The 401(k): Retirement Money Tar Pit

Looks like I started kicking myself too soon.

A few weeks ago I explained why I'm going to have to spend the next few years as an indentured servant to the feds to pay the taxes and penalty on my 401(k) withdrawal…but if I hadn't done it when I did, I may never have seen that money again.

The Wall Street Journal reports that 401(k) investors are finding that they can't get their money.

"When Ed Dursky was laid off from his job at a manufacturing company in March, he couldn't withdraw $40,000 from his 401(k) retirement account…"

"I hate to be whiny," said Mr. Dursky, "but it is my money."

Turns out that the money you put into the 401(k) can be locked up a lot longer than you'd like. Most plans allow investors to borrow from their own accounts and some even allow outright withdrawal of matched funds ― with the requisite 10% penalty and income tax. The only way to get all of it, however, has been to terminate employment…but now even that's not good enough.

Of course if you're the kind who pays attention to things like history and human nature, you'd have noticed the funny smell around the defined benefits plan a long time ago. And you would have seen this coming.

Here at Whiskey Bar we never stop casting a suspicious eye at the government and we turn our noses at their offers for help. We regret that this time around the feds aren't the ones keeping voluntary and involuntary retirees from their cash. 

Still, if this entire mess hasn't filled you with fear and loathing, then I'll have what you're having.

General economic collapse means that fund managers are finding it in their best interests to limit reallocattion and withdrawal by 401(k) investors. It doesn't matter if you're a 69-year-old recent retiree or a laid-off schlimazel who was counting on the money you'd saved to see you through a few months of unemployment.

Folks are starting to catch on to how important it is to own gold. We harp about that every day in these pages. Not a one of you reading this doubts for a moment that the value of little green pieces of paper that so many others take for granted is only good as a politician's promise.

So what escapes me is why anyone smart enough to save in gold and silver would still tuck money away in a defined benefits plan. The circumstances concerning retrieval have always been extreme. We were assured this was for our own good. After all, this was supposed to be retirement money; the rules had to discourage us from getting at it ahead of time!

But the whole set up smacked of the sort of paternalism that really should have raised our hackles.

And now we discover that fund managers can keep our retirement funds...even after we've retired...or been separated from the payroll under less pleasant circumstances. Looks like in some cases, some folks may never see that retirement money. The value of their locked investments may dwindle to nothing or they may die of old age before things are sorted out in the courts.

I remember years ago when I began my working life and didn't know enough to be wary of the state's siren songs about financial security. I thought the 401(k) such a wonderful idea. As suspicion toward leviathan grew I still harbored a child's hope that at least this whole "invest pre-tax and get a company match" thing wasn't a trap. Of course, turns out it was...

The federal government itself hasn't yet taken a turn at freezing 401(k) accounts, but this sudden if inevitable betrayal by fund managers should serve as a warning.

Please don't let this happen to you. No matter how the feds try to lure you with tax-deferrals, no matter how tempting the company match is, don't fall for it.

Granted, money you deposit anywhere besides your mattress can be nationalized or misappropriated, but putting funds into something like a 401(k) is akin to forcing your head into the mouth of the lion.

So what can you do?

Well, you don't have to bind your retirement money with government red tape.

Fellow editor Jim Nelson sits just a few feet from the Whiskey Bar and in response to my outraged cussing over this news about 401(k) freezes he's offered to share his own strategy for building retirement wealth.

And this is money that can't be penalized by the feds for early withdrawal, or kept from you by callous fund managers…

Be sure to be reading when Jim Nelson stops by tomorrow to tend the bar.

 

Here's an amusing little missive from someone who objects to James Howard Kunstler's strong language…and who surmises from it that I'm a low down darkie…

"Sir," and I use the term loosely, I was somewhat surprised by your response, I expressed an opinion that his language was CRUDE to say the least. Civilized human beings do not speak in that manner. You said that you "shoot straight and sometimes a little hard." But it seems that when others also shoot straight and sometimes hard, it is unacceptable as far as you are concerned. "You unsubscribed me". I was puzzled until I saw a picture of you, I then understood. You were probably raised in a neighborhood where foul language and criminal behavior was accepted as the norm. I was born and raised in Irvington, New Jersey, in the 1940's and the 1950's. Irvington bordered Newark, New Jersey. Newark had a high percentage of blacks. Irvington was 95 % white.  We could walk the streets at midnight and not have to worry about crime. Now Irvington is the most violent city in New Jersey, with their drugs and high murder rate. 

We should have picked our own cotton!  I also shoot straight and a little hard. By the way if I really wanted to, I can easily check out your website, but I could care less, I already have much too much to read on a daily basis. Happy Hanukah.

James Howard Kunstler used the term "pissed off"…plus he has a naughty word in the title of his website...plus Gary Gibson is black...so add it up and this obviously makes Gary Gibson a low class darkie from a low class darkie neighborhood.

Thanks for clearing that one up.

I'm not going to apologize for the language that appears in Whiskey. If you don't like it, you don't have to read it. I'll even give you your money back.

I do take exception to his assumptions about my upbringing, but I try my best to remember what my father taught me about people who say this sort of thing. What they say has nothing to do with the truth about me, just the truth about them.

Here's a bit of encouragement from a happy Shooter who sees things in a very different light:

Gary, I am almost 58 years of age and in the process of evolving (and at times, revolving) into my 4th career. Although educated in the formal sciences, two of the four career paths I took in those tender years did not yield the kind of financial security I had hoped. This fourth (and God willing, the last) occupation involves finance and trading and I need to tell you that reading your articles and others, endorsed by yourself, has helped me immensely. Understanding the world of economics as impacted by geography and politics is not easy for someone with my background. You guys are truly gifted, ALL of you, and the ability for you to see the BIG PICTURE, and the language conveyed to best explain it to us readers, is an endeavor that I, for one, truly appreciate.
 
Thanks for all your great work, good Sir!

Thank you very, very much. We take our mission very seriously and it does me good to hear that all the shots we send your way are doing some good.

If you'd like to meet me along with some of our most frequent contributors, then join us in Vancouver at the Whiskey Bar Top Stocks For 2010.

Yep. Economics, geography, politics…we know they meet up somewhere. Central banks, fiat currency, credit bubbles, bank bailouts, major industry nationalization…those of us who've paid any attention to history saw all these things coming a country mile away.

Now begins the outright theft of the citizenry's funds in the low-hanging fruit that is the 401(k). I expect the contents will eventually be nationalized and at some point private gold ownership will be outlawed.

We all know what's coming. Stick with us as we try to keep one step ahead.