401K-stocks to PM's~tax?

gsa1fan

I'm looking to cash some stocks from 401K & personal. All $ will go into PM's.

Would it be better to do before 2010 or after?

Starting out 2010 unemployed. Full years salary for 2009.

Would there be a tax advantage in either year?

secondrepublic

401(k) withdrawals are taxed at ordinary income tax rates. Your income will be lower in 2010 since you're unemployed, therefore tax rate will be lower on money withdrawn from 401(k) in 2010.

However, if you're less than 59 1/2 yrs old, you'll be hit with a 10% withdrawal penalty in addition to the ordinary income tax.

For stocks in a personal account (not in a retirement plan) I believe you pay capital gains tax rates. Those depend on how long you held the stock - i.e., is it short or long term capital gains.

But - if you're going to be unemployed - don't you want some cash as a cushion?

gsa1fan

Both are small accounts. I know I'll be hammered on the 401K withdrawl.

jmski52

What second republic said is correct. You will pay a 10% penalty, and you will pay tax on any gains. That rate will be your personal marginal income tax rate for the year that the money is withdrawn from your 401K, whatever that rate may be.

The Bush tax cuts expire in 2010, meaning that this year's rates will probably be lowest. When I took my money out of my retirement accounts, my net proceeds were a little over half of what was in the account.

Everyone has their reasons for taking money out or leaving it in a tax-deferred retirement account. It's always a gamble what the markets might do and what Congress might do. In my view, it's all "vaporware" until you have it in your grubby little paws as physical metal and is 100% accessible with no intermediaries taking their cut and standing between me and my assets.

For me, it's about security - which is, as I recall - the whole reason for setting up a retirement account in the first place. It's a sad commentary when people are taking money out of their retirement accounts in order to keep it safe.

gsa1fan

jmski52, you & I see eye to eye on the issue.

I still will have my biggest 401K account for now. I just want to cash the smaller 2.

I'm afraid the tax penalty's will grow as more people choose & are forced to do this.

I see these bank failures. When I read depositors will get 40cents on dollar from FDIC.
Reminds me of seeing my 401K accounts reduced to 1/2 twice!

I can't imagine going to the bank doors locked and not knowing when or if I can get my $$ out!

jmski52

I can't imagine going to the bank doors locked and not knowing when or if I can get my $$ out!

I can't imagine that either. Maybe that's part of the problem - nobody can believe that all of these bailouts and spending programs will ever really touch them personally.

I keep in my mind the news conference when Henry Paulson was standing before the cameras, telling us how the whole world would come crashing down instantly if he didn't get an immediate $800 Billion slush fund for his buddies at the investment banks.

"What he really meant was: Me and My Friends have A PROBLEM, and You and Your Friends are gonna pay for it."

That is not a good sign, and that's what drives my investment stance.

yellowkid

Leave your money in the 401k. amass some PM outside of that when you can afford it. These are challenging economic times but I don't think we need to go to the mattress's yet.

PS This is a theme we seem to keep going back to here. I am of the opinion that when it gets so bad that your bank has no money, your PM isn't going to be a big help, try to find some middle ground here.

gsa1fan

So the next crash 401K can go to 1/2 or less again

You REALLY think this stock bubble will hold?

roadrunner

However, if you're less than 59 1/2 yrs old, you'll be hit with a 10% withdrawal penalty in addition to the ordinary income tax.

There may be exceptions to that rule.

When I was offered a severance package last year at the age of 54-1/2 T. Rowe Price mentioned that if I were to wait until 55 that I could withdraw the 401K w/o the extra 10% penalty. Since that didn't happen I never had the chance to verify if what they said was true. If it applies you should consult your own advisor/expert. And certainly starting off 2010 with low income would make it an advantageous year to start reducing your 401K.

roadrunner

gsa1fan

Yes, I took the "severance package" 7 years away from 55 though.

yellowkid

<< <i>So the next crash 401K can go to 1/2 or less again

You REALLY think this stock bubble will hold? >>


Even after coming back from their lows, my stocks are still down 30-40% from their highs. Is this a "bubble." You would have this guy take investments that are way off their highs to buy another investment that is at an historical high? Does the term "whipsawed" mean anything to you? Probably not.

Sorry, at the beginning of this post I didn't realize I was talking to you. Your stocks should have regained a good deal of the loss you experienced last year, if they haven't that is something you should be looking into, are you diversified, overseas? To take that money now, particularlyl with that huge penalty, means that you have "locked in" a sizeable loss, to buy something that is at an all time high, not a good move. Why not leave it alone and instead of adding to the 401k, put your future contributions into PM's. Another thing, how much are we talking here, do you have a 25k 401 or a 250k 401K? If it's toward the low end, it's not as important what you do. If you are firmly convinced that the sky is falling, what about hedging your bet and only taking some of the 401 k money? Something you have to keep in mind when you are in this forum, for better or worse, advice that you get can be very "polarized". I don't have any ax to grind , and it's your money, what you do or don't do with it means nothing to me and my life, I just don't want to see someone make a very huge investment leap without giving it a lot of thought.

yellowkid

<< <i>However, if you're less than 59 1/2 yrs old, you'll be hit with a 10% withdrawal penalty in addition to the ordinary income tax.

There may be exceptions to that rule.

When I was offered a severance package last year at the age of 54-1/2 T. Rowe Price mentioned that if I were to wait until 55 that I could withdraw the 401K w/o the extra 10% penalty. Since that didn't happen I never had the chance to verify if what they said was true. If it applies you should consult your own advisor/expert. And certainly starting off 2010 with low income would make it an advantageous year to start reducing your 401K.

roadrunner >>



I believe the rule, for most 401ks, is if you retire IN the year you turn 55, then you can take your money with no penalty. The first "advisor" I talked to didn't know this, I quickly moved on.

gsa1fan

If you assume gold is through you have a point. At $1,225 oz spot or $400oz spot I'll still have a oz of gold in my hands.

Now if I had $500,000 to trade every day I'd have no fear of the stock market.
Folks getting rich off my $$ and others while I'm loosing $$ is my point.

jmski52

yellowkid, there once was a time when I thought the way you do. I have an MBA in finance, and I do know all about diversification of risk.

That was then. Now, I feel that the government wants nothing more than to keep people locked into their stock market investments in order to keep raking off the top.

Problem is, when you have a group in power that demonizes capitalism and pushes for wealth redistribution, it's simply not healthy for business, at all.

What irks me most is that the redistribution is planned for people who have absolutely no intention of ever earning it.

coynclecter

If you want to convert your 401 to PMs and keep them in a retirement account then you would pay no tax or penalty. Have them distribute it to Sterling trust and then purchase the items and have them sent for storage to Sterling.

yellowkid

<< <i>yellowkid, there once was a time when I thought the way you do. I have an MBA in finance, and I do know all about diversification of risk.

That was then. Now, I feel that the government wants nothing more than to keep people locked into their stock market investments in order to keep raking off the top.

Problem is, when you have a group in power that demonizes capitalism and pushes for wealth redistribution, it's simply not healthy for business, at all.

What irks me most is that the redistribution is planned for people who have absolutely no intention of ever earning it. >>




I have to say that I am not as entrenched in my investing habits as I once was, I do hold PM funds and I have reduced the stock portion of my portfolio, but what do you do when you are 61 and living on your portfolio, cash it in, go to PM's and hope they continue to rise? As I mentioned to Tim, that could put you in a great position to just get whipsawed.

jmski52

I have to say that I am not as entrenched in my investing habits as I once was, I do hold PM funds and I have reduced the stock portion of my portfolio, but what do you do when you are 61 and living on your portfolio, cash it in, go to PM's and hope they continue to rise? As I mentioned to Tim, that could put you in a great position to just get whipsawed.

I will defer to your age and experience, since I am but a mere 59.

I'm not hoping that my pms will continue to rise, but I expect that they will, whether I want them to or not. As to being whipsawed, I take responsibility for my decisions, and I'd rather have pms at any price since I perceive price to be somewhat illusionary, transitory, or however you want to say it.

Have I mentioned that I don't trust the Fed, the Congress or the Central Bankers? If not - I don't trust the Fed, the Congress or the Central Bankers! I've been transitioning into pms since '98. Now that my transition is complete, I must state unequivocably that I feel more secure with pms than I would in stocks.

Maybe when I am 61, I will feel differently.

yellowkid

Certainly if I had been moving in to PM's when they were at much lower prices I would feel secure also, but they didn't, and even with the big drop in stock prices, I am still about $150k ahead of where I was when I retired seven years ago, so a combination of stocks and bonds, with a higher emphasis on overseas than is usually recommended( most stock advisors still haven't caught up with the fact that it is a global economy now) has still been good to me, not as good as if I had bought gold at 4-500 dollars, but still good. As for the government, I stopped trusting them when they told me we had to stop the Reds in Vietnam before they started landing in Long Beach!

fishcooker

I would check the withdrawal rules. Maybe congress passed some special rule loophole for unemployed people. After all, the IRS declared that people who bet wrong when exercising stock options would NOT owe their taxes.

BBN

<< <i>

What irks me most is that the redistribution is planned for people who have absolutely no intention of ever earning it. >>



nor do they have the ambition, intention and know-how to create wealth or start a business with it.

guitarwes

Great conversation guys. I agree with both Yellowkid and jmski52 on their seperate points (good points by the way), but it's all a timing issue. Could've, Should've, Would've rears it's ugly head once again.

I would leave my stuff in growth stock mutual funds and invest and new monies in PM's. BUT, I'm only 32 and have a few years to gamble with.

gsa1fan

Pay the house off first. Best move I ever made. Peace of mind

yellowkid

<< <i>yellowkid, there once was a time when I thought the way you do. I have an MBA in finance, and I do know all about diversification of risk.

That was then. Now, I feel that the government wants nothing more than to keep people locked into their stock market investments in order to keep raking off the top.

Problem is, when you have a group in power that demonizes capitalism and pushes for wealth redistribution, it's simply not healthy for business, at all.

What irks me most is that the redistribution is planned for people who have absolutely no intention of ever earning it. >>



I always enjoy reading your posts, you obviously keep well informed and you know how to have a discussion about what is going on without resorting to the finger pointing and name calling which seems to be so common here. We don't all have to agree here, what good would this be if we did, it would just be a mutual admiration society. I appreciate those who recognize that others have a right to expressing their ideas, that is perhaps our countrys greatest strength, we should always cherish and encourage it.

KUCH

<< <i>

<< <i>yellowkid, there once was a time when I thought the way you do. I have an MBA in finance, and I do know all about diversification of risk.

That was then. Now, I feel that the government wants nothing more than to keep people locked into their stock market investments in order to keep raking off the top.

Problem is, when you have a group in power that demonizes capitalism and pushes for wealth redistribution, it's simply not healthy for business, at all.

What irks me most is that the redistribution is planned for people who have absolutely no intention of ever earning it. >>



I always enjoy reading your posts, you obviously keep well informed and you know how to have a discussion about what is going on without resorting to the finger pointing and name calling which seems to be so common here. We don't all have to agree here, what good would this be if we did, it would just be a mutual admiration society. I appreciate those who recognize that others have a right to expressing their ideas, that is perhaps our countrys greatest strength, we should always cherish and encourage it. >>



Ok, from the heart it's not name calling just TRUTHFULNESS, healthcare = corruption, bribery, killing of unborn children, death panels, higher taxes, bigger debt, government intrusion. OMG I feel better getting that off my chest. Yes we do have the right freedom of speech. I'll go buy alittle silver tomorrow and everything will be better.

pf70collector

I put 2K in Fidelity's Magellan Fund 8 years ago. Today it was worth $1900. I just transferred to Fidelity's Gold Fund. I think there is over 21 Billion invested in the fund. I just don't understand how so much money can be invested in such a poor performing fund. I admit to being one of the sheepie on this one.

buffalonut

I would consider keeping your 401K intact and rolling it into an IRA with a company that would give you access to PM stocks or mutual funds PMPIX and FSAGX come to mind. The HUI and XAU are attractively priced considering how far gold has come and will likely go.


EBAY ITEMS

yellowkid

<< <i>I put 2K in Fidelity's Magellan Fund 8 years ago. Today it was worth $1900. I just transferred to Fidelity's Gold Fund. I think there is over 21 Billion invested in the fund. I just don't understand how so much money can be invested in such a poor performing fund. I admit to being one of the sheepie on this one. >>


I don't know that the Magellan Fund has even outperfomed the market since it's heyday, when Peter Lynch ran it. Because it was so good for so long it developed a certain cachet which drew people to it, even after it's return to more realistic returns.

secondrepublic

<< <i>I would consider keeping your 401K intact and rolling it into an IRA with a company that would give you access to PM stocks or mutual funds PMPIX and FSAGX come to mind. >>



A lot of 401(k) plans, including mine, now offer a Personal Choice Retirement Account feature which allows you to buy/sell individual stocks, ETFs, etc. You have to actively enroll in it, but once you do, you can trade pretty much everything just like you would through E-Trade or other similar account. A lot of people don't know about it and assume they're stuck with their plan's dozen or so mutual funds, but that's not the case.

buffalonut

<< <i>

<< <i>I would consider keeping your 401K intact and rolling it into an IRA with a company that would give you access to PM stocks or mutual funds PMPIX and FSAGX come to mind. >>



A lot of 401(k) plans, including mine, now offer a Personal Choice Retirement Account feature which allows you to buy/sell individual stocks, ETFs, etc. You have to actively enroll in it, but once you do, you can trade pretty much everything just like you would through E-Trade or other similar account. A lot of people don't know about it and assume they're stuck with their plan's dozen or so mutual funds, but that's not the case. >>



401K has a feature called Brokerage Link that allows access to about 4,000 different mutual funds. No ETFs or individual stocks though.

roadrunner

would consider keeping your 401K intact and rolling it into an IRA with a company that would give you access to PM stocks or mutual funds PMPIX and FSAGX come to mind. The HUI and XAU are attractively priced considering how far gold has come and will likely go.

That's basically what I did with my 401K a year ago....transferred into a brokerage IRA where I have freedom to pick most anything I want in the leading markets. I feel that I need to be exposed to gold equities and this is one way to trade without generating taxes in the short term. Another gold fund I'd recommend to someone looking in that direction is USAGX. I think an important feature of the gold fund you picked is the financial strength, risk, and integrity of the company behind it.

My 401K did add the option of a trade link account in 2004 but that was a few years too late for me. It allowed one to diversify 50% of their holdings away from the standard cookie-cutter brokerage company choices.

roadrunner

yellowkid

A Fidelity brokerage account would give you a wide variety of gold and PM funds to choose from.

jmski52

I had a brokerage account set up for my IRA at TRowe Price, and I could trade virtually any stock, mutual fund or ETF for $19.99 per trade. Not as cheap as a discount broker, but not too bad.

If you gotta trade in paper, doing it inside of an IRA account isn't a bad way to go. All that matters for tax purposes is the amount you put in, and the total that you end up with when you withdraw it.

moonshine

"when" it happens, you will not be expecting it. There won't be an announcement ....

"ok folks, you have one month (week/day) left to prepare and get your money out -- everyone better hurry and do it now".

not going to happen like that.

jmski52

"when" it happens, you will not be expecting it. There won't be an announcement ....

Maybe there will. I still can't get that news conference when Hank Paulson stood in front of the cameras, stuttering about how the world will end if he didn't get a quick $800 Billion to fix the whole banking system, blah, blah, blah...

You're probably right about it happening when we least expect it, though. We may not even be aware of the trigger that could cause a black swan meltdown prior to its happening, because so many of the financial world's key ingredients are kept away from public scrutiny or obfuscated with bad data.

Or, we might be watching something like this on tv one morning...

"Well, ah - we've decided that in order to preserve our financial stability, we're only gonna use special debit cards for all transactions in the US. This measure is being taken to prevent fraud against seniors and/or to prevent identity theft. Your dollars will all be kept in a special account that only you and the US Treasury will have access to. We'll only charge your account a surtax if we think you aren't spending enough money on the economy or your omnibus health care account. We'll provide more details as soon as we figure out how to keep home-grown financial terrorists from tapping into the system so that we can locate that $78 Trillion that has gone missing from the Homeland Defense Program. That is all for now. Thank you for your cooperation."