Talk me out of liquidating my IRA and buying preps

[leadcounsel]

As many of you are, I'm uncertain about the future, and frankly concerned. But doomsday predicitions have never been right before (I suppose to someone, they were right, and I also suppose they need be right only once...). Humor aside, here goes.

I have relatively significant experience with survivial and self defense. Some hand to hand training, I'm above average fitness, and many years of military experience, to include several combat deployments. I also have significant firearms experience and proficiency. I am admittedly weak on food preps, gardening, and mechanical/electrical/metal working skills.

I listened to the "experts" about Y2K. I worried about it. Prison doors were supposed to swing open. Banks were supposed to crash. Financials were supposed to be erased. Computers lost. Gold was $300 an oz. We woke up on Jan 2, 2000 and it was a non event.

I watched in horror as we were attacked on 9/11/01, and I believed we would be attacked again by Nuke/Bio/Chem. Lots of small attempts that were largely unsuccessful (plane bombings, anthrax, etc.), but nothing large scale. Still, we have sacrificed a lot of liberty in defending liberty...

My profession is as a lawyer, but I have experience in the stock markets having worked as a stock broker in the past. Since I've been an investor, I've seen the highs and lows of the markets in 2000, 2001, 2006, 2008...

It concerns me that keeping my $ in the markets offers very little room for upside growth, but the very real potential for losing 25%, 50%, or heck even all of it in a collapse.

I'm very concerned about several real and likely and also not so likely 'events' we are faced with. We lost our manufacturing base. We owe 16.3 Trillion and counting. We can't balance a budget. We have powerful enemies that we cannot seem to stop, either armed with nukes or close to having them. Open borders to the south. We have very high real unemployment and tracked unemployment, and half of America wants to freeload rather than work. We have built a house of cards that is very delicate and we are spread too thin, and we don't have the right leaders to fix the problem.

1. The economy and what I believe is the coming collapse. 1 Trillion per year to run our Government. $16.3T in debts to nations that would consume us. 8% counted unemployment, and experts say real unemployment is over 15%. We lost our manufacturing base, which was our strength. Experts believe the debt and economy is our largest enemy and threat to the US. And it doesn't seem that there's a real solution. Our leaders in charge want more spending and social programs to stay in power. Dollar is rapidly falling in value. Fuel prices are tied to this too.

2. Iran ignoring sanctions and pursuing nukes. Iran made IEDs killed Americans in Iraq. Iran provides weapons to terrorists, including Hamas attacking Israel. America cannot or will not intervene. Why?

3. Terrorists organizations are no weaker than they were 10 years ago. Attacks this year demonstrate that they are here to stay, despite a 2 front Trillion dollar war and the symbolic death of UBL. They continue to try to get us. The US seems impotent to stop this or respond long term. Sooner or later, will they?

4. Oil and energy - the foundation of our wealth - is depleting without a viable replacement. Peak oil is near. The loss of oil will cause or contribute greatly to our loss in modern life privileges.

5. Open borders to Mexico. This allows terrorists and violent drug dealers have easy access. It also ensures a flood of voting base for social welfare programs for what I believe is a hostile takeover of the United States for people that want handouts.

6. Corrupt leaders and a divided nation. Our leaders are more intersted in socializing, expensive world travel, being popular, and lying to Americans rather than fixing problems and making hard choices that right this ship. Since Regan, the nation has been split about 50/50 and the parties continue to divide. I fear a liberal SCOTUS and the loss of the 2A, which is a real possibility.

Since the highs of 2000 and that crash, the Dow has gone from about 10000 to 12000, or up 20% in 12 years. That is a poor return of 2%. Meanwhile the Nasdaq has gone up from about 2000 to 3000 in that same 12 years, or about 30%, or less than 3% per year. I understand that over the long term, the markets have been great.

But the markets and economy have NEVER faced the REAL and GLOBAL problems we have today, as outlined above, with the noteworthy exceptions of the threat of nuclear war (which was real), and the great depression (which was a monetary policy issue that was man made and fixable), and the oil embargo, which was temporary.

With risk of total loss in the market, and a very low return, I can see no reason to remain in the market.
So my plan is to sell off and close out my IRA at a 10% loss on my profits. Then increase my prepping materials, including food, water storage, ammo, gold, and silver.

But experts and I were wrong before, and "doomsday" never came. However, had I bought gold at $300, or all that cheap ammo or supplies, I would be richer today.

Thoughts? Anyone care to endorse or talk me out of my plan?

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[aslinged]

Liquidate your IRA and buy preps.

 

[slimmer13]

Diversify future investments but dont cash out at a loss. Forget the IRA is even there. It is an insurance policy against the sky not falling.

 

[Nwcid]

Like anything else you need to keep your "money" diverse.

There is NOTHING in this world that is for sure to go up in value. As for prepping much of it will not hold its value either unless there is an emergency.

Food and water stocks need to be rotated to keep them fresh and ready to go. So unless you are using it all in your daily lifestyle that will be a loss.

Precious metals will always hold some value as has been proven since recorded time. Will it always be worth over $1000/oz, no. Will it be worth anything if there is a global collapse, not while people are starving. When there is a "rebuild" is where the value will come back.

Ammo and firearms are just as hit and miss. Ammo has had a steady upward trend but it could go down in price. Say for some reason there is a flood of surplus ammo prices will fall. IF there is some kind of ban that could effect it also, maybe up or down depending on what the ban was on. Guns are always up and down depending on what you buy. In 1993 at one of our local shops you could buy any Colt AR you wanted for $650. Then for over a decade you were excited to find any AR for $1000. Then the AWB ended in 2004 and price dropped a little so it was easy to find AR's for around $1000 again. Over the past few years the market has become so saturated with AR's you can find them for $650 again easily. No they are not Colts but they are still good guns. So in 1993 it says $1 is equal to $1.59 today. That means that a basic AR is almost 30% cheeper now then they were 20 years ago.

If you really want to "prep" well and with the least "cost" you need to make it part of your daily life. Use the stuff you "prep" with so it all get rotated and you are not left throwing things out.

 

[Crazyeye24]

Pour it into ammo...it'll be with it's weight in gold in the future.

 

[mjbskwim]

OK I have some cash.I don't like banks. I like to deal in cash. So I cash my retirement check and put it in with the guns and pull what i need out when I need it.
You can look at what goes up and down or you can look at it like the cost of everything usually goes up. That $1.50 candy bar used to be a nickel when I grew up.

So I see my cash,say 10k,as being worth a few dollars less every day.
Why not buy supplies you need now? The 10k will buy more today than in 6 months or 1 year.
Things could go down with certain trends,but YOU have to decide how long the downward spiral will go.

And if the bottom doesn't drop out,you don't have to buy food for the next few years.

 

[katsnatchfever]

I don't entirely disagree with your point of view, but there's a few things I'd like to throw in.

Debt: 16 trillion, but...11 trillion is held by "the public". 48% of that 11 trillion is held by foreign govts with China and Japan at 1 trillion each. If you trust wikipedia check "United States Public Debt". Now let me ask you: Have you ever considered how many countries owe the US? I'm not suggesting this would cover our debt, but we forgive debts all the time. When the media reports that we are giving foreign aid, a lot of the time that means we are forgiving a portion of their debt payments so they have more cash on hand. Japan isn't about to forgive 1 tril, but they have darn good interest in working with us so we can continue to service that debt.

Manufacturing base gone: Okay, A LOT is gone. BUT, the US is still the most productive nation in the world. Dont care? Okay, well the US exports are worth more than ANY other country including China. China makes tons of crap. The US has Boeing, Microsoft, etc... Even when China surpasses us, we will be #2. Is that the end of the world or changing times?

Currencies: Yes the dollar has lost value. As an American you are still one of the richest people on the planet. The world's average daily income is like $12. What do you make in a day? We are so spoiled it's ridiculous. Dollar has gone down, but our standard of living has gone WAY up. Don't stare at the #'s, look around you. Cell phones with broadband internet, advanced cars with horsepower AND decent MPG...I can go on and on. I'm sure someone will give examples of how crappy things are, but it's all about perspective. Zimbabwe has seen annual inflation rates at 1,000,000%. That's not a typo. They literaly created a 500 BILLION dollar bill. Now that's a declining currency. Look up what a loaf of bread is in an economy like that. Do you honestly think that we are as bad off, or going to be as bad off as these places? Remember we are a net exporter of grain...and we still get fat. We've all had to cut back, but we still have it pretty easy man.

Americans are going to have to adjust. It will be painful. But, we are still a resilient people and sometimes it takes a crisis to unify and bring sides back together. We will get past this. People are emotional right now. The freeloaders will always be freeloaders. My advice to them is get it while they can, it's going to end soon and they are still going to be worthless to society regardless of demographics or govt structure. Remember, this is the country that puts bubblegum on mars (with the help of others, I know). Do you really need to liquidate to have the proper preps? Don't go overboard with it. If you're that gunho, use your credit card reasonably to get some more supplies. If you like gold and silver then start accumulating but not with your IRA.

 

[EZLivin]

As many of you are, I'm uncertain about the future, and frankly concerned. But doomsday predicitions have never been right before (I suppose to someone, they were right, and I also suppose they need be right only once...). Humor aside, here goes. .

Thoughts? Anyone care to endorse or talk me out of my plan?

It sounds like you have a good grasp on the challenges the US and rest of the world faces. The only way you will sleep well at night is by making the decision that feels right for you, not by following somebody elses advice or plan.

As a side-note: This section of the board seems dominated by rabid "TEOTWAWKI FOREVER" thinking. Most of us know things have gone too far, and huge change is going to come (much of it not good as far as American living standards go), but, some sort of Armageddon, or Send-Us-Back-to-the-Stone-Age-Event, is not inevitable at this moment in history (or at any moment in history). Could it happen - yes. Will it happen - who the heck knows, but if history is a guide (which it is) the US and the world will emerge from this crisis as it has with every previous crisis. China, India, and the rest of the developing Far East, Mid East, and Latin America want the comforts that we take for granted in the West. Baring a worldwide cataclysm (which, again, is not inevitible), the chances are good the developing world is going to continue to grow and modernize. There is opportunity there. People need to stop being so mypic - there is a world outside our borders, and much of it is modernizing. That world is likely not going to disappear just because America and Europe is going through its crisis period. American society is likely to survive, but with living standards more like the 1950s or 1960s rather than the constantly predicted (here) Mad Max or The Road worlds.

 

[BAMCIS]

Both leadcouncil and katsnatchfever make very compelling arguments. I have to admit I too am in the same dilemma. I have military and LE training but I don't know if I should be stocking up on food, bullets and guns or putting more money in stocks. Oh what we'd all give for a crystal ball.

The commodities after a SHTF, end of times scenario are going to be (in this order) gold, bullets, and guns. The question is how long can one hold out? How long before some sort of order is restored? And how fragile will that order be after it is restored? Having said that how much prepping is REALLY necessary? A lot of preppers seem to think 30 days is enough. They seem to think if you can last 30 days then they'll be fine. Personally I don't think 30 days will be a real SHTF scenario. A real SHTF scenario will be years or even decades.

A better question to ask is (other than buying guns and lots of bullets) is it worth the time and money to “properly” prep now even you could? They way I see things is the stronger will be preying on the weak just as they have been since the beginning of time. So all you really need to do is make yourself a hard target the be able to take from the weak. Sooner or later your supplies are going to run out no matter how much prepping you do now and you will be forced to take what you need.

So I don't know if I can be of any help to you leadcouncil or not. But for now I find myself buybg more gold, guns and bullets than investments.

 

[Nwcid]

The very first step to prepping is be OUT OF DEBT. If you are in debt you will have problems long before any kind of economic collapse.

 

[ATCclears]

leadcounsel, I find my thinking similar to yours. I've done a LOT of preparing in the past 12 months. My retirement accounts are still there, but I have played the what-if game of what it would mean to yank the funds, take the tax hit, and then what would I do with it.

I do feel the markets are artificially inflated, especially by Quantitative Easing (QE).

In the shorter term, can you move to an all-cash position in your IRA accounts? You wouldn't earn anything, but you wouldn't take it in the groin if there was a 25% decline (or worse) in the markets in 2013.

You might also consider a partial IRA withdrawal. Per others, consider what preps you want to do for yourself and your family, current debts, and how to make it happen financially.

I do believe the USA will go on, but as a two-tiered society with deep poverty. Muggings will be more common. Funding for the current entitlement culture will not nearly be as extensive. Our country will become like Brazil or Argentina.

Peter

 

[MissJ]

I didn't read every response yet....pardon me if I'm repetitive.

I've had this same exact internal dialogue for 2+ years now- and I pretty much agree with your POV and conclusions. There is no easy answer. I'll tell you what I've done (with regards to retirement).

First off, I am fortunate enough to be in a position where I can (and do) save money outside of retirement, and also can (and do) devote money to preps.

As such, I've got a decent liquid "emergency savings" account and a decent mound of prepper items. I'm not set for life by any means, but we don't live paycheck to paycheck either. We could weather almost any natural disaster or short term unemployment. I think that is step #1. If you haven't secured your immediate future....why devote resources to the far off future?

You'll quickly find that if you are a wise shopper living within your means that it only takes a few months or a year to accomplish #1. OK- so now what?

This may shock you, coming from a prepper like me, but I say leave that money in your retirement portfolio. Just do it wisely. Because if our country and currency survives, I guarantee you that social security will be a joke. I don't know how old you are, but I am 31 and don't hold any hope of SS being there for me, but I do still hold hope of living into my seventies or eighties. Therefore....I've got to not only prepare for disasters, I've got to prepare for success....I don't want to be a 78 year old Wal-Mart greeter living with my grandkids and buying underwear at the dollar store.

I have no debt besides our home mortgage. If I did, I would say pay all those off, starting from highest to lowest interest (hopefully your home is the lowest interest)

I stopped contributing to my 401-K about 9 months ago. If the fiscal cliff thing ever levels off...I may start contributing at 3% again in the future.

I took a loan against 50% of my 401-K and I pay the interest back to myself. There was a $100 fee for this transaction, but I incurred no tax penalties. That money is no longer at risk in the stock market. I used that money for needed home repairs and upgrades that I COULD have depleted my emergency cash for, but opted for this instead because, like you, I feel the stock market is currently overvalued (like our housing market was back in 2007.)

I took the remaining 50% of my retirement and put it into a Money Market Account, but I paid no penalties since it is still invested in the fund. I earn almost nothing on this money, but it is a little bit more insulated from market forces. The downside is obviously that if something quickly sends the economy crashing I won't have time to extract the cash before the banks shut down. To that I respond "Oh well. That money was for the future anyways...I never relied on it for my day to day"

I mentioned that I am not contributing to my 401-K anymore, so what am I doing with that extra cashflow? I am paying down the principle on our mortgage. It is the same basic idea as "investing in the long term" but without the volatile risk of the stock market. If our currency survives, then paying down my mortgage at 4.75% interest will serve me well. If our currency doesn't survive, then I've got much bigger problems to worry about....

I just don't see all the risk of the stock market crashing being worth the possible reward of gaining a few percent increase per year when I COULD be investing in something I already want and need now and in the future....which is my own home....REAL PROPERTY on acreage in the country that I could live in until I die and then leave to my kids or grandkids.

 

[Burt Gummer]

The $596 trillion in derivatives debt will implode at some point and anything tied to paper will burn and turn to dust, including your IRA.

 

[MissJ]

Both leadcouncil and katsnatchfever make very compelling arguments. I have to admit I too am in the same dilemma. I have military and LE training but I don't know if I should be stocking up on food, bullets and guns or putting more money in stocks. Oh what we'd all give for a crystal ball.

The commodities after a SHTF, end of times scenario are going to be (in this order) gold, bullets, and guns. The question is how long can one hold out? How long before some sort of order is restored? And how fragile will that order be after it is restored? Having said that how much prepping is REALLY necessary? A lot of preppers seem to think 30 days is enough. They seem to think if you can last 30 days then they'll be fine. Personally I don't think 30 days will be a real SHTF scenario. A real SHTF scenario will be years or even decades.

A better question to ask is (other than buying guns and lots of bullets) is it worth the time and money to "properly" prep now even you could? They way I see things is the stronger will be preying on the weak just as they have been since the beginning of time. So all you really need to do is make yourself a hard target the be able to take from the weak. Sooner or later your supplies are going to run out no matter how much prepping you do now and you will be forced to take what you need.

So I don't know if I can be of any help to you leadcouncil or not. But for now I find myself buybg more gold, guns and bullets than investments.

hmmmm....I guess I agree with the general spirit of your post, but not the details.

As to the "commodities"...I think the first things that we will notice are unavailable to us will be: Gas, ammo, food. in that order.

as to the order of things that people will desperately trade for I think they will be gas, food, medicine, ammo in roughly that order.

Although I stock gold and silver I don't foresee it being real helpful in surviving an event....more as an investment/hedge for when the crisis is over.

 

[Grunwald]

I would strongly advise you against cashing out your IRA or 401K.
If you do you, the amount of your withdrawal will be added to your earnings and you will pay income tax on that, plus a 10% penalty (no penalty if you're over 59.5).

People keep bringing up Y2K as a non event. I work as a programmer, so trust me that the only reason it was a none even is because billions were spent to patch all the systems. Granted, some of the predictions that were floating around were stupid, but the risk was real.

If you really want to invest in things other than the stock market look into self managed IRAs. You can buy real estate, notes etc.

 

[MissJ]

The $596 trillion in derivatives debt will implode at some point and anything tied to paper will burn and turn to dust, including your IRA.

If everyone paid taxes at a 100% rate the debt as is it now would take 22 years to pay off. Since it is rising exponentially, even that would not be possible.

So, what in layman terms does an IRA let you do for you? It lets you put money aside w/o paying taxes on it now in favor of paying taxes on it later. The problem is, taxes 'later' will be much higher.

Without the mathematical certainty of a dollar collapse brought into the equation, and your IRA going 'poof', it still is a faulty premise. Banks and money men are criminal in nature, don't give them so much power over your future. You might also want to rethink swallowing all their propaganda while you are at it (Iran, etc).

That's a great idea that I had rattling around somewhere in the back of my mind, but you formulated it so nicely for me...

Most of the retirement investing that I do is in a ROTH IRA (after taxes now, no taxes later). I used to do some through my employer on an after tax basis...but thanks for making me re-think that....

 

[Burt Gummer]

We have nothing to recover with; we are gutted, immoral, entitlement-minded and ready for one serious wake up call. Just because we are 'Americans' won't mean squat.

The benefactors will be the people of nations that have lived like cockroaches up to the time of the global economic collapse.

Americans are too busy worrying about Lindsay Lohan and digesting propaganda to care about the freight train headed right for them.

 

[Boomerang]

Don't do it.

A catastrophic event that causes instantaneous collapse and mayhem in the streets could happen but is improbable. Most likely we will see more inflation, higher prices, and more social unrest, but drawn out over time. So you don't urgently need 20 years worth of preps socked away before January.

What I would do is make a budget. With any money left over for saving, start putting 10% in a cash emergency fund, 20% in preps, 20% in precious metals as a hedge against inflation, 20% in the stock market via growth mutual funds, 10% in firearms, and the other 20% save it however you want-- maybe in real estate or maybe in one of the previous categories. There may come a time when you need lots of preps. In the meantime, you may need fiat cash for things and you might as well make some money in traditional forms of investing.

It is wise to prep and think ahead. It's also wise to have a balanced approach to things because what we imagine might happen probably won't play out exactly like we are envisioning.

Oh, and don't keep putting all your savings in the IRA, but leave what you have there. Start prepping with your current income.

 

[8ball]

Humans have been predicting apocalypses since the first written word. It sounds like you've already lived through two potential TEOTWAWKI events at first hand, and neither resulted in major disruption to our civilization. At some level, I think this sort of thinking is hard wired into human brains, especially as we get older.

Like everyone here, I like being prepared, but it's primarily for natural disasters (and a weird hobby). Diversifying your investments against market risk is a good idea too. But sinking everything into the prepper approach is just crazy IMHO.

 

[Burt Gummer]

Normalcy Bias is a bubblegum. Conditions (all nations having a fiat currency based on nothing) and many, many factors have never existed like they are right now. Collapse is a mathematical certainty.