This page has been archived and commenting is disabled.
Record Number Of Americans Using Retirement Funds As Source Of Immediate Cash
If our readers have been wondering where, in addition to the decision to never make mortgage payments again, do Americans get the money to buy a 2nd iPad (for that real 3D-effect of iTunes porn), preorder the iPhone 12.499, and bid up Amazon stock at 999x P/E, here is your answer: according to a new study by Fidelity, a record number of workers tapped their retirement funds and made hardship withdrawals from their accounts in the second quarter. In other words, just like the country they live in, Americans no longer give a rat's ass about the retirement years in a narrow sense, and the future in a broader one, and since real unemployment is about 20%, wage deflation is everywhere, even as Solitaire time is down to 0 (except for SEC employees), and nobody has any money left, the only logical recourse is to borrow from the self-funded pension fund. According to the Fidelity study, "Among the 11 million workers whose 401(k) plans are run by
Fidelity, 11 percent took out a loan from their plan during the
12 months ended June 30, the company said, up from 9 percent at
the same point a year earlier. By the end of the second quarter, plan participants with
loans outstanding against their 401(k) accounts had reached 22
percent versus 20 percent a year earlier." And if anyone is so deluded to think that these not so gracious retirees have any intention of ever paying these "loans" back, we have some AJ-rated CMBS to sell you at par prime. Which also means that suddenly Fidelity may find itself with worthless liens instead of cash, and should the market plunge again and the fund giant find itself in a need to satisfy billions in collateral calls, it is game over. But why worry: after all, it is not like investors have been steadily pulling cash out of stocks over the past 15 weeks.
More from Reuters:
During the quarter, 2.2 pct of Fidelity's active 401(k) participants took a hardship withdrawal, up from 2 percent a year earlier, and another peak, Fidelity said.
Often those withdrawals were used to prevent foreclosure on a home or pay college tuition.
"People have been looking to their 401(k) plans as a source of relief to help them meet financial hardships," said Beth McHugh, a Fidelity vice president who oversees the area. "For many individuals that is their primary savings vehicle."
Loans and withdrawals were highest among workers between 35 to 55 years old, Fidelity found, peak earnings years.
Fidelity, the Boston mutual fund giant, is also the country's largest administrator of retirement savings plans like 401(k)s, making its quarterly survey a closely watched barometer of saver behavior.
As more companies end traditional "defined benefit" plans like pensions, workers are relying more on "defined contribution" plans like 401(k)s to carry them through retirement.
To encourage savings, tax codes and other rules discourage early withdrawals. Distributions from 401(k) plans are taxed as ordinary income, and withdrawals by individuals younger than aged 59 1/2 may be subject to an early withdrawal penalty.
Balances in 401(k) plans, which tend to be held in mutual funds dominated by U.S. equities, slipped in the second quarter as major stock indexes tumbled more than 10 percent.
The average 401(k) balance as of June 30 was $61,800, up 15 percent from a year ago but down 7.6 percent from $66,900 as of March 31.
Fidelity found signs of continued thrift in the workforce. The average percentage of salary saved in a 401(k) held steady at 8 percent, similar to the rate in the first quarter, while 32 percent saved 10 percent or more of their pay.
And since the administration will most certainly do the expected and react wrongly to this development once again, we expect to see even greater penalties to pension fund redemptions, which will do nothing to decelerate this troubling trend (and quite likely do the opposite), but merely take even more money out of circulation, as the government's bloated machine keeps ever more capital to fund such massively value added activities as the SEC daily porn surfing habits.
»
- 20183 reads
- Printer-friendly version
- Send to friend
- advertisements -
Could be a flaw in your analysis somewhere. Especially if said sample participant has had his or her car reposessed
gotta be all those census workers...
One observation to add here...
I believe you will see fairly consistent/flat gasoline consumption levels throughout this depression, and here's why - this entire country is designed and built for automobile transit.
Try/desire as we might to take the bus or ride a bike, these options are truly unworkable for 95% of americans. Yes, one can get around on the bus system in most places, but the number of exchanges/stops one must endure to execute a true point-to-point commute from home-to-work-to-home again via the bus is completely unreasonable. And if one must also run errands and/or pick-up kids and/or get to a 2nd job... forget it.
As for bicycles, so long as our road/civil engineers insist that bicycles share the same lanes/surface as cars... forget it. Bicycle usage in this country will remain low due to the structural, irrefutable fact that bikes & cars on the same roads is unsafe and impractical.
I lived in Holland for six years and I never needed a car. I rode a bike/tram/train to do everything. Their road system keeps bike & car traffic separate 95% of the time, and that's the reason it works. When I came back to the States I was determined to continue to ride a bike daily... but two near-death experiences w/in the first week with idiotic american drivers put a swift end to that little experiment.
Suburbia must die before the transit/bicycle revolution can get any real traction. I believe the will & desire are there (esp. in the younger generation) but the infrastructure, bad habits, and policy will take decades to transition.
+ 10,000 ride a bike at your own risk with today's distracted, self-centered asshole drivers.
Bicycle usage in this country will remain low due to the structural, irrefutable fact that bikes & cars on the same roads is unsafe and impractical.
agree. defensive bike handling is the only way to stay alive.
basically i am so sick of humanity in america. i find very few people i want to engage conversation with or even eye exchange. i have more in common with these homeless people around here. they are the true café culture of the good old US of A. they know it.
If everyone's doing it they will later write their congressperson and beg for a 401(k) rule change when the bill is due so they don't have to pay back the money and/or penalties. We live in America so spending must continue by ANY means necessary regardless of future consequences (see today's ZH post on societal classification).
http://www.zerohedge.com/article/guest-post-good-ol-us-turning-classy
Your 401k clients will get bailed out tomorrow, just like yesterday's subprime borrower is getting bailed out today!
The future tax bill is not going to concern anyone, if they are hitting their 401k for rent and food - and it shouldn't.
If they need the money today just to get by they should go ahead as use it. Worry about settling up with the IRS when they have to. You can always arrange to have payments taken out of your paychecks - if you ever get another one.
I smell a small scale tax revolt unfolding...
Long over due, imo.
(Hey kids if you don't pay your taxes, you too may become U.S. Secretary of the Treasury. Or the chairman of the U.S. House Committee on Ways and Means.)
CD,
It will not matter likely on most of them (the Taxes), the IRS will cut a deal with them for $0.10 on the dollar.........if they have no assets.
Free homes, don't pay taxes, it's all ok..Unca Bama take care of it.
Just DO not be responsible w/ real assets..you will get killed.
Hide the ones you have.
Love the ones you with
Sadly, to a lot of folks here in the US, "living expenses" DO include iPhones. Most people can slash living expenses far more than they've been conditioned to believe.
You mean to tell me they do not need that $120+ cell plan so they can play Farmville from anywhere?!? That is blasphemy.
I too wish they would stop with the farm thing
Ever think your clients are LYING to you to save face/argument?
I know most of your financial wizards *think* your clients believe everything you say and that the sun rises and sets on your asses, but I got news for you:
They DON'T.
And if your client called and said, "hey dude, cash out my position in X, I'm buying a boat" you would spend the better part of the day trying to keep them from doing just that.
Guess what, your clients KNOW that too.
Reality, the other white meat.
The ponzi unravels.
Just trying to beat Pelosi's 10% windfall surtax ......
Depending on what happens to tax rates FY11 - feds/state/local/sales/real estate and the rest - it might not be a bad idea to cash in some of your 401K money this year if you are aged 591/2 +. Who knows what government will let you keep in your 401K - what the government giveth in tax breaks in can taketh.
Bruno, Just spoke to my Tax guy, on that very issue..........
The problem is, THE GV'T is not saying WHAT the NEW rules are in that regard.
Much rather cash out, pay the income taxes, and not get hit w/ the NEW Capital GroaNs increases.........30% frigging percent.
Personally I think anyone that CAN should empty their plans IF their past 59.5,and Roll em'............
No doubt in my mind, that VERY soon, those funds will be GARNISHED to a NEW & IMPROVED Pension/Retirement plan for those holding the bags.
And they will dole your 401k cash out, as they see fit...and you won't be able to touch a nickel of it.
There has been talk of that, and the same on IRA's for 2 yrs already..........
It's just ONE more bomb waiting to blow up, on the public.
Yep, and that qwm
http://www.carolinajournal.com/exclusives/dems-target-private-retirement...
for instance, but her testimony is all over.
We do work in Argentina and with Argentines who are suffering under this "regime."
- Ned
I'm 29 and I just emptied my entire Simple IRA at a 25% penalty because the account was less than 2 years old. I could care less about the taxes at this point because if I was unable to repair my vehicle, I would have lost my job and you can imagine what happens next. I believe I am not alone in this endeavor and I regret bankrupting my future, but what else could I have done? Perhaps a shiny new Hyundai from Billy Fucillo at 30 interest for 7 years with a chip in the car that deactivates it remotely if I am late on 1 payment. I would never use the funds to buy an iphone or what have you...
The question is, what happens next time? When I have no last resort account to empty, parents are tapped out, bank loan denied, no cash advance on that credit card, and there is nothing left to sell (certainly not my Savage 110! I might need that soon).
I'm generally just a lurker here but I felt the need to share the experiences of the common man. Here's to 2011! May we all be financially sound or so unsound that it does not matter anymore..
By the by, I looked at the 2010 Accents and they are anything but huuuuuge! (NYers may know what I mean)
(Raises hand on the Fuccillo reference)
ArgentDawn,
I was back and forth on the Thruway to Syracuse and Ra'chista for a couple of years. Are you in the rapidly depopulating upstate? Searching...I guess you are. Just another annoying big city schlock export.
We will not all be financially sound, watching Greece, we will not all go so unsound... No Mad Max imho. Slow or medium deflation like my left front tire that is driving me insane.
I was also back-and-forth to Ithaca. Fascinated with the Ithaca Food Market and the "Ithaca Hours" honor program that they have loosely associated. Patterson can't see all of the tax revenue that he's losing; there is hope for upstate NY as folks are in fact able to adjust.
I went to school in Troy, back when that wasn't a nice place to be (OK, it is better now). Always loved upstate (ADK, Marcy, Whiteface, in Jan), always felt sad that upstate was associated with NY.
Good luck.
And remember that it is un-American to buy from Government Motors.
- Ned
word.
Do not, fear, ArgentDawn. I went through the exact same situation about a decade back.
YOU are not bankrupting your future. Someone else is. Don't sweat it.
ArgentDawn
just relax little brother. your future is only bankrupt when you stop breathing. don't buy into all the bullshit your elders have sold you. they are just as fucked as you and i. smile bro. you can't enjoy the trip if all you do is sweat the little shit. down size as much as you can. do not be a sucker and pay off any loans. move from job to job and let the assholes try and find you. it's the time we find ourselves in. enjoy. eat, drink and be merry! it's a whole new game, with different rules. find simplicity and they can never touch you again! your welcome.
It was discussed yesterday that 1072 on the S&P was important.
After this morning's washout, is anyone surprised that the PPT has skillfully lifted the S&P all the way back to 1073. Can't have a weekly close below 1072, now can we?!?
Next week the ppt will resort to throwing mains at Con Ed substations and sabotaging the generators.
Hah hah
Con Ed
Con Gress
Con Stipated
Con Flicted
Con Ficker
1071.67. Now what?
I love zerohedge and I am just as bearish, but unfortunately I don't think that the commentary here shows an understanding of 401k loans. 401k loans involve selling the funds and distributing the cash from the 401k and its included mutual funds. The "loan" just allows them to avoid taxation and repay the withdrawal to the 401k. Any "interest" is paid to the 401k holder themselves, not Fidelity. If all of these loan recipents loose their jobs tomorrow and stop repaying their 401k loans, while Fidelity would be upset about the loss of future potential AUM, Fidelity would incur no loss... these loans would merely convert to fully taxable withdrawals.
However, if you are paying back the loan, you are paying back the tax free dollars you borrowed with after tax dollars and you lose any appreciation on the money you borrowed, if any.
My fear is that the federal government is going to grab all that 401K money and issue you an annuity - sort of Social Security Part 2.
Bruno,
BIN_GO!, 401k's also.................hide and watch.
Over 2 Trillion bucks WAS in them, how long you think those fktards will leave that alone?.
Mark4124 is exactly right. I currently have a 401k loan outstanding (it was strategic, not out of desparation). Fidelity sold the mutal funds and sent me the cash. Mechanically it isn't much different than if I had told my broker to sell shares out of my trading account and send the cash. The difference is that I have to put that cash back into the account over time or else face significant tax penalties.
Correlation does not equal causation. Just because you did it 'strategically' does not mean others are in the same position. Also, AFAIK you will have to put the money back in with post-tax Dollars, correct? Also, the Dollar is on the way up and you may just have to pay this back with more expensive Dollars than the ones you took out.
It's a losing proposition either way you look at it. Borrow or watch it disintegrate. What a choice.
By no means do I think others are in the same position as I am. I know others are borrowing out of desparation.
For me, the 401k loan just went into a savings account. I am paying the loan back over time from the same savings account. It was just a shuffling of assets from point A to point B for strategic reasons. So I'm paying back this pre-tax loan with the same pre-tax dollars I took out. The interest I pay myself is higher than my savings interest, so I suppose I am paying the interest with post-tax dollars. That difference is trivial for me.
The whole point of the exercise was to have immediate cash on hand for a possible situation that did not arise. I'm considering just paying the loan back completely now, but it is easier just to let the automatic payments do their thing.
+1
I don't think that you completely understand how it works.
Just because funds are requested does not mean that the fund actually has to sell the asset, only deliver the requested cash.
If enough people start to withdraw cash and/or do not return the cash within the specified time, it will (probably) become necessary to liquidate the asset(s).
Right. It all comes down to accounting practices, and I fear that every trick in the book will be used to make it look like no one is exiting the burning building.
Helicopter Ben, to the rescue!
A helicopter at this point would just fan the flames. Dollars dropped would burn up in the roaring furnace of deflation.
Isn't the crux of the fear in the article because the money is being REMOVED from the hallowed halls of Wall Street? (and government intervention to, get it in cash today rather than promises tomorrow).
Just more proof that the real man is running away.
My feeling is that there are two types cashing/loaning out right now, those that MUST due to financial constraints and those that fear the HO is right and bye-bye balances is coming.
I took my loan right before the end of '07, hub thought I was nuts, but I ended up preserving my capital and am still buying back in (with my repayments) lower than I sold.
Except for one time in my life I actually managed to keep the government's grubby hands off my money!
Until the crash wipes me back out again, I think Monday I'm going to look at paying it off and then taking a new one out.
The sheeple and Fidelity are scroomed bitchez.
Daily I read about people now completely desperate and willing to do virtually anything to feed his/her children. This substantiates what we already know. The problem is that penalities and taxes will be due.
Now my prediction: When the IRS attempts its typical strong-arm tactics against completely desperate people, especially when his/her children are in jeopardy, I see a violent civil reaction against the IRS.
I agree. It will be a bunch of Joe's blowing their Stack!
http://en.wikipedia.org/wiki/2010_Austin_plane_crash
BTW, tomorrow 18 years to the day is the anniversary of day one of the siege of Ruby Ridge.
http://en.wikipedia.org/wiki/Ruby_Ridge
One man's terrorist is another man's patriot.
Percolater,
The 2010 plane crash IRS dude, the media made him out to be a Right Wing Conservative Whack job..........
Later evidence came to light he was a registered Democrat, and had been forever,and was a left winger.
Didn't hear that on MSM Did ya?
10 reasons to become self sufficient and 10 ways to become self sufficient.
http://www.prisonplanet.com/ten-reasons-to-become-self-sufficient-and-ten-ways-to-get-there.html
Quite frankly, retirees are screwed either way. If they keep it in their retirement accounts hyperinflation (a few years from now - not today) will wipe them out. So unknowingly they may be doing the right thing as none of these funds are able to account for the level of inflation I expect after 2012/2013.
How do you know that. What constitutes hyperinflation 11% or you in the Weimer camp. Shit's value is dropping off a cliff and yet we're going to have Hyperinflation. I guess deflation can't happen and yet the 38 ' Sailboat I just bought for 20 cents on the dollar is just bad luck I guess for the seller.
Hyperinflation is characterized by non-essential items (to wit: a recreational sailboat) going down to almost zero, while essential items (to wit: food, energy) going to the moon.
In Weimar Germany, housing prices went down to less than 1% of overall living costs. In other words, owning a house didn't protect a person against hyperinflation. The larger issue was actually affording to eat!
Maybe he just bought the Good Ship Lollipop.
pitz, how do you know that the sailboat (or any other item, for that matter) is "non-essential". After all, Joe Kennedy senior thought all different kinds of boats were "essential" in the early '30's to get certain liquids trans-shipped across Horseneck Beach (beautiful place sans-sharks).
I've been looking around for good reference/background/whatever book on Weimar. Limited knowledge to what Milton and Anna discussed. Recommendation(s) would be more than welcome.
Thanks in advance,
- Ned
By the time the Weimar hyperinflation ended, putting food on the table took 93% of median household income.
you must be magical to make your way to the top of the sky like this.
p o o f, i float like a butterfly sting like a bee. my dad use to say my boobies were like bee stings.
My TIPS portfolio has increased about 6% this year in a 401K. While I understand the basic concept of how TIPS work, I have no idea why they are going up in a deflationary environment. And, assuming there is a government left to pay back these bonds, they should protect against inflation.
And more important, assuming the CPI is not rigged by the government.
If CPI rigged in up direction, and actuality is down, then the lad is making out like a bandit. - Ned
You trust the U.S. government, which is going to cause hyperinflation, to later tell you exactly how much they screwed the citizens by reducing their purchasing power. And they'll then pay you the difference.
That's so sweet!
mole,
Here' the part of the story WE are not hearing..............
I would venture a guess, that the majority of the parents withdrawing funds to help their kids, are kids that have been used to living high on the techno hog and in homes, and cars way over their heads.
Ask me how I know...........
Your bed, you made it, now work your way out of it..........bailing out spoiled 30-40yr olds, is a bad mistake..........most of the time.
Most kids when they leave home these days,graduate HS,College, think they should live as well as their parents DO, now.
Without the work, and years of toil, and sacrifices.
Dos, this conversation is good, thanks.
"Most kids..." well I don't know. Maybe the kids of the "house-as-ATM"
Stuck some kids into tough situation in '91--after the fact we said "they would not have hired us if we had to compete with this crowd."
Don't undersell the young guys and gals.
especially the Tessicans.
- Ned
This merits a few minutes of your time.
http://usawatchdog.com/why-is-the-u-s-government-protecting-bp/
I think you have two schools of thought. The first school is that people are tapping 401Ks just to survive into next year. The second school (which I am in) is to take the tax I know now versus the unknown of 30%, 40%,...80% tax rate when I retire in 30 years. Take the cash buy PM and land. A 10% penalty now may look cheap in 20 years. I might be wrong but it is a risk worth taking. I have lost faith in the "system" taking care of my money.
I'm 29 and I just emptied my entire Simple IRA at a 25% penalty because the account was less than 2 years old. I could care less about the taxes at this point because if I was unable to repair my vehicle, I would have lost my job and you can imagine what happens next. I believe I am not alone in this endeavor and I regret bankrupting my future, but what else could I have done? Perhaps a shiny new Hyundai from Billy Fucillo at 30 interest for 7 years with a chip in the car that deactivates it remotely if I am late on 1 payment. I would never use the funds to buy an iphone or what have you...
The question is, what happens next time? When I have no last resort account to empty, parents are tapped out, bank loan denied, no cash advance on that credit card, and there is nothing left to sell (certainly not my Savage 110! I might need that soon).
I'm generally just a lurker here but I felt the need to share the experiences of the common man. Here's to 2011! May we all be financially sound or so unsound that it does not matter anymore..
By the by, I looked at the 2010 Accents and they are anything but huuuuuge! (NYers may know what I mean)
Thanks for sharing that. Most likely a resident of NYC Tyler is obsessed with Apple products but I think the truth out there is a lot uglier. Yes, there are idiots out there who blow away their unemployment checks on toys but I don't think that's the norm across the nation. If you have any doubt about that read 'The Two Income Trap' - I read that years ago before Elizabeth Warren made it into the limelight. She described clearly that this whole idea of a splurging middle class is less black/white than many perceive it to be. Yes, the entire housing bubble required a huge amount of idiots to buy into it - but if you look beyond that at actual household expenditures you can't argue with the fact that in the last 20 years it took two incomes to afford a lifestyle that one person could bring home half a century ago.
This whole game goes a LOT deeper and has been in the making for over fourty years.
Perhaps I'll have to read The Two Income Trap. Frankly, I think it's a crock as living standards have changed dramatically over the last fifty years. Fifty years ago, families were much more frugal. They typically owned only one vehicle, and drove the vehicle for ten to fifteen years. No one had cable, internet, designer clothes, cell phones, iPods, computers, HD-DVD players, multiple SUVs, McMansions, etc. ad nauseam. I could go on... and on... and on, but I think you get my point.
I'm not picking on you molecool, but I get rather tired of the "poor me" line of BS. The majority of Americans have made their own beds. Now they get to lie down in them.
I assume you were replying to molecool's "...it took two incomes to afford a lifestyle that one person could bring home half a century ago."
I can confirm that statement from personal experience. In the sixties my parents were able to live off my father's income as an engineer, with two children, one of those me. In 1970 -oldest memory I can recall- we lived in a new house on a well-sized parcel (with a mortgage) 35 miles away from New York in a nice neighborhood, had 2 cars, color television and a swimming pool (ok, it was unheated). My father wasn't splurging, but for example he had a SLR and a Super8 film camera, with which he made Kodachrome pics and films of us. So for those times we were well gadgetized.
I am now an engineer myself, scratching at the top 5% income group and quite frugal,
and even with a very frugal lifestyle I would be barely able to support a wife and two kids without scrapping all payments to any kind of pension plan.
The best kept secret is it is the Welfare Recipents buying the I Pads. I rent properties in an area that is mostly Secion 8. Every small Apartment has a Big Screen TV. Almost bigger than the Living Room. Plenty of I Pods, I TVs.
You get the picture. Those are your I Phone Buyers.
P.S. They are all on Section 8 Housing so they pay $10 a month to live in a $900. Apartment. They get Food Stamps, Energy Assistance, Welfare and about $400. per month per child.
They are your Buyers of I Phones, I Pads. They have no monthly expenses.
P.P.S. Free Health Care for them and their Children. No Premiums, No Deductables, No Worry.
It pays to be Poor in America.
Tempting, but I'll stick with my old but paid for house on a very large acerage (240). Many of us old farts have worked long and hard and have accumulated substantial assets. Nor did we all lose our life savings to Wall Street. I have been converting my IRA to gold for some time - need about two more dips to finish the job. My sympathies go to the young that did not have the same opportunities as those of us that grew up in the 1960's.
Water fall,
Nothing is new under the Sun.
In the late 70's, I was in a grocery store, behind a couple of affluent looking minorities.
They had a shopping basket full of things, I could only drool over.
When the checker finished the tab was over a $100.00(this was late 70's),food stamps got thrown down.
I was next in line, and checked out the few itmes I had, as I was leaving the Super Mkt, I noticed the couple that was previously in front of me, with a Kings gourmet, paid for w/ food stamps.
They were finishing loading them into a New Cadillac.
Needless to say, I left mumbling, as a very young 20's guy.Even then, I knew we were fkd.
Everything they had, was 20x's better,more, than what I had, or could afford.
One more anecdote? I was in line at Krogers the other day behind a well-dressed lady who had to take back a loaf of bread and exchange it for a different type/brand. The high-end bread she had was not accepted by the food stamp software at checkout. I waited a long time for her to return with a lower priced whole grain type bread that was accepted. Her basket was chock full of really nice meats, cheeses, and stuff. As I was checking out, the clerk (whom I know by sight as a regular customer) commented that the lady comes in often, buys a lot of nice stuff. More in dollar amounts than the food stamp recipient would have in a month's time. Hmmmm. Upon leaving and seeing the lady climb into her Escalade I just wondered what the real story is.
" 401k plans, which tend to be held in mutual funds dominated by U.S. equities, slipped in the second quarter as major stock indexes tumbled more than 10 percent."
And then there's this of course - perhaps many retirees don't see a rosy future ahead and simply are willing to utilize their cash now that it still can buy them food and shelter.
" 401k plans, which tend to be held in mutual funds dominated by U.S. equities, slipped in the second quarter as major stock indexes tumbled more than 10 percent."
And then there's this of course - perhaps many retirees don't see a rosy future ahead and simply are willing to utilize their cash now that it still can buy them food and shelter.
I do mortgages and I'm seeing more folks than ever using 401k loans for a "cash in" refinance or for down payment funds on a home purchase.
And, most don't have much to borrower anymore either...scary.
challenges aboun d
it,
That is some dumb shit,,,
How do these folks think their going to keep these NW homes, and pay taxes,and utilities?.
Wait till the Home Mtg interest deductions are gone.
Just pulled 1/3 of my money out of Simple IRA. Using it to pay for a baby birth, a wood fired oven (killer pizzas and cooking without electricity http://www.fornobravo.com/residential_pizza_oven/beehive_oven.html#beehive_oven), some life saver jerry cans (http://www.lifesaversystems.com/jerrycan.html), and building up the food storage. Shooting for 3 months non freezer plus a lot of meat / veggies in the freezer. Next 1/3 will come out prior to year's end and will probably go to an emergency cash fund and maybe some silver. We are currently a paycheck to paycheck (give or take a few months) family and a 10% penalty seems like the cheapest I will ever get this money in any case.
moonbats escaping the system: doesn't mean that they are wrong about their "individual" "personal" "financial" conditions, but there are many who are acting differently from their preaching.
Or, optimizing their individual situations.
http://www.ithacahours.com/
They would treat this as "free-market" opportunity.
As would I.
- Ned
Coder,
My regrets to you..but at least your hanging in,and preparing.
Remember you get to pay income txes ,plus the 10% on your withdrawal.
One item you need to seriously consider is a Generator.
You cannot afford to lose your food supply....refigerator items.
Whatever they are doing with the money, it is a good move. They are getting out while the markets are up and the money can still buy things. And they are kicking the ponzi where it hurts. It's a win/win.
1st job out of college... Fidelity 401k customer service... helped people to get loans, withdrawals, trade MFs, etc... Not the most intellectually stimulating job for sure, but you see a pretty large slice of life.
the SEC and solitare? Are you fucking nuts?
8-9 hours of porn a day! Every single day! Especially the laywers who make over 210k a year.
Wait, you used up that 2 TB hard drive that belongs to taxpayers you sick jackass? no problem, just bring in CDs tomorrow morning. Blackmotherfuckers.com has a new movie out and you cant miss it!
Solitare is sooooo '90s bro...
orange drinker what in heavens is on that womans back? boobs, i can't see well any more, granny here.
"Which also means that suddenly Fidelity may find itself with worthless liens instead of cash, and should the market plunge again and the fund giant find itself in a need to satisfy billions in collateral calls, it is game over."
I don't think so. Typically (perhaps always?), when you take out a loan against your 401(k) they reduce your market exposure (sell the funds) rather than letting you leverage up.
I have £330K in my pension fund in UK, am 48 but can't touch a penny till 55 minimum, for that matter no one can at least in the US you have a choice to stop playing the game. Given what it's like here then if we were on on the 401 system things would be just the same in fact I'd guess higher than 11%.
Hopefullly you can invest it(self directed) into something worth a shit.
I have yet to see ONE plan that had a Commodities Offering........
When asked WHY Not, told too risky.
What a joke, lying bstds.
Sure ya do. It's printed on a statement so it must be true.
There is a group of people who have educated themselves in the past couple of years ini regards to IRA/401(k) and decided it was all a scheme to handcuff their money and keep it out of their control. Once realizing this, we closed down our IRAs and stopped contributing to 401(k)'s, regardless of penalty since a 10% haircut now is better than a 100% haircut 10 years down the road.
Dr.No,
10yrs???....my ass.
Ya done good...............I yanked mine last year, rolled into IRA's and likely fixing to cash out of those.
Have a neighbor, worked as a Blue Collar in Aerospace.
His wife got Alzehiemers about 5-6yrs ago, and finally had to be put into a home.
She was old enough to qualify for Medicare after a couple of those years.
The Feds, came out, took 50% of his(she never worked outside the home), pension, and SS, and evaluated his homes value, took that from his savings, and took 50% of his savings, and 50% of his retirement income.
He is barely able to stay in his home, after 45yrs on the line.
Had they NOTHING after 40yrs of marriage, he would be home free...........
This system, must be changed, the housing, food, clothing, and free medical shit has to stop....even if someone has to work free gratis for community svcs,or child care...........
There is no free lunch?.Bullshit, depends on who you are.
Tyler, also a VERY important one to notice.
Most big companies has employee retirement plans. And every month, bit by bit, they deposit some money into the account.
BUT, IF the employee hasn't worked for the company
And leaves
OR gets fired...
The company can reclaim that money and the employee gets nothing.
GUESS WHICH PEOPLE GOT SACKED FIRST?!
Guess what that refund did to their anual profits?
HA!
Sudden Debt,
it's early for me, that post makes NO Sense, re-read and splain Lucy?
Most big companies has employee retirement plans. And every month, bit by bit, they deposit some money into the account.
BUT, IF the employee hasn't worked for the company
<...long enough to be fully vested?>
Yes... exactly. I agree with the notion that it is a bad omen about folks desperate for cash in many cases. However the idea that MFs are straddled with liens is not technically correct.
Tyler,
I hope you keep your finger on this one. This, to me is a better indicator of the consumers demise than any damn government or Wall Street analytical report. This is the ultimate indicator that will tell you how hot the fire is and possibly how long until the economy explodes.
Another thing to check out is number of times people already refinanced their house.
I know people who did a refinancing 3 times these last 3 years (and still buy a jaguar, but hey I'm no judge :) )
RS,
they are now trying to DO the the right thing.
And will continue till their dead ass broke.
When it's all gone, they will do what millions more are........
Then they just go on Unemployment, and live free in their houses,
Fidelity is a complete rip. Their fees are always suspect. There is a reason why it is a private company. I am forced to deal with them for my 401k. I just put in 1% and have my full time a employer match. On the side I put allot more in IRA Roths accounts. Tax deferred is bull shit marketing because taxes are just going up in the future not down.
Fidelity!!!?? Seriously!!!????? Biggest whore house on the block. Follow the green arrow to an ass fucking.
i thought i just read three private equity boyz were buying something, Fidelity?
i like your hat trick, ;-) ;-)
401Ks, even the whole concept of "retirement" is total bs, too. Sold to you.
Sudden Debt... that is not true of 401ks, that can be true of pensions and can be true of the "company contribution" in a 401k which needs to "vest." But employee contributions to a 401k are the employee's property and can be withdrawn or rolled over into an IRA after termination, retirement, or under special hardship conditions while still employed.
All part of the master plan, 401k, housing bubbles, etc.
They assume that old people can't or won't fight when reduced to slavery. Wrong assumption.
I have a simple solution, move to Canada which offers a far more humane social fabric. Diabetes? No problem, we'll take care of you.
Great, so everyone with diabetes will live to be old enough to have children; and these children will genetically inherit the diabetes from their parents and will pass the diabetes genes on to their children; and so on until eventually everyone in Canada has diabetes. What kind of economic drag is that going to put on Canada as a whole?
It's not just diabetes. This is true of every genetic malady -- allergies, cancers, bad eyesight, whatever. Once human beings reached a point where they could keep their fellow defective human beings alive to reproductive age -- and allowed them to reproduce -- it was all over. The human gene pool is falling apart.
What wall?
Buy weed. Then smoke it.
My solitaire time today is around 90 min.. dmn August so slow.
Does it qualify me to work for SEC? Not that I require the solitaire or online poker to be part of my benefit package.
Relax, this is all part of the Socialist party agenda; make everyone dependant on government handouts for sustenance, either directly by working for the government in a public sector union, directly via receipt of welfare, social security, AFDC, medicare, unemployment "insurance" (lol), et al., or indirectly by working for a "private" company that is totally controlled by the government. Osama, Pelosi and Reid are just executing the plan.
Remember folks, you have one chance to turn this around, in two-parts: gridlock post Nov-10 via removing Socialist control of at least one Chamber, and removal of the Socialist leader Osama in Nov-12. If you blow either chance, it's game over.
Chemba
Put the crack pipe down and walk away, ain't no goddamned Socialists in US government. Socialism for corporations possibly.
The Social Security system -- that's socialism. The 60% taxpayer stake in GM -- that's socialism. Obamacare -- that's socialism. The public school system -- that's socialism. Every time the government tells you how to spend your money or how to live your life or how to raise your children -- that's socialism. The US government is absolutely filled with socialists.
Yeah, social security is security just as "Operation Iraqi Freedom" is freedom to the average Iraqi. Or, the "Blue Skies Initiative" brought us clean air and, well, blue skies... Or, NAFTA brought distributed wealth to North Americans.
You're confusing words with actions.
Anyway, it's lever-pullers like you two half-wits that's a big reason why things are so fucked. You wouldn't know a socialist if he/she came and whacked you upside the head.
Socialism is for benefitting the common person. Look at where the money went- hint: it didn't go to the common person; the markets, which are run by the wealthy, shot up every time the "socialist govt" acted.
Thanks for playing!
+ !!!
Do you think he will understand it?
the other party is socialist too
I have been considering cashing out the 401Ks and a Roth to pay off principal on our house. None of my "retirement" monies are in stocks, all are money markets or Treasury type Funds and all are earning damn near 0%. Stock funds are worse. You have to give people a reason to save, you know? My best play is to pay of the house sooner and cut out that 4.875% interest cost. Sucks ass.
There is very little reason to save for retirement as far as I can tell. If our monetary regime collapses, all the saved up money is gone in an instant. If I live through the turmoil, I'll have to worry about retirement after the currency stabilizes. I'm terrified of not having the use of the cash.
This is why the mess we are in is so fucking dangerous--you can't save. If you can't save, you can't smooth out the bumps that life throws at you. So as another poster put it "the wheels come off instantly."
I might be dense here, but trading a 4.875% interest for a 10% penalty doesn't seem like a good deal.
My plan is to reduce my income to the point that cashing in my IRA won't place me in another tax bracket. Achieves two things: 1) helps accustom me to a lower standard of living (we're going in that direction and there's nothing that can be done about this trajectory); 2) allows me greater control of my money/wealth.
4.875% is compounded over 30 years which comes out to a hell of a lot more than a one time simple 10% haircut.
that interest goes to YOU.. you only have to pay $50 or so one time to get the loan.
this article is full of falsehoods. You can only take out up to half of what you already have in so it doesnt matter if no one pays it back, it was their money anyway.
If you mean the equity holdings that were represented are still left in full while Fidelity gives you a loan; well i doubt that is happening and who the hell has their 401k in equities anyway? anyone smart keeps it in a cash fund just to accumulate the 100% match.
Then you take out a load to either pay off some high ass % loan or credit card or buy gold/silver
Bingo
You wanna see a blood bath. Wait for the soon to be unemployed laborers, iron workers, police, fire, transit, plumbers, teachers and electricians use the hardship clause for an early withdrawal.
We are talking decades of annuity contribution about to be withdrawn first to pay the mortgage, then to stay alive or retire early and moving to a 90k home somewhere in the nation. The hardship clause is very easy to use and exercise. As talks if a double dip/ modern depression increase in the media these guys will be looking for an out while the market is still up. If we get a 600+ downday shortly that could be the catalyst to spark fears.
John McCloy
Iron workers? They aren't just a legend in the modern US are they?
In other news shit Stinks.
I spent time breaking down exactly why I believe this won't end with a simple Deflationary Collapse. Please tell me what you think or where I might be wrong.
I am going to break it down nice and easy without getting overly technical (I didn't study economics in college and haven't been brained washed by professors bought n' paid for by the FED)
The FED has just 'printed'/ QE the most money the country has ever seen. However, the money ONLY went into the banking system which is because that is the US’s banking system (aka Federal Reserve System). This was done to keep the banks solvent, for the time being. Bernanke, scholar of the Depression, knew the Great Depression resulted in a Deflationary Collapse via massive Banking failures.
The entire purpose of what the FED has done thus far was to prop up the financial/banking system from total collapse and another Great Depression. Now, here is where I am going to break. It is important to remember there is a difference between the FED and the US treasury.
The unemployment we currently see in this country has very little to do with the Monetary policy Bernanke and his ilk have been pursuing. It is a result of a collapse of the business cycle that PURGED main street’s balance sheets. The unemployment over the last few years has been a result of massive deleveraging of small businesses and poor credit worthiness of average Joe to obtain loans. Jobs continue to bleed because the Business cycle fights with fury to correct while the Federal Government does everything in its power to FIGHT it off. Enter Mises:
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final total catastrophe of the currency involved."
Read it twice. What have we seen the Government pursue over the last two years? Cash for clunkers, 8 thousand dollar home credit, 99 weeks unemployment, One Massive government stimulus along with several smaller doses. These actions were pursued by the US Congress to pull forward future economic demand at the expense of the necessary correction of the Business cycle to restore final private demand to an appropriate balance to foster ORGANIC economic growth.
Why a currency crisis and a most likely Hyper-Inflationary Depression will ensue.
Confidence. Confidence. Confidence.
The Government has been able to continue to borrow and spend because of countries like China, Saudi, Japan and a few others lending the US money. They have bought government treasuries exporting the Inflation out of the real US economy onto the balance sheets of these said countries. It is also safe to assume the FED has two sets of books. They too have been buying US treasuries but because their actions can be kept secret, the world remains in the dark thus not triggering immediate anxiety on US Government paper.
Now, let us say the Republicans are swept into office and congress shuts down into TOTAL gridlock. Unemployment benefits are not extended, new stimulus bills don’t pass and new measures to curtail the contraction of mainstream assets such as mortgages don’t come to fruition. Now Main Street enters into a Deflationary Collapse. The FED can ease further, but the money remains in the US banking system as the credit worthiness of borrows continues into free fall. The FED is out of ammo.
Now the confidence game begins. Does the world stay confident that the US will be able to meaningfully pay of its debt obligations? While the real economy continues to free fall, does congress suddenly wake up and suddenly cut Government spending across the board (Entitlements, Military, Government agencies, Government salaries, etc)?
Now it is time to pull up a chair with a beer in hand.
If China or Japan see that the situation is hopeless, they will outright declare/admit the US is bankrupt refuse to buy any more US paper and begin to dump their holdings.
Now the US is caught up in a political crisis of IMMENSE proportions. The US can allow the business cycle to correct via a MASSIVE deflationary collapse or the politicians see it in their interest to keep their jobs by not allowing chaos to get too far out of control. Now the FED independence comes into play as they remain the lender of last resort.
The FED buys Govt paper by creating demand despots on the US treasury’s balance sheet. This money is directly inflationary, cannot be exported to Asia and goes directly into the economy. Price inflation starts to get out of control. As more and more become unemployed, riots are now a daily occurrence, Society starts to break down- delivers are delayed, stores refuse to accept the dollar in fear of lower returns, seniors cannot obtain medical care because hospitals cannot run via delayed cash flow from the Government. Now the FED has lost control, the political crisis is severe. Does Bernanke suddenly have a come-to-Jesus moment to no longer accommodate the demands of the US government? This is where the debate ultimately ends between the Inflationist and Deflationists. If Ben does not give into the demands by the government, congress has no choice but retake control of monetary policy and start printing the money themselves IN EFFORT TO CURTAIL the CHAOS AS MUCH AS POSSIBLE
The new money in circulation is spent the second it hits the streets, prices start to become runaway in nature (even changing hourly) and eventually the currency collapses under its own weight.
Dont forget about the imminent failure of the states, along with the public pension funds they carry!
This is pretty much my view. I believe we are headed towards a deflationary collapse and I do believe that given the current levers nothing can be really done about it. The question is, "how bad will things have to get before their is a revision in law to allows for the actual creation of real money pushed directly into the system"?
That is a question that is very hard to answer. The number of tricks that can be pulled is astounding - but it is finite. I would guess we get gridlock through 2012 but not absolute collapse. But after 2012 - all bets are off. It could happen very quickly.
Z
The loss in confidence has more to do with people finding that the American Dream is a souless blood-draining sham, that time-sucking electronics, gass-guzzling SUVs and maintenance-heavy McMansions are NOT what life is about. The fact that the USD is tied into all of this should tell us that people are starting to walk away from it all: actually, people have been leaving the System for some time now.
Mises and other libertarian champions think that they can rectify the system, that leaving it to work out its own problems will fix it. I disagree. The System is past salvaging, it's rotten, dead. Further, and most importantly, growth is dead, which, but default, means that the System itself is dead, as it's predicated on only being able to operate on long-term growth.
This isn't just overshoot of the economy, it's overshoot of physics, of nature. Credit contraction will equal population contraction (until a more sustainable balance is achieved).
Seer, the word "sustainable" is reaching to exceed the word "unexpectedly" as the most mis-used, fraudulent concept. Not there yet.
Especially since the "sustainability" crowd propose junk science "solutions" that are, well, unsustainable.
But there is another agenda isn't there: "population contraction."
Any thoughts on who will decide on population contraction? Mao-ists have held that role in the past, for instance.
- Ned
You missed a little item in your review of the history of our collapse.
"Now the FED has lost control, the political crisis is severe. Does Bernanke suddenly have a come-to-Jesus moment "
See it right after the severe. berpanki is unexpedidly shot by what looks like a long range snipper. (and new text to correspond to events)
berpanki comes to Jesus moment.
unexpectedly
sniper
To Gloomboomdoom
I'm not an economist either, I'm a retired computer programmer.
My guess about the future is indentical to yours. My time frame for all this hitting the fan is about four years, maybe sooner. It all depends (in my guess) on how long the Chinese etc. continue to give us a free ride.
All I can add is that the Chinese are not happy about their having to finance our military encirclement of them by their rolling over our debt. I think our establishment will resort to WWIII and martial law here.
I'm not expert in military field but if you talk about WWIII you have to consider industrial base of US. Maybe my ideas about it are wrong, but as it stands right now US military will be shut down very quickly because first tier suppliers of arms and material are probably US based but they depend on 4-th, 5-th and lower tier suppliers, and they are located in China. That's what they wanted. Nobody can fight any major wars without proper and flexible industrial base, I mean manufacturing and basic material supplies. The only thing US has now is reliable food supply. You want to fight a war with financial services as your economy foundation? We have to get realistic.
we decided to exit the markets and build a badass addition on our house. Needed to take the 401 loan to cheapen the financing. Might as well like where we live. Wierdly, it appraised way high so we could refinance both the mortgage and a new HELOC extension at far lower rates.
So even though it wasn't meant to be an investment, it turned out to work well for us. We have the cash flow to pay it down in a few years. Years during which the markets will do exactly nothing for investors, if they don't kill them.
I think investing is dead for a long while. Until the zombies and corruption stop their reign of financial terror, money will go....elsewhere....in many ways. Both for those who can afford to save, and those who can't, the big banks are anathema and many folks are working diligently to exit the NY/DC system that weren't a couple of years ago.
OT - ZH just tweeted a while ago, 2nd confirmation of Hindenburg Omen today.
In other news, whooping cough epidemic declared in California. WTF?
I'm guessing illegals plus a bunch of kids whose mothers decided on delayed vaccination schedules.
Well, not exactly. Well, yes, but you know what these epidemics are like....remember the Swine Flu when about 1/4 of the world's population died? And the tainted vaccine? Oh, never mind, it was rumored years ago.
But back to the Whoopee Cough thingie. An ArtsieCraftsie Group on the Central Coast of the Winter Home of the Great Satan (aka California for the mysogynists) decided that their ArtsieCraftsie crap wasn't a very big draw since nobody seemd to care about their ArtsieCraftysie homemade stuff, so they decided to have a Feel-Good Fete where everybody is just gonna walk around hugging everybody else, passing germs, contaminating the water supply, sneezing lugies on strangers backs and hair and all in all, passing on the great feelings of the Universe to a Bunch of Nobody Gives a Shit or Cares Strangers because these same Arteistes that cannot let alone make any Artsie-Craftsie shit that anybody cares about, can't even get a hug at home.
Now, what has this to do with a Whooping Cough Outbreak? Hug enough people and you're sure as a Monkey with an Olivetti Standard Manual and a lifetime supply of ribbon, carbon paper and whiteout, gonna get Whooping Cough as well as replicate the Five Books of Moses interspersed with the Selected Works of Sir Arthur Conan Doyle.
And just to make you feel better, gentle reader, remember, that all major trends begin in the Winter Home of the Great Satan. Reinforces your Faith in Mankind, no?
dark
light
This does not surprise me, at all. Much of the country's economy is running on fumes, i.e., consumption of savings to fund expenses. Same with individuals as with small businesses.
Wonder if the threat of the Government putting 401K's into Government Bonds had anything to do with the withdraws.
I also wonder what will happen if the assets (Stocks) in the 401K go down in value. If the Borrower is underwater in their 401K after taking a loan will they make up the deficit or will they just Default like with their Mortgages.
Are Consumers Gaming the system? If the Stocks in my 401K I will pay back the loan, if not I will default. By Defaulting on the loan will they owe Taxes?
What are the regulations on Defaulting on a 401K loan?
Correction: If the Stocks in my 401K loan go UP I will pay back the loan, if the Stocks in my 401K go down I will not pay back the loan, I will default.
Fidelity could end up with a lot of losses.
The liability is on you, to your own account. It's not a loan from Fidelity. Your counter-party is you.
I would think about cashing out the 401k... if I could pay off 100% of my house. Given the ROI on the 401k is lower than the cash I am pay to the bailed out banks I would be looking good cash flow wise, enough to buy silver or gold every month. But I am not in that position... yet.
Unless you're paying an insane interest rate (read: variable) on your house, I'd use the 401k to purchase PMs while they are cheap, and use your future dollars of declining value to pay off the mortgage over time. Why? Because your monthly debt payment is fixed, while the price of PMs isn't, and may rise drastically before you can buy enough.
Worst case scenario, you have to liquidate some metal at times to make a house payment.
This of course, is assuming that PMs held in hand are the most secure asset class going forward.
So, based on Tyler's post and all of the subsequent discussion, the question boils down to this; does your 401k holder actually liquidate your assets, or is it just an accounting entry for them?
Next question, can this even be determined?
I rolled a ROTH IRA into an "Owner(K)" (similar to a 401(k)) so that I could borrow enough money to pay off my car. The interest rate is lower and I am paying myself back. If the market declines enough I might do the same trick and pay off the last of my student loans (I'm in a Rydex reverse fund for some of the money in the Owner(k).
Zulkir
Is it any wonder?.....
We have 41% of the Employable workforce without a job.
Walk away's on homes is on the increase also.Even the Gv't subsidized one's.
We will have a record year of foreclosures.
If there were any doubt we were ever OUT of Depression Deaux'( some called it a recession), I call it,like it IS, there shopuld be no doubt this truck is heading off a HUGE cliff in 2011, for sure 2012.
(if not sooner)
Social security will be means tested in the future. I'm going to spend up my 401k so I can I will be dead broke in order to qualify for the full SS benefits.
Dear Tyler,
Please explain why any actual person reading Zero Hedge should not immediately decide never to pay another nickel to any TBTF bank. "Prior Breach" is a valid defense in any common law jurisdiction.