Thread: Anyone know anything about 401K's??

With lunatic pelosi and her dunces looking to give away more money again, I keep hearing about them changing our 401Ks.

Again, THEY will not touch my money and I will pull it out. Does anyone know anything about this and how we handle removing our money if they pass any ridiculous laws to take away our 401 earnings??

Thanks in advance!!!

Originally Posted by alisab

With lunatic pelosi and her dunces looking to give away more money again, I keep hearing about them changing our 401Ks.

Again, THEY will not touch my money and I will pull it out. Does anyone know anything about this and how we handle removing our money if they pass any ridiculous laws to take away our 401 earnings??

Thanks in advance!!!

If you take your money out before age 59 1/2, you will have to pay income taxes on ALL OF IT, plus a 10% early withdraw penalty. Unless you take all the money and move to another country, then they won't get any of it.

Originally Posted by Bowman

Originally Posted by alisab

With lunatic pelosi and her dunces looking to give away more money again, I keep hearing about them changing our 401Ks.

Again, THEY will not touch my money and I will pull it out. Does anyone know anything about this and how we handle removing our money if they pass any ridiculous laws to take away our 401 earnings??

Thanks in advance!!!

If you take your money out before age 59 1/2, you will have to pay income taxes on ALL OF IT, plus a 10% early withdraw penalty. Unless you take all the money and move to another country, then they won't get any of it.

I thought of doing this too (tho we don't have much money left after the bailout). They really have us by the balls don't they??

Yeah my aunt took a big hit on her ritrement 401k. My uncle is still good. It's a ggod thing they paid their house off early.

I think you're referring to the Dem plan to remove the tax incentives for 401k accounts, so they are no longer tax free going in or taking funds out. Probably another way of saying "redistribute." I am fairly certain this would never pass, there would be too big an uproar from the public. It would be a great way for the Dems to lose power in the next election.

There is a plan out there that would be a government run 401K plan. They would hold the money for you and guarantee you a rate of 3%. They are trying to use the current stock market crash to lure people into supporting this concept. I don't think it will happen but then again....I never thought Obama would be elected.

Government using the same slight of hand shellgame the central bank uses. More smoke and mirrors from big brother.

Originally Posted by alisab

With lunatic pelosi and her dunces looking to give away more money again, I keep hearing about them changing our 401Ks.

Again, THEY will not touch my money and I will pull it out. Does anyone know anything about this and how we handle removing our money if they pass any ridiculous laws to take away our 401 earnings??

Thanks in advance!!!

I can help you with this one. You can view the IRS pub 17 online at irs.gov for verification and/or more information.

401(k) accounts are fully taxable when distributions are made (when you withdraw all or part of your money).

If you are not of retirement age, which is generally accepted as age 59 1/2 but could be different according to the terms of your particular 401(k) agreement, then you will be assessed a 10% penalty in addition to your regular tax rate when you file your tax return.

There are exceptions to the penalty rules, such as a rollover, first-time homebuyer, disability, etc.

You can rollover your pension funds into an IRA through a credit union, rather than a bank, which would probably be more beneficial than simply pulling out the money, paying the tax and penalty, and letting it sit somewhere that won't earn any interest.

Some states will tax the pension if the IRS charges that penalty. (For instance, in PA, 401(k) distributions are not taxable unless it's an early withdrawal, in which case it becomes taxable at the state rate).

The 'plan' for these pension accounts is to stop letting them be tax free contributions now, which will make them non-taxable when distributions are made, presumably at retirement.

It's a BAD idea, IMHO, because it's set up as non-taxable now to ensure that retired persons will still have taxable income later on, thereby still contributing to the treasury, albeit at a lower tax percentage.
Taxing these contributions now will prevent the taxpayer from paying into the treasury years down the road. They need to think ahead with this one.

So, unless you qualify for one of the exceptions or rollover the funds directly into another retirement fund, you will have to pay tax on it plus penalty.

Thanks Seaturtle for the valuable information. I just want to stay on top of this. I REFUSE to let the government handle my personal retirement account. They will destroy it like everything else they touch.

Just for grins, I got out my business calculator and ran some numbers on this. To make it simple, I assumed a person 45 years old or younger with a current 401K that was worth $142,000 before the financial crisis hit us. Then I tried to estimate what that 401K would be worth in 20 years if it were withdrawn, penalties paid, and income taxes paid vs. leaving it in the government hands for 20 years. I also assumed the government was going to mandate a 5% additional contribution by ALL workers, so I did not factor in any additional payments into either fund.

The results were quite revealing. Even if the account was down 30% at the time of withdrawl, 10% penalty paid, and 25% income tax paid, there would still be $67,500, approximately, left in the account. Placed in indexed mutual funds for 20 years, that sum would equal $315,000 (aprox) at 8% return, and $454,000 at 10%. These are pretty modest averages. Under the government plan, you would get your original $142,000 invested in govt bonds, and earn 3%. It was unclear whether that was fixed, or was in addition to inflation. At a fixed rate of 3%, the 401k would amount to $256,000 in 20 years. Assuming inflation of 3%, the interest rate could be 6%, and the 401K would be worth $455,000.

Granted, taxes would be due on captial gains and dividends in a private account, and I did not factor those in. However, to me it is a no brainer if one is 20 years or more away from retirement because the odds are a private 401k will be worth more than the government plan. Even if both plans come out about the same, a private plan will be your money in your name, and you can leave 100% of it to your heirs. Under the government plan, my understanding is that there are no individual bond certificates with the owners name on it. All the money will be plopped into the general fund, with all the so-called security of the Social Security Lock Box. Which means the probability of you being able to access 'your' 401K in 20 years is linked with the probability of Social Security not being bankrupt in 20 years.. And the Democrats think putting Social Security deposits in the stock market is a big risk.

I urge you to run your own estimates as to what a plan withdrawl would do to you before making any major decisions. With regard to risk assessment, compare the track record of the stock market since 1928 with track record of the US Government.