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Friday’s Reader’s Question - 401(k)
By JLP | January 12, 2007
I received the following email this week:
I am about to leave my job and have a sizable (at least for me) 401k account of about $450k. I’m very concerned about where to put this money to keep it safe and hopefully make it grow. I have put it all, in the meanwhile, in the “fixed” account, which does not invest in stocks or bonds, but almost certainly has an unknown exposure to mortgage debt and derivitives. Upon leaving my job, I’m looking to move it somewhere that is not likely to go bust in what I consider the inevitable crash of the U.S. economy. I’ve thought about rolling over to a precious metals, minerals or resources related mutual fund, but worry that the losses in other areas of the fund family will bring the “whole house” down.
I’ve been very careful not to fall into the “debt trap” that many Americans will be caught in by living below my means and saving. I don’t want all this hard work and sacrifice to “go up in smoke”. I am also concerned that the government will shut the doors on IRA/401k liquidations, so they can pilfer my hard-earned nestegg. I am presently 55 years old and will immediately start to take the money at 59 1/2 to get it in my hands and away from government tactics. Can you suggest some interim
safe havens for this 401k money?
A couple of things in this email bother me:
1. “I’m looking to move it somewhere that is not likely to go bust in what I consider the inevitable crash of the U.S. economy. I’ve thought about rolling over to a precious metals, minerals or resources related mutual fund, but worry that the losses in other areas of the fund family will bring the “whole house” down.”
First off, how do we know that there will be a crash in the U.S. economy? And, there is NOTHING safe about precious metals, minerals or resources! Don’t fall into that trap! Sure, those areas have performed well over the last couple of years but there’s no guarantee that they will keep performing well.
2. “I am also concerned that the government will shut the doors on IRA/401k liquidations, so they can pilfer my hard-earned nestegg.”
The worst the government can do is raise taxes, which will take a bigger bite out of your savings when you withdraw it. The government cannot “shut the doors on IRA/401(k) liquidations.”
Here’s my suggestion:
1. Read Paul Grangaard’s The Grangaard Strategy
2. Come to the realization that there are no “safe havens.” Yes, there are places you can stash your money that will keep your principal safe. However, they won’t protect you from inflation, which will eat away at your retirement account and leave you with half your purchasing power in as little as 10 years. That to me is a very real risk.
3. Finally, quit worrying about things you can’t control. Life’s too short to worry about such things as economic collapses and government pilfering.
Topics: 401(k), IRAs, Retirement Planning |