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***SPRAYER
08-25-2009, 06:04 AM
http://finance.yahoo.com/expert/article/richricher/184720

"Is the crisis over?" is a question I am often asked. "Is the economy coming back?"
My reply is, "I don't think so. I would prepare for the worst."

Like most people, I wish for a better future for all of us. Life is better when people are working, happy, and spending money.

The stock market has been going up since March 9, 2009. Talk of "green shoots" fill the air. Yet, in spite of the more positive news, I continue to recommend that people prepare for the worst. The following are some of my reasons:

1. I believe the stock market is being manipulated. I suspect the government, banks, and Wall Street are doing everything they can to keep the market from crashing. Our leaders know that nothing makes the world feel better than a raging bull market.

Do I have any proof that the market is being manipulated? No. I just smell a rat, or a pack of rats. I believe greed, self-interest, arrogance, and fear control the financial markets. I suspect those in charge will do anything to keep us all from panicking... and I don't blame them. A global panic would be ugly and dangerous.

2. In my view, this global crisis has been caused by the Federal Reserve Bank, the U.S. Treasury, Wall Street, and the central banks of the world. They caused the problem, profited excessively in doing so, and now profit by being asked to fix the problem.

Every time I hear a politician mention the word stimulus, my mind flashes back to high school biology class, when I touched battery wires to a dead frog to make it twitch. Today, you and I are the dead frogs. Pretty soon the dead frog will be fried frog.

In the 1980s, our government's hot money stimulus was measured only in the millions of dollars. By the 1990s, the government had to ramp the stimulus voltage into the billions in order to get the frog to twitch. Today the frog has jumper cables with trillions in high-voltage hot money pouring through the lines.

While most us feel better when we have more high-voltage money in our hands, none of us feel good about higher taxes, increasing national debt, and rising inflation for the long term. Another old saying goes, "Sometimes the cure is worse than the disease." I say the government stimulus cure is killing us frogs.

3. Old frogs don't hop. Another reason I am cautious about the future is that the Western world has a growing number of old frogs. Between 1970 and 2000, the economy responded to bailouts and stimulus packages because the baby boomers of the world were entering their greatest earning years -- their purchasing power increased, and demand for homes, cars, refrigerators, computers, and TVs boosted the economy.

The stimulus plans seemed to work. But when a person turns 60, their spending habits change dramatically. They stop consuming and start conserving like a bear preparing for winter. The economy of the Western world is heading into winter. Hot wires and hot money will not get old frogs to hop. Old frogs will simply join the bears and stick that money in the bank as they prepare for the long, hard winter known as old age. The businesses that will do well in a winter economy are drug companies, hospitals, wheelchair manufacturers, and mortuaries.

4. The dying frog economy will lead us to the biggest Ponzi schemes of all: Social Security and Medicare. If we think this subprime financial crisis is big, it's my opinion that this crisis will be dwarfed by the crisis brewing in Social Security and Medicare...Medicare being the biggest crisis of all. As old frogs head for the big lily pad in the sky, they will demand young frogs spend even more in tax dollars just to keep old frogs from croaking.

5. The 401(k)Ponzi scheme. A Ponzi scheme, like the scheme Madoff ran, depends upon young money to pay off old money. In other words, a Ponzi scheme needs tadpoles to finance old frogs. The same is true for the 401(k) and other retirement plans to work. If young money does not come into the stock market, the old money cannot retire. One reason so many people my age are worried, not only about Social Security and Medicare, is because they're concerned about getting their money out of the stock market before the other old frogs decide to drain the swamp.

The facts are that the 401(k) plan has a trigger that requires old frogs to begin withdrawing their money at a certain age. In other words, as baby boomers grow older, more and more will be required, by law, to begin withdrawing their money from the market. You do not have to be a rocket scientist to know that it is hard for a market to keep going up when more and more people are getting out.

The reason the 401(k) has this law related to mandatory withdrawals is because the Federal government wants to collect the taxes that they deferred when the worker's money went into the plan. In other words, the taxman wants their pound of flesh. Since they allowed the worker to invest without paying taxes, the government wants their tax dollars when the employee retires. That is why the laws require older workers to sell their shares ¬-- and pay their pound of flesh.

Demographics show that we are entering a battle between young and old. I call it the "Age War." The young want to hang onto their money to grow their families, businesses, and wealth. The old want the tax and investment dollars of the young to sustain their old age.

This war is not coming...it is upon us now. This is one of many reasons why I remain cautious and say, "The worst is yet to come."

patteeu
08-25-2009, 08:31 AM
The author is wrong about 401(k)s though. There is no requirement to withdraw 401(k) funds from the market. There is only a requirement to unshelter those funds and expose them to a tax event. The funds remaining after the government takes it's payoff can remain in the market.

Otherwise, your depressing article has the ring of truth to it. :(

KC native
08-25-2009, 09:33 AM
The author is wrong about 401(k)s though. There is no requirement to withdraw 401(k) funds from the market. There is only a requirement to unshelter those funds and expose them to a tax event. The funds remaining after the government takes it's payoff can remain in the market.

Otherwise, your depressing article has the ring of truth to it. :(

Yes there is. It's called Required minimum distributions.

http://www.irs.gov/retirement/article/0,,id=96989,00.html
What are Required Minimum Distributions?

Required Minimum Distributions (RMDs) generally are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 70 ˝ years of age or, if later, the year in which he or she retires. However, if the retirement plan account is an IRA or the account owner is a 5% owner of the business sponsoring the retirement plan, the RMDs must begin once the account holder is age 70 ˝, regardless of whether he or she is retired.

Retirement plan participants and IRA owners are responsible for taking the correct amount of RMDs on time every year from their accounts, and they face stiff penalties for failure to take RMDs.

When a retirement plan account owner or IRA owner dies before RMDs have begun, different RMD rules apply to the beneficiary of the account or IRA. Generally, the entire amount of the owner’s benefit must be distributed to the beneficiary who is an individual either (1) within 5 years of the owner’s death, or (2) over the life of the beneficiary starting no later than one year following the owner’s death. See Publication 590 , Individual Retirement Arrangements (IRAs), for complete details on when beneficiaries must start receiving RMDs.

Return to List of FAQs

What types of retirement plans require minimum distributions?

The RMD rules apply to all employer sponsored retirement plans, including
profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans. The RMD rules also apply to traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs.

The RMD rules also apply to Roth 401(k) accounts. However, the RMD rules do not apply to Roth IRAs while the owner is alive.

KC native
08-25-2009, 09:40 AM
http://finance.yahoo.com/expert/article/richricher/184720

"Is the crisis over?" is a question I am often asked. "Is the economy coming back?"
My reply is, "I don't think so. I would prepare for the worst."

Like most people, I wish for a better future for all of us. Life is better when people are working, happy, and spending money.

The stock market has been going up since March 9, 2009. Talk of "green shoots" fill the air. Yet, in spite of the more positive news, I continue to recommend that people prepare for the worst. The following are some of my reasons:

1. I believe the stock market is being manipulated. I suspect the government, banks, and Wall Street are doing everything they can to keep the market from crashing. Our leaders know that nothing makes the world feel better than a raging bull market.

Do I have any proof that the market is being manipulated? No. I just smell a rat, or a pack of rats. I believe greed, self-interest, arrogance, and fear control the financial markets. I suspect those in charge will do anything to keep us all from panicking... and I don't blame them. A global panic would be ugly and dangerous.

2. In my view, this global crisis has been caused by the Federal Reserve Bank, the U.S. Treasury, Wall Street, and the central banks of the world. They caused the problem, profited excessively in doing so, and now profit by being asked to fix the problem.

Every time I hear a politician mention the word stimulus, my mind flashes back to high school biology class, when I touched battery wires to a dead frog to make it twitch. Today, you and I are the dead frogs. Pretty soon the dead frog will be fried frog.

In the 1980s, our government's hot money stimulus was measured only in the millions of dollars. By the 1990s, the government had to ramp the stimulus voltage into the billions in order to get the frog to twitch. Today the frog has jumper cables with trillions in high-voltage hot money pouring through the lines.

While most us feel better when we have more high-voltage money in our hands, none of us feel good about higher taxes, increasing national debt, and rising inflation for the long term. Another old saying goes, "Sometimes the cure is worse than the disease." I say the government stimulus cure is killing us frogs.

3. Old frogs don't hop. Another reason I am cautious about the future is that the Western world has a growing number of old frogs. Between 1970 and 2000, the economy responded to bailouts and stimulus packages because the baby boomers of the world were entering their greatest earning years -- their purchasing power increased, and demand for homes, cars, refrigerators, computers, and TVs boosted the economy.

The stimulus plans seemed to work. But when a person turns 60, their spending habits change dramatically. They stop consuming and start conserving like a bear preparing for winter. The economy of the Western world is heading into winter. Hot wires and hot money will not get old frogs to hop. Old frogs will simply join the bears and stick that money in the bank as they prepare for the long, hard winter known as old age. The businesses that will do well in a winter economy are drug companies, hospitals, wheelchair manufacturers, and mortuaries.

4. The dying frog economy will lead us to the biggest Ponzi schemes of all: Social Security and Medicare. If we think this subprime financial crisis is big, it's my opinion that this crisis will be dwarfed by the crisis brewing in Social Security and Medicare...Medicare being the biggest crisis of all. As old frogs head for the big lily pad in the sky, they will demand young frogs spend even more in tax dollars just to keep old frogs from croaking.

5. The 401(k)Ponzi scheme. A Ponzi scheme, like the scheme Madoff ran, depends upon young money to pay off old money. In other words, a Ponzi scheme needs tadpoles to finance old frogs. The same is true for the 401(k) and other retirement plans to work. If young money does not come into the stock market, the old money cannot retire. One reason so many people my age are worried, not only about Social Security and Medicare, is because they're concerned about getting their money out of the stock market before the other old frogs decide to drain the swamp.

The facts are that the 401(k) plan has a trigger that requires old frogs to begin withdrawing their money at a certain age. In other words, as baby boomers grow older, more and more will be required, by law, to begin withdrawing their money from the market. You do not have to be a rocket scientist to know that it is hard for a market to keep going up when more and more people are getting out.

The reason the 401(k) has this law related to mandatory withdrawals is because the Federal government wants to collect the taxes that they deferred when the worker's money went into the plan. In other words, the taxman wants their pound of flesh. Since they allowed the worker to invest without paying taxes, the government wants their tax dollars when the employee retires. That is why the laws require older workers to sell their shares ¬-- and pay their pound of flesh.

Demographics show that we are entering a battle between young and old. I call it the "Age War." The young want to hang onto their money to grow their families, businesses, and wealth. The old want the tax and investment dollars of the young to sustain their old age.

This war is not coming...it is upon us now. This is one of many reasons why I remain cautious and say, "The worst is yet to come."

As far as the author is concerned, this guy is garbage. He advocates concentration instead of diversification. He used nothing but anecdotes in his writing and now we're supposed to listen to his advice regarding what happened in the financial crisis? ROFL

Beyond that, 401(k)'s are not a ponzi scheme. If you choose illiquid investments within your 401(k) then that's your problem.

patteeu
08-25-2009, 10:12 AM
Yes there is. It's called Required minimum distributions.

http://www.irs.gov/retirement/article/0,,id=96989,00.html

You're supposed to be some kind of financial genius? Wow.

No, there is nothing that says that a required minimum distribution (RMD) has to be withdrawn from the market. It has to be withdrawn from the 401(k) but it can be taken in the form of stock (http://www.amper.com/publications/review/w09-2-rmd-tax-deferred.asp) instead of cash, thus leaving the bulk of the money invested in the market.

When during the year the owner takes the RMD will depend on other available retirement assets and income needs. One basic strategy taps assets in taxable accounts first to allow the assets in tax-deferred accounts to keep growing. The same line of thinking suggests postponing RMDs until the last possible date to allow those assets to continue growing tax-deferred as long as possible. Another strategy calls for taking the RMD in stock and holding the stock to defer taxes on the appreciation, instead paying capital gains tax when the stock is sold.

KC native
08-25-2009, 10:27 AM
You're supposed to be some kind of financial genius? Wow.

No, there is nothing that says that a required minimum distribution (RMD) has to be withdrawn from the market. It has to be withdrawn from the 401(k) but it can be taken in the form of stock (http://www.amper.com/publications/review/w09-2-rmd-tax-deferred.asp) instead of cash, thus leaving the bulk of the money invested in the market.

You are still going to pay income tax on the value of the distribution which then opens you up for capital gains tax down the road.

FTR, I don't deal with personal level details. I don't deal with individual clients and ERISA is a complicated set of rules.

patteeu
08-25-2009, 10:38 AM
You are still going to pay income tax on the value of the distribution which then opens you up for capital gains tax down the road.

Yes, I said that in my original post. It could have been more gracious, but at least you've admitted that I was right from the beginning.

KC native
08-25-2009, 10:40 AM
Yes, I said that in my original post. It could have been more gracious, but at least you've admitted that I was right from the beginning.

Yes, misunderstanding on the verbage.

patteeu
08-25-2009, 10:42 AM
Yes, misunderstanding on the verbage.

Fair enough. :thumb:

***SPRAYER
08-25-2009, 04:17 PM
Beyond that, 401(k)'s are not a ponzi scheme. If you choose illiquid investments within your 401(k) then that's your problem.

He didn't say they were--- he said that social security is a ponzi scheme.

KC native
08-25-2009, 04:20 PM
He didn't say they were--- he said that social security is a ponzi scheme.

Look at his 5th point again dumbass.

http://finance.yahoo.com/expert/article/richricher/184720



5. The 401(k)Ponzi scheme. A Ponzi scheme, like the scheme Madoff ran, depends upon young money to pay off old money. In other words, a Ponzi scheme needs tadpoles to finance old frogs. The same is true for the 401(k) and other retirement plans to work. If young money does not come into the stock market, the old money cannot retire. One reason so many people my age are worried, not only about Social Security and Medicare, is because they're concerned about getting their money out of the stock market before the other old frogs decide to drain the swamp.

The facts are that the 401(k) plan has a trigger that requires old frogs to begin withdrawing their money at a certain age. In other words, as baby boomers grow older, more and more will be required, by law, to begin withdrawing their money from the market. You do not have to be a rocket scientist to know that it is hard for a market to keep going up when more and more people are getting out.

The reason the 401(k) has this law related to mandatory withdrawals is because the Federal government wants to collect the taxes that they deferred when the worker's money went into the plan. In other words, the taxman wants their pound of flesh. Since they allowed the worker to invest without paying taxes, the government wants their tax dollars when the employee retires. That is why the laws require older workers to sell their shares ¬-- and pay their pound of flesh.

Stewie
08-25-2009, 04:26 PM
As far as the author is concerned, this guy is garbage. He advocates concentration instead of diversification. He used nothing but anecdotes in his writing and now we're supposed to listen to his advice regarding what happened in the financial crisis? ROFL

Beyond that, 401(k)'s are not a ponzi scheme. If you choose illiquid investments within your 401(k) then that's your problem.

Whew! I was really concerned that diversifying would have lost people a ton of money. Glad that didn't happen.

KC native
08-25-2009, 04:29 PM
Whew! I was really concerned that diversifying would have lost people a ton of money. Glad that didn't happen.

:rolleyes: Hey, we all can't buy gold coins over 8 years and then claim we're up 800%

Stewie
08-25-2009, 04:41 PM
:rolleyes: Hey, we all can't buy gold coins over 8 years and then claim we're up 800%

Sorry you missed the boat. Did you see that China sold dollars for things that matter? Their U.S. dollar holdings are down to $700 billion while they've spent those dollars on copper, oil, metals, and other natural resources to the fools that would sell it to them. They know what real money is. It's not something you get from a bank and is printed for 20 cents when it says $100.

Dow equivalent gold = 13,225

Yeah, I'm really happy with my investments. I'll buy/sell as I see fit.

KC native
08-25-2009, 04:48 PM
Sorry you missed the boat. Did you see that China sold dollars for things that matter? Their U.S. dollar holdings are down to $700 billion while they've spent those dollars on copper, oil, metals, and other natural resources to the fools that would sell it to them. They know what real money is. It's not something you get from a bank and is printed for 20 cents when it says $100.

Dow equivalent gold = 13,225

Yeah, I'm really happy with my investments. I'll buy/sell as I see fit.

Have I ever stated I believed the dollar was strong?

Beyond that, money is whatever people say it is. Rocks, metals, paper, etc. BTW if the Chinese start selling dollars that is the best thing that could happen to us. First off, the Yuan would rise relative to the dollar and the cheap chinese imports would no longer be cheap. This would crater their economy because they don't have enough internal demand to sustain their manufacturing.

Stewie
08-25-2009, 04:52 PM
Have I ever stated I believed the dollar was strong?

Beyond that, money is whatever people say it is. Rocks, metals, paper, etc. BTW if the Chinese start selling dollars that is the best thing that could happen to us. First off, the Yuan would rise relative to the dollar and the cheap chinese imports would no longer be cheap. This would crater their economy because they don't have enough internal demand to sustain their manufacturing.

Good lord. They re-pegged the Yuan to the dollar in May. Where have you been?

KC native
08-25-2009, 04:55 PM
Good lord. They re-pegged the Yuan to the dollar in May. Where have you been?

And that's not enough. It is still pegged to the dollar and only allowed to vacillate within a range. Until it is free floating it will be undervalued.

Stewie
08-25-2009, 05:00 PM
And that's not enough. It is still pegged to the dollar and only allowed to vacillate within a range. Until it is free floating it will be undervalued.

Not enough of what? They fucking RE-PEGGED!

I have a question. Do you know why Obama is suddenly going to China in November? A hint: it's kind of important.

KC native
08-25-2009, 05:06 PM
Not enough of what? They ****ing RE-PEGGED!

I have a question. Do you know why Obama is suddenly going to China in November? A hint: it's kind of important.

It shouldn't be pegged at all. China manipulates their currency by keeping it artificially low by their purchases of dollars. China should have a freely floating currency.

Also, I wouldn't call a twice a year meeting suddenly. But since you obviously have a point you want to make, go ahead and make it.

Stewie
08-25-2009, 05:25 PM
It shouldn't be pegged at all. China manipulates their currency by keeping it artificially low by their purchases of dollars. China should have a freely floating currency.

Also, I wouldn't call a twice a year meeting suddenly. But since you obviously have a point you want to make, go ahead and make it.

1) China is selling dollars (pegged or not). In fact, they don't care about dollars, they want assets.

2) Really? You don't know the significance of what happens in November?

Halfcan
08-25-2009, 05:35 PM
sorry I would not put one penny in a 401 k

***SPRAYER
08-25-2009, 06:26 PM
Look at his 5th point again dumbass.

There is no need for name calling. Rich Dad Poor Dad makes a good point, not sure if I agree with it.

Social Security on the other hand, is a Ponzi scheme, no different than what Madoff did.

***SPRAYER
09-10-2009, 02:31 PM
http://www.thepeoplescube.com/images/NEA_Agitprop_Lenin_Mickey_Obama.jpg

2bikemike
09-10-2009, 03:24 PM
sorry I would not put one penny in a 401 k

Not even the minimum to get the maximum company match?