Liquidate IRAs and 401Ks or Suffer Grievous Losses

By: Mac_Slavo

As government ramps up spending and continues its attempts to stimulate the US economy, Americans are being further burdened with an irreversible debt liability. The fact of the matter is that US government tax revenues, which are roughly $4 trillion per year, are nowhere close to providing the amount of money that government needs for current and future expenditures.

This means that at some point in the future, when government comes under pressure from debt buyers to raise interest rates in order to offset the risk of a depreciating dollar and potential for default, the interest payments on our debt will rise significantly. Some estimates suggest that 60% of our outgoing payments will eventually be interest - a number so large that it will literally destroy the US economic system as we know it. At some point, our international line of credit (provided by China, Russia, Japan, et. al.) will be cut off.

In a last ditch effort to prevent complete financial, economic, political and social collapse, the government, like those in Argentina and Hungary, will move to seize private assets of Americans. Those assets are primarily held in IRA and 401k retirement accounts and they will become the targets of government intervention.

If you’re not sure what to do to prevent your wealth from being wiped out, we recommend Elitists Leading On An Odyssey Of Economic Ruin by International Forecaster Bob Chapman for some insights:

Considering what the Federal Reserve and the US Treasury have done over many years we believe we can expect a continuation of fiscal spending and more money and credit to be injected into the economy. That will lead to higher inflation, which could lead eventually to hyperinflation. In preparation in businesses or professionally, or individually, your cost of doing business or living should be reduced and those savings should be used to purchase gold and silver bullion coins and shares. This is the only way you can protect your investable assets. Business and job opportunities have already fallen off a cliff and we believe that situation will get much worse.

Many of you have IRAs and 401Ks, which we have said your government would like to get their hands on. They are not going to stop pursuing these savings, so you have to act before they do. The government desperately needs that $6 trillion. These funds are at risk, even if all you have in these vehicles are only gold and silver coins or shares. If legislation is passed confiscating these assets and you are given a government guarantee on return, you end up with 100% of nothing. Based on that IRAs and 401Ks should be systematically liquidated with an eye toward tax consequences and penalties. Those who refuse to do so will suffer grievous losses.

If the dollar loses 50% of its value versus other major currencies or even more versus gold and silver you will suffer a major loss of buying power. Those are losses versus inflation. If we have hyperinflation the losses will be even worse. That means you have to get a loan against your 401k and invest those funds in gold and silver related assets. 401Ks and pensions are invested in stocks, bonds and other possible illiquid assets. If the stock and bond markets fall you could lose a big part of your savings. Get whatever you can out now while you still can.

While we generally shy away from providing investment advice, it is important to point out that having your eggs in one basket may lead to disaster, just when you need your money the most.

Many financial advisers suggest a balanced portfolio of stocks and bonds. This strategy has worked since the 1960’s, and many advisers believe it will work going forward. Just listen to any Sunday afternoon AM talk show host promoting mutual funds. They’ll set you up with a diversified portfolio of blue chip stocks, US Treasuries and corporate bonds. In the past, when one went up, the other went down - providing security for savings.

In today’s economic and fiscal environment, however, this may not be the best strategy to take. The risks facing the dollar are real - even mainstream analysts will agree on that. Now, consider what might happen if the dollar does collapse. For one, bonds will detonate - which means that your bond portfolio holdings would crash. Subsequently, as bonds and the dollar drop, stock markets may as well - simply out of panic - and they may stay depressed for years. During the 1970’s recession, stocks saw no growth over a 10 - 12 year period. In the Great Depression, it took nearly 20 years before growth resumed. If you are depending on portfolio growth during this crisis, consider that it might not happen - potentially, your account will dwindle over the next decade or two, rather than grow. Even if stocks do rise, if the US dollar collapses, along with the economy, the price rises in stocks may not keep up with inflation in core necessities like food and energy. Potentially, you could see record highs in stock prices, but they would  mean nothing if the price of essentials went up 100%, 200% or 500% over the same period.

Rethinking your investment strategy, especially if your time horizon for retirement is 5 - 20 years, would be a prudent idea at this time. While you may not want to risk taking all of your eggs from your IRA or 401k basket and putting them exclusively into a precious metals basket, consider having multiple baskets that include precious metals (and other hard commodity investments). Contrarian financial professionals and forecasters like Marc Faber, Gerald Celente, David McCalvany, and Jim Rogers have recommended that 10% to 30% of your personal assets should be held in precious metals and/or hard commodities.

Otherwise you run the risk that your private account will soon be managed by the US government under that guise that pensions need to be fairly redistributed to everyone for the betterment of the United States as a whole.

By Mac Slavo
http://www.shtfplan.com/

Mac Slavo is a small business owner and independent investor focusing on global strategies to protect, preserve and increase wealth during times of economic distress and uncertainty. To read our commentary, news reports and strategies, please visit www.SHTFplan.com

© 2010 Copyright Mac Slavo - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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