doesn't make any sense. Either we'll have an economic collapse and/or hyperinflation and all your money will be lost. Or the government will seize all 401k money in order to stave off bankruptcy. But don't worry--your 401k will be just as safe as social security.

My wife has a 401k. We stopped putting money into it a year ago.


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## partdeux (Aug 3, 2011)

tough tough decision. Depends on how much you think there will be a financial calamity in our lifetime. I'm about 75% invested in the market with my IRA, rest in cash. Not putting anything else in right now, taking every available penny and paying down all debt.


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## kappydell (Nov 27, 2011)

no. i have never felt good about the market, but then I don't gamble, either. Just put it into hard money and sat on it, and it has done well for me.


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## ZoomZoom (Dec 18, 2009)

AlabamaGal said:


> The 401k significantly reduces my taxes and is the only tax-deferred account I can qualify for.


My concern with that is it's "tax deferred". OK, the money is put away now and you don't pay taxes. When you retire and it's time to withdraw, any idea what the tax rate will be then?
I don't see taxes going lower in the remainder of my lifetime. They only direction they would go is up. Pay 28% now or 28+% (who knows?) when I go to withdraw.


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## AlabamaGal (Dec 27, 2011)

ZoomZoom said:


> My concern with that is it's "tax deferred". OK, the money is put away now and you don't pay taxes. When you retire and it's time to withdraw, any idea what the tax rate will be then?
> I don't see taxes going lower in the remainder of my lifetime. They only direction they would go is up. Pay 28% now or 28+% (who knows?) when I go to withdraw.


I agree that's a risk, especially since tax rates are nearly at an all-time low in the US. But when I retire I most likely be in the bottom tax bracket taking minimum distributions only. Historically speaking, those in the bottom brackets haven't been paying as high as 28% or 33%, even in the high tax years following WWII. It's impossible to guess what an individual's actual tax rate will be, even if you know the rates, since they are changing what affects your taxable income all the time.

However with non-deferred investments (with the exception of the ROTH IRA*), you pay taxes up front on the investment and then also pay capital gains on the earnings. So you are still at risk of fluctuating tax rates on the back end. Tax rates would nearly have to double to get the same tax advantage you get with a 401k or an IRA.

So I think the risk of rising taxes with a 401k is acceptable for me -- for where I'm at right now. If I were in the 15% tax bracket, I'd still choose to invest in a 401k up to my employer's match and then fully fund a ROTH IRA instead.

AG

*A ROTH IRA allows you no pay taxes up front on the investment and then grow tax-free, but annual contributions are very limited. Also, no mandatory withdrawals.


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## TheAnt (Jun 7, 2011)

> 401K/IRA: if you haven't started one yet, would you?


NO.

At least if you burned your money you could be warmed by it.


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## sailaway (Mar 12, 2009)

The Bible says the best investment you can make is in your own business. I spend my money on realestate and can look at my investments every day I drive by. The big boys can wipe out our 401ks when they get together and decide to drive the market down so I stay away from them. NO 401K HERE.


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## oldvet (Jun 29, 2010)

Nope no way!


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## BillS (May 30, 2011)

I think we're going to see the collapse this year. Greece is about to go bankrupt. Other countries will follow. Banks around the world will be wiped out. The Federal Reserve will step in and create as much money as necessary to prop everything up. We'll see the death of the dollar and the end of the dollar as the world's reserve currency. 

I also think we're going to see World War 3. Iran is developing nuclear weapons. They've already threatened the US and Israel with annihilation. We could wake up and find out that Washington DC has been nuked. Iran is allied with Russia and China. Iran has threatened to take out the Saudi oil facilities in case of war. It could get pretty ugly in just the next few months.


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## BillS (May 30, 2011)

sailaway said:


> *The Bible says the best investment you can make is in your own business*.


That's a new one on me. I just finished reading the Bible for the second time in two years. You can make the case that the Bible teaches diversification when it comes to investments:

(Eccl 11:2 NIV) Give portions to seven, yes to eight, for you do not know what disaster may come upon the land.


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## Claymore5150 (Nov 17, 2011)

We do invest in Roth 401k because the company I work for matches to a certain percentage. 
It'd be kinda crazy NOT to if your company matches a percentage of the investment. I think it boils down to about $15/wk that I personally put in, they match it, so I invest $30 a week when it's all said and done.

Investments ARE somewhat risky sometimes. Mine did NOT perform worth a FLIP in 2011...essentially it lost money. I'm in a high risk, global economy fund, big risk can reward big returns OR losses. It's very volatile, but I knew that going into it.

I consider it prepping for the "best case" scenario, which is, we prepare for whatever may come our way....best case is nothing at all and life goes on as normal. 

That's just the way I look at it. We save in other ways, as well. Not good to keep all the eggs in one basket.


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## sailaway (Mar 12, 2009)

BillS said:


> That's a new one on me. I just finished reading the Bible for the second time in two years. You can make the case that the Bible teaches diversification when it comes to investments:
> 
> (Eccl 11:2 NIV) Give portions to seven, yes to eight, for you do not know what disaster may come upon the land.


I've read the good book thru 7 or 8 times but am not a thumper, can't recite verses. It is referencing not only your money, but also your time. I do enjoy tithing, been doing it most of my life except when married, x said charity began at home. gave every thing xtra to crack head son and lazy daughter.  They didn't appreciate any of it. Economically we went down the toilet. Now that we've split I started tithing again not on my net income, but on my gross because I enjoy gross rewards. Boy are the floodgates of heaven opening on me again. I will not get involved in religious debate here but do enjoy what the good Lord does for me!


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## Tweto (Nov 26, 2011)

Back to the main point of the thread.

Would I Invest in a 401K or an IRA knowing what I know now. *NO!*

I retired in 2001 with a service pention and a 401K.

I put money into a 401K every month and when I received raises my contribution to my 401K increased. Now this is kind of freaky but if I had bought 1 ounce gold every month for 30 years I would have had $600,000 in gold and it would not be taxed like my 401K will be when I start to draw it down. I checked my first contribution amount and it was very close to an ounce of gold and again when I retired in 2001 my contribution amount was very close to an ounce of gold.

The only advantage for the 401K was the income tax decrease.

Food for thought.


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## interacting (Aug 24, 2011)

Today I would not invest in a 401(k) for fear of too much government control of it and too much market manipulation as well. Here is a link to a video by CBS interviewing people who lost big time by not staying on top of their 401(k)'s. Many think that a 401(k), is a "set it and forget it" account, but this video link shows they lost alot by assuming their account custodians were not watching out for them.


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## prairie (Jun 11, 2011)

forluvofsmoke said:


> Any thoughts or advice for someone thinking about going this route (401K/IRA), or someone wanting to pull-out and put their money to work on more tangible forms of assets, such as long-term preparedness?


Not only would I not contribute to a 401K/IRA but we took ours out to put in hard assets. Just my two cents but I think land, PMs, and preps are the way to go in this economic climate.


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## NorCalSurvivalist (Mar 26, 2012)

I'm struggling with his one quite a bit, so I'd like to put in my thoughts and see what you all think. 

I have a 401k through work that I pay into what my employer will match. Since this is pre-tax and my boss is keeping up with me it doesn't make sense not to do this. I don't know the exact equation or whatever but the amount out of my check every payday isn't noticeable at his point. 

I have property paid for, no debt and a pretty good amount of preps at this point. My plan is to spend the next 25 years (I'm almost 40) building my retirement house on my property and setting things up there as I have money for it. I will not borrow money for this project. 

I'm not a "the sky is falling" type and don't feel a huge rush to prep, since I'm fairly well set up now. 

So, for me and all the others out there like me, why not invest in a mild 401k?


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## BillS (May 30, 2011)

NorCalSurvivalist said:


> I'm struggling with his one quite a bit, so I'd like to put in my thoughts and see what you all think.
> 
> I have a 401k through work that I pay into what my employer will match. Since this is pre-tax and my boss is keeping up with me it doesn't make sense not to do this. I don't know the exact equation or whatever but the amount out of my check every payday isn't noticeable at his point.
> 
> ...


It all depends on your world view. To me, even a small 401k seems like a waste of money if it's being put into the stock market. If you could use it to buy gold that would be great.


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## ZoomZoom (Dec 18, 2009)

If your employer is doing matching contributions, I'd do that too. What I would do is look at the fund options you have available to determine which is "safest" if you're looking for preservation.


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## Bushwhacker733 (Jan 17, 2011)

I thought I was being responsible by investing years ago in a Pioneer mutual fund ($50/Month) and later when my agency offered a matching funds deal ($40 gets ya $20/Month) like some have mentioned here, I gave the max allowed. Both have lost serious money since about 2008 and I'm hoping that it will eventually bounce back; at which time I will cash them out so fast you'll hear the atoms split at the cash register! I really wish I'd invested in Gold starting back when it was $300 an ounce but I was broke then too and married wiff "chilren" so that really wasn't an option. Real Estate in the sticks was my best overall investment.


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## mojo4 (Feb 19, 2012)

Personally I'm a big fan of having complete control over my money. There are too many shenanigans that can be pulled with 401k's that would wipe them out before you can pull out a cent. Gold, silver and land are all real and can't be manipulated or vanish like a fart in the wind!! And just because your not in wall street nonsense doesn't mean its not an investment. Too many people try to act like buying these is like an old woman burying money in coffee cans in the back yard. Investing in real things and not silly ideas (facebook??) Has a far lower risk but the chance for return is just as good or better. And seriously, how the hell does anyone think facebook is worth billions?? Gimme a factory that makes real products instead any day of the week.


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