Can You Afford to Buy as much Silver and Gold as you'd like?

[Chief]

While I cannot afford to buy as many silver as I'd like, I do buy what I can with these sub-20 prices.
Since I started stacking, prices have never been lower.

[TwoPenniesEarned]

Just curious... hypothetically, lets say you had an old employer's 401-k that's earned $10,000 but has been mostly stagnant for the last couple of years. Would you be apt to take the early withdrawal penalty (10%), AND income tax penalty (~25%) to cash out and buy PMs right now?

I think this is a good idea and did it myself. Granted my conventional IRA/RRSP was pretty small, I took the hit and moved into what is called a "TFSA" in canada which is not taxed at all, ever. I bought PM mining stocks with a bunch of it. And I don't add money to this account but rather stack physical.

The reason that I checked out of my IRA/RRSP is that I think that the government will end up reaching into our retirement savings to support the next banker bailouts, either overtly or covertly through inflation and financial repression. So as a worst-case they will directly help themselves to your savings a la Cyprus, and in a best case you will end up having the IRA/RRSP grow artificially as a result of inflation, so it will appear to be getting larger while in fact it will only be holding its purchasing power if you are lucky. As the retirement savings appear to grow, so too does the amount of tax that you will pay when you take them back out. So if you have $100,000 in your retirement savings account today, it might grow to $400,000 by the time you retire, but the purchasing power might end up being the equivalent of $90,000 today. The problem with this is that you will be paying taxes on $400,000 when you take it out instead of paying taxes on $100,000 today. Plus, tax rates are likely going to increase as we come to grips with government bankruptcy. So today you could withdraw the $100,000 and pay 30% tax or whatever, ending up with $70,000. Where as in the future you will need to pay taxes on 400,000 at possibly much higher rates of taxation.

Even assuming tax rates do not increase, you will still end up paying more to get the money out because of the way progressive income tax works. Our tax brackets are based on a progression of income between low and high income, set at a time when $100,000/year was very very high. So if you earn $25,000/year you pay very little taxes, where if you earn $50,000 you pay some taxes, and if you make $100,000 plus you pay a TON of taxes.

So today, it would take you only four years to withdraw your $100,000 in $25,000 chunks and pay the low tax rate. Whereas in the future it would take you sixteen years to withdraw $400,000 at the same low tax rate. So if in the future you want to withdraw an amount of money that has (almost) the same spending power as $25,000 today, you will need to withdraw $100,000, and thus you will be taxes as having a very high income.

This type of BS forms the basis of financial repression. IE how governments inflate their way out of debt and obligations, and pass the buck onto innocent savers.

Christine Legard with the IMF was recently on record actually recommending financial repression, and voicing the opinion that outright expropriating up to 10% of wealth to stave off state bankruptcy is acceptable. I'll find her comments and post them.

[TwoPenniesEarned]

I found the pension / savings expropriating link:

Christine LeGard, head of the IMF, who lives in France yet somehow doesn't pay any taxes herself, recommended that governments can hide defaulted debt in the investment portfolios of savers, by stuffing the debt into local pension funds and insurance policies:

The distinction between external debt and domestic debt can be quite important. Domestic debt issued in domestic currency typically offers a far wider range of partial default options than does foreign currency–denominated external debt. Financial repression has already been mentioned; governments can stuff debt into local pension funds and insurance companies, forcing them through regulation to accept far lower rates of return than they might otherwise demand.
- Christine LeGard, IMF

Legarde goes on to recommend that governments can expropriate up to 10% of real estate, securities and savings from the public in the event of an imminent state bankruptcy. She says that another method of defaulting on debts would be to indefinitely extend the maturation date of bonds. So if you own a maturing bond, Legarde's suggestion is that the government simply keep the principal and continue paying you X rate of interest, rather than paying your money back on the maturity date as promised.

http://www.zerohedge.com/news/2014-07-0 ... oman-world

It is not a safe time to have your assets within reach of the government.

[Gobirds66]

Just curious... hypothetically, lets say you had an old employer's 401-k that's earned $10,000 but has been mostly stagnant for the last couple of years. Would you be apt to take the early withdrawal penalty (10%), AND income tax penalty (~25%) to cash out and buy PMs right now?

Funny you would bring up such a hypothetical. I will turn it into an actual.

I had a 401K with my company that matched dollar for dollar up to 3% and I was immediately vested. All my money. So, I contributed 3%, got the matching 3%, kept it in as low of a fee mutual fund as the company would allow, and let it grow while I was at the company. When I left 3 years later, and being just under 40 years old at the time, I took a cashout of my entire 401K. Of course, every single person that I encountered to make this happen (plan facilitator, broker, financial investment guy for the broker) all tried to scare me into keeping my money in some kind of government tracked program (rollover to new 401K, IRA, etc.) I just laughed. I asked them all the same question and never got a satisfactory answer. The question? "What will my tax rate be when I can legally withdraw this without a penalty at 59 1/2?" Answers I got ranged from "There is no way to know that!" to "Less than what your tax rate is now since your income will be lower" and just about any other non-answer you can think of for that question. No one could predict the future for me, which was when I knew what I was doing was right.

I calculated that I would lose no more than 40% of the entire amount. So, in our scenario, let's assume I had no gains (due to fees eating up any return, a bad market, economy tanks, etc.) which means I contributed $5000 and my company contributed $5000. I would have lost $4000.00 for taxes and penalties. That leaves me $6000.00 to take with me. Since I only put in $5000, I get my portion essentially tax free and I get a 20% return on my money...after taxes. Now, when you add in the actual gains that a person would likely realize in addition to the contributions, the percentage of return just gets higher.

In my situation, I took my money, I tagged home with it by putting it in PM's. Now the government cannot see it, they cannot tax it, or tap it. They cannot federalize it, and they cannot find it to take it. I do have other investments as well just to diversify myself, just not in a government tracked program. I choose to invest long term in things where it is harder for the government to change the rules as they choose.

Oh, and after about a year, I went back with the company. Yeah, you guessed it. I started my 401K again....it is collecting money again, half by me, half by my company, and when I leave, I will take it again. The advisors who drink the 401K Kool-aid will think I am a little crazy again and probably try to talk me out of it so they can keep the fleecing of my account, but I have a plan that fits me that will get me to my end game, hopefully sooner than later. The reason why this works is because I am willing to sacrifice the company's portion of the money and do not view it as my own...and I am vested on day one. If I had to wait 3-5 years to be vested, this would not work as well if you left before being vested. If I had a waiting period, my strategy may change dramatically.

Just my thoughts on the situation

[Recyclersteve]

Great poll! A few thoughts- I don't have nearly as much silver as I'd like. Ideally I'd like to have about $1 million in silver at today's prices, and have only a very small fraction of that. Also, I am assuming that if you find $10 in silver halves at face value that are worth $100 in today's market (this would be a combination of 90% and 40% halves), that you would count this as a $100 investment, not a $10 investment. I stand to get a small inheritance in the next few years- it will all be used to buy silver, unless silver is priced at $500 an ounce or something ridiculous at the time. I have investments in real estate and the stock market, so I guess this is my way of saying that FOR ME there is too much in those other areas and not enough in silver. Also, I have to add that if I were single and didn't have a wife who adds her opinion from time to time, I'd have a lot more in silver and less in real estate right now. I'm not complaining about the wife- we balance each other out pretty well most of the time.

[Recyclersteve]

Also I meant to add that it is interesting that your poll asks about monthly investments. I have a spreadsheet where I've been tracking my investments and I have bought or found (at face value) at least some silver each and every month since the summer of 2007. Some months I might only get a coin or two. Also, I've noticed that my stress level goes up near the end of the month when I haven't gotten any silver yet. Today is the 28th and I haven't gotten a single coin this month. I've got (realistically) only two more days to make it happen and keep the streak alive!!!

[Recyclersteve]

I try to pick up a few ounces here and there, but I'd lie to (both literally and figuratively) "back up the truck."

Just a little comment on the concept of backing up the truck. The problem with going "all in" is that if you do and silver goes down 10-20% pretty quickly after you've gone all in, you will be in a world of hurt and your emotions will have emotions.

I don't mind backing up the truck if we're talking about a single truck and I have a fleet of 20.

[Cu Penny Hoarder]

Starting buying in the mid 80's. Once in a while I buy something new and interesting like the 2014 CML's, but for the most part, I'm basically done accumulating silver. Not going to say how much Ag I have, but I would require a forklift to move it.

[mrrosado]

Zincanator,
I would ask my financial advisor about that.

really???? Do you really think a financial advisor knows more than you yourself what is best for you own situation?

I hope so. They are the "professionals."

[mrrosado]

Starting buying in the mid 80's. Once in a while I buy something new and interesting like the 2014 CML's, but for the most part, I'm basically done accumulating silver. Not going to say how much Ag I have, but I would require a forklift to move it.

that's a great position to be in. You probably paid $3/ounce

[SilverDragon72]

Starting buying in the mid 80's. Once in a while I buy something new and interesting like the 2014 CML's, but for the most part, I'm basically done accumulating silver. Not going to say how much Ag I have, but I would require a forklift to move it.

that's a great position to be in. You probably paid $3/ounce

Wow! A forklift to move it?

I'm not quite there, yet.

[beauanderos]

Starting buying in the mid 80's. Once in a while I buy something new and interesting like the 2014 CML's, but for the most part, I'm basically done accumulating silver. Not going to say how much Ag I have, but I would require a forklift to move it.

that's a great position to be in. You probably paid $3/ounce

Wow! A forklift to move it?

I'm not quite there, yet.

Here's all it would take to move mine

[Chief]

Here's all it would take to move mine

Yeah right, Ray. I have always had this picture of you in my mind...

[SilverDragon72]

I try to pick up a few ounces here and there, but I'd lie to (both literally and figuratively) "back up the truck."

Just a little comment on the concept of backing up the truck. The problem with going "all in" is that if you do and silver goes down 10-20% pretty quickly after you've gone all in, you will be in a world of hurt and your emotions will have emotions.

I don't mind backing up the truck if we're talking about a single truck and I have a fleet of 20.

If you go "all in"....and then drops like that, be happy! Buy more at the reduced rate!

If you are holding silver for the long term, so what if the price drops. It might be a different story if one trades in paper silver.

[JadeDragon]

I don't need a forklift for just the silver but if you add in the copper, well maybe a forklift would come in handy Can't lift the silver all at one anymore, mostly because my old arms are getting weaker!