quote:
I halfway believe the government is going to raid these accounts in the next decade or so anyway, and I more than halfway believe that the current highs are built on a house of cards.

So because you halfway believe that the government will raid the accounts at some point in the future, you are going to willingly give them a third of it now.

And you said that with a straight face thinking you are making a well thought out move.

Seriously, I think you need to step back, and take a deep breath, and consider the implications and ramifications of your actions.

Even assuming your paranoia is completely valid, you are not having a reasonable response to it.

You would be better off ceasing your retirement contributions to pay off your debt.

Not saying that's what you should do, but it would be a damn smarter move than what you are considering.

This post was edited on 4/10/13 at 1:51 am

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Posted by Siderophore

Member since Nov 2010

3338 posts

Posted on 4/10/13 at 1:49 am to Anfield Road

quote:
Correct me if I'm wrong, but technically, isn't he losing only 10% of his money due to the early withdrawal penalty. The money he's taking out right now is still going to be taxed when he withdraws during retirement (could be more/could be less depending on future tax rates). Of course, he'll lose out on possible returns, but technically he'll only lose 10% via extra taxes.

The compounded returns is not something to scoff at.

It's a huge difference in opportunity cost.

But just looking at the now

-The withdrawn money shows as income this year, problably increasing his tax bracket higher than normal, and almost certainly higher than it would be in retirement

-100% of that money is taxed at that maximal rate + 10%

If you pulled enough in retirement to be in the 25% tax bracket, you aren't paying 25% in taxes. In reality your effective tax rate is more like 15%. If he pulls it in a lump sum now, he is probably looking at paying 35% or higher on it. So clearly not the same...

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Posted by OnTheBrink