re: Should I continue to max out my 401K? I'm worried about it being raided one day

quote:

---

Coming from an expert here, if the government ever raids your 401k or bank accounts, the balance in said accounts will no longer matter because the United States as a nation will no longer exist.

---

this. taxes will almost certainly rise, but the government will not begin confiscating your wealth under our current system of government. the collapse of our government is the only realistic scenario where this would happen. if that were the case, the only asset that would do you any good would be gold because if they take your accounts, they are going to take your land too. you have to decide just how realistic you think this is (not at all, imo). if you think there is a good chance, put your money where your mouth is and start buying gold instead of paper investments.

That's good advice - thanks

quote:

---

I would add that IMO if there is ever some kind of apocalyptic financial collapse, you'll do better off with batteries, gasoline, canned foods, guns as "currency" than you would with Gold. And certainly cash would be basically worthless so who the hell cares what you r got in your bank account or 401k.

While gold has historically been used as a form of currency and value, people often forget gold is merely a rock. Nothing more, nothing less...it's only valuable because we say/think it's valuable in many ways.

Much smaller example, but If a hurricane is coming, people aren't flooding the markets storing up on gold...pretty much 100% of people are heading to the grocery store or Walmart to stock up on stuff that actually has more important practical uses. And that stuff disappears fast in the face of adversity/chaos.

---

everything you say is true, but gold has been a currency since the 4th millenium BC (per wikipedia - i'm no historian). i don't see why this would change in the apocalypse scenario of the U.S. gov crashing. one reason for this is because it does not degrade, and it can be easily measured. all the other things you mention stocking up on half a shelf life and their value is more difficult to quanitfy. and while it's true that gold wouldn't do much for you after a hurricane, neither would a 401(k).

quote:

---

So unless you're a full out prepper, having gold hoarded up in such a scenario is well, stupid.

---

well hoarding gold is pretty stupid to begin with, even if a prepper.

But the goal of having a few gold coins is that you shove them up your bum and flee the country as a refugee. If done right, no one will know you have $10k up your bunghole.

Its worked for thousands of years, and it would work for us.

quote:

---

You should definitely contribute up to your employer's match. But beyond that, open up a brokerage account. Your 401k options are very limited for what funds you can invest in. You want diversity, and you can invest in lots of other things.

---

But, wouldn't you lose out on the protections from capital gains taxes and the deferment of income taxes that the 401k provides by doing this? For instance, if I invest $1000 in my 401k and you invest $1000 in your brokerage account, my investment is with pre-tax dollars so it costs me $1000, but the cost of that same investment for you is the cost of the investment, plus whatever percentage of taxes you've already paid on your income to leave you with $1000 in hand. Then, assume both of our investments are worth $1500 in 18 months. If you sell out of the brokerage account, aren't you on the hook for at least 15% of that $500 gain the following April while I can sell my investment and take all of my $500 gain and reinvest it?

I agree completely with you, though, on the breadth of investment options you have in the 401k being vastly smaller than you would have in a brokerage account.

I thought the typical order of investment to ensure you get the best tax benefits (and free money from your employer) with the money you have to invest is:

1) 401k up to employer match
2) Roth up to income allowment
3) Traditional IRA for the remainder of the $5500 Roth/IRA limit
4) 401k up to contribution limit
5) Brokerage/other investments.

Geniunely curious here.

quote:

---

ETA: my bad, IRA is pre tax dollars also. I assume you like the IRA over the 401K given increased choices for investing with the IRA?

---

Yeah, the order of my list assumed that the IRA contributions were deductible, so the investment options of the IRA made it more attractive than the 401k. So, I guess depending on personal circumstances and how they affect if the IRA contributions are deductible or not, I'd be willing to switch maxing the 401k and the traditional IRA.

I think the IRA still should come first. Even though you lose one of the two tax shelters an IRA provides if you can't deduct the contributions, the IRA still should provide the tax benefit of the gains not being taxable until withdrawn allowing you to reinvest them fully to build more wealth. A taxable brokerage account will report your gains and losses when you sell things, so you're on the hook for gains and losses in the tax year they occur in.

quote:

---

What if you are purely buy and hold for a long time in something like index ETF?

---

Hmm. I'd imagine that it would end up being advantageous to have it in the brokerage in that case. You'd pay long-term capital gains after 30-40 years instead of income tax at the end, but you've got to sit there and never sell it until it's retiring time. This is where my knowledge breaks down at this point. I've not analyzed that tactic, though I'm sure others far smarter than I have.

This kind of idiotic thinking keeps people poor. It's the thinking that had people gifting everything in 2012 because they thought Obama would let the estate tax exemption go back to 1m. But stupid people are what's need for arbitrage situations. Carry on.