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Message
Should I continue to max out my 401K? I'm worried about it being raided one day
Posted on 8/24/14 at 11:59 am
Posted on 8/24/14 at 11:59 am
I am pretty convinced that at some point in my career (I'm 33) the feds (or more specifically some Elizabeth Warren type progressive Democrat President) will decide to lead a charge that anybody with over (let's say) $5 million in their 401k has been overly privileged and should be taxed on this after all (or have it outright raided).
It just seems that with soaring deficits, debt, etc. it's the most logical (and politically acceptable) thing to do - to raid or tax the tax free retirement funds of multi-millionaires who have presumably (from the amount in their 401k) had long and lucrative careers (and just to clarify, I'm obviously not a multimillionaire right now - not even close. But if I continued to contribute over 10% for the rest of my career I'd have around $5MM assuming continued 8% growth YOY).
I assume that many will say I'm being overly concerned about this, but I've already bought an investment apartment to rent out and cut my contribution from 12% to 7% as an indirect result. I'd like to do this again every 2 years just to have a more diversified portfolio that isn't too 401k-heavy.
It just seems that with soaring deficits, debt, etc. it's the most logical (and politically acceptable) thing to do - to raid or tax the tax free retirement funds of multi-millionaires who have presumably (from the amount in their 401k) had long and lucrative careers (and just to clarify, I'm obviously not a multimillionaire right now - not even close. But if I continued to contribute over 10% for the rest of my career I'd have around $5MM assuming continued 8% growth YOY).
I assume that many will say I'm being overly concerned about this, but I've already bought an investment apartment to rent out and cut my contribution from 12% to 7% as an indirect result. I'd like to do this again every 2 years just to have a more diversified portfolio that isn't too 401k-heavy.
This post was edited on 8/24/14 at 12:06 pm
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Posted on 8/24/14 at 12:28 pm to SirWinston
If that happens, I'm moving to Costa Rica.
I think you're being overly concerned. But I don't trust ultra liberal politicians, either.
I think you're being overly concerned. But I don't trust ultra liberal politicians, either.
Posted on 8/24/14 at 12:33 pm to SirWinston
Dude, think this through.
If the government can get your 401k, they can get your rental property. They can seize it, or get the money directly from the tenants. They can get the income from that via taxes, or pull it out of your bank account. If you think you are going to hide it in your mattress, then they will come through the front door and take it.
So unless you think you're going to shoot all those MFers I suggest you max out your 401k. In any event, your money is probably not going to be worth all that much if/when they start doing that sort of thing, because we'd be in such a economic shitter we'd probably be better off burning it for warmth.
Its like the people who buy gold thinking the economy is going to collapse, but don't have any food or weapons. I say, "OK dude, I'm gonna keep getting my yearly return, because we're both fricked either way if that worst case scenario plays out, and if it doesn't, your retirement is going to suck, if you get one."
If the government can get your 401k, they can get your rental property. They can seize it, or get the money directly from the tenants. They can get the income from that via taxes, or pull it out of your bank account. If you think you are going to hide it in your mattress, then they will come through the front door and take it.
So unless you think you're going to shoot all those MFers I suggest you max out your 401k. In any event, your money is probably not going to be worth all that much if/when they start doing that sort of thing, because we'd be in such a economic shitter we'd probably be better off burning it for warmth.
Its like the people who buy gold thinking the economy is going to collapse, but don't have any food or weapons. I say, "OK dude, I'm gonna keep getting my yearly return, because we're both fricked either way if that worst case scenario plays out, and if it doesn't, your retirement is going to suck, if you get one."
This post was edited on 8/24/14 at 12:37 pm
Posted on 8/24/14 at 1:15 pm to Teddy Ruxpin
quote:I somewhat disagree with this. Politicians still have to get elected and these untaxed accounts would be much easier for politicians to rally against and get certain voter blocks behind them.
If the government can get your 401k, they can get your rental property.
I am not saying I think it will happen, but if it did then 401k would get taken way before peoples physical property.
Posted on 8/24/14 at 1:58 pm to Teddy Ruxpin
I see your point but the first responder to you addressed my thought process - an untaxed 401K (especially over $3 Million / $5 Million / $7 Million, etc) is an easier sell politically. It wasn't taxed in the first place, if you accumulate that much in your 401K you were obviously enjoying a great career in the first place, etc. etc.
Didn't Greece recently raid the accounts of citizens with over $5 Million Euros in them or something? That's what planted the seed. Similar to our inheritance tax as well - I could see the figure arbitrarily being set that "anything over $3million in 401K accounts will be taxed now to help offset the Social Security shortage".
Didn't Greece recently raid the accounts of citizens with over $5 Million Euros in them or something? That's what planted the seed. Similar to our inheritance tax as well - I could see the figure arbitrarily being set that "anything over $3million in 401K accounts will be taxed now to help offset the Social Security shortage".
This post was edited on 8/24/14 at 2:00 pm
Posted on 8/24/14 at 2:53 pm to eelsuee
The point isn't which is more likely. The point is how futile it is to forgo such a tremendous benefit for some murky future that most likely would not occur in such a way that would make your contributions to a 401k effectively pointless.
I don't have time to be scared about such eventualities.
And I suggest that even if they started taxing it, the benefit even post whatever tax would still probably be in favor of contributing, and the cost of not contributing thinking this may happen is too high if it doesn't occur.
While the government is greedy, they don't want to tax out the incentive to contribute, as they won't be able to go back to the well.
I don't have time to be scared about such eventualities.
quote:
anything over $3million in 401K accounts will be taxed now to help offset the Social Security shortage".
And I suggest that even if they started taxing it, the benefit even post whatever tax would still probably be in favor of contributing, and the cost of not contributing thinking this may happen is too high if it doesn't occur.
While the government is greedy, they don't want to tax out the incentive to contribute, as they won't be able to go back to the well.
This post was edited on 8/24/14 at 2:59 pm
Posted on 8/24/14 at 3:03 pm to Teddy Ruxpin
Well I'm not ending my contributions, I'm just scaling them back from 12% to 7% to help facilitate my diversification plan and asking other people's thoughts on that.
I agree with you that my conjecture is highly hypothetical. I was just curious if anybody else agrees that politically this might be one of the first benefits that goes.
I mean, government employees were promised pensions and those are raided or scaled back for political reasons. I feel like 401k's are the private sector's version of the pension in some respects. It doesn't have the political protection that other investments (real estate, gold, livestock) would have.
I agree with you that my conjecture is highly hypothetical. I was just curious if anybody else agrees that politically this might be one of the first benefits that goes.
I mean, government employees were promised pensions and those are raided or scaled back for political reasons. I feel like 401k's are the private sector's version of the pension in some respects. It doesn't have the political protection that other investments (real estate, gold, livestock) would have.
This post was edited on 8/24/14 at 3:05 pm
Posted on 8/24/14 at 3:12 pm to SirWinston
I don't think anyone is going to argue against having multiple sources of income. If it gives you piece of mind and happiness financially then who cares right?
This post was edited on 8/24/14 at 3:13 pm
Posted on 8/24/14 at 3:26 pm to SirWinston
You should take this to the poli board where your paranoia is shared.
Posted on 8/24/14 at 3:27 pm to SirWinston
I don't think there's a chance they will 'raid' your 501k, but there is a very good chance they will
* means test social security, as they do now to an extent by taxing it if your income is over some level...I think in the future you'll just not get social security if you have some level of income
* raise tax rates on higher incomes
either way though, I still think you're still better off maxing out your contributions and getting the tax deduction...though the investment in rental real estate will probably do better for you over the long term, even if the income is taxed as you have depreciation to shelter for some time
* means test social security, as they do now to an extent by taxing it if your income is over some level...I think in the future you'll just not get social security if you have some level of income
* raise tax rates on higher incomes
either way though, I still think you're still better off maxing out your contributions and getting the tax deduction...though the investment in rental real estate will probably do better for you over the long term, even if the income is taxed as you have depreciation to shelter for some time
Posted on 8/24/14 at 4:23 pm to Ole War Skule
No it was Cyprus you're referring to and it was all due to that country being a laundering point for Russian mobsters anyway. LINK
Posted on 8/24/14 at 8:59 pm to RadTiger
I'll take the Caymans or Switzerland for $500, Alex.
As to the OP, if Uncle Sam wants your money, he'll get it. In a socialist transition, every wealthy party is a target. Emigration might be your only real option.
As to the OP, if Uncle Sam wants your money, he'll get it. In a socialist transition, every wealthy party is a target. Emigration might be your only real option.
Posted on 8/24/14 at 10:34 pm to soccerfüt
quote:
Emigration
Still gets screwed by penalties or high tax rates if he depletes his 401K and leaves the country.
Posted on 8/24/14 at 10:35 pm to soccerfüt
Switzerland is really really expensive
Posted on 8/24/14 at 11:42 pm to LSUtoOmaha
The amount of paranoia on this board is ridiculous.
Posted on 8/25/14 at 12:02 am to cjared036
I'm not planning on emigrating, for the record. If there is an alarmist it would be the OP.
I'm reconciled to a government getting a share from me for the rest of my life. It might as well be here.
I'm reconciled to a government getting a share from me for the rest of my life. It might as well be here.
Posted on 8/25/14 at 8:29 am to SirWinston
THen diversify to a Roth or something that is done with money already taxed.
IMO, if they ever do something like you described, it will be on vehicles like 401's that weren't made with taxed money....
I think you might be over thinking, I think they would change the law first and grandfather plans like yours in to the old law.
IMO, if they ever do something like you described, it will be on vehicles like 401's that weren't made with taxed money....
I think you might be over thinking, I think they would change the law first and grandfather plans like yours in to the old law.
Posted on 8/25/14 at 9:06 am to SirWinston
I hate politicians as much as anyone on this board, but they will never get their hands on your money unless you let them through the electoral process. I know the direction you're going, I just don't see the general public putting up with that type of shite - especially the key donor demographic in the Democratic party: Wall Street.
Now that we have that out of the way, I guess it depends on your alternative investment options. Real Estate will depend on the location and the stability of the local economy, amongst other things.....
Now that we have that out of the way, I guess it depends on your alternative investment options. Real Estate will depend on the location and the stability of the local economy, amongst other things.....
Posted on 8/25/14 at 9:30 am to SirWinston
I don't think they'll raid it so much as I think they'll impose restrictions on it. So consider it an opportunity that you should exploit while you still can.
401k's are gaining in popularity, and with that comes an increased proportion of the population vested in that option, and that brings political support as time goes on.
401k's are gaining in popularity, and with that comes an increased proportion of the population vested in that option, and that brings political support as time goes on.
This post was edited on 8/25/14 at 9:33 am
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