What to do with money now, assuming a huge crash is coming?

Maserati wrote:

The lastest blow for me is that I am self-insured, yet I now have to purchase insurance from someone else. I am, and have been, comfortably self-insured for years. If you know how I can get out from under the new mandate by proving this self-insurance to the satisfaction of the government, do tell...but it represents, to me personally, yet another gigantic, ever-increasing tax, to add to all the others.

really? self insurance for health care doesn't really exist except in the minds of pure libertarians and those who have $5 million in ready cash.

if a 'self insurer' needs a heart transplant, a $10,000 week drug, or a nasty form of cancer, 'self insurers' will quickly run out of money and depend on the rest of us to pay the bills.

kaitanen, I have neither the time, nor the inclination, to debate you.

I started this post for my benefit, but responding to you has become burdensome. Your reading comprehension leaves much to be desired--for instance, "at some point" does not exclude "now". Your last paragraph also evidences the same poor reading comprehension.

Romney might have some IRA's, but none of the very wealthy I know have any, and I know more than one.

Feel free to abandon this thread if you don't agree with its basic premises--increasing tax and regulatory burden on me personally, and comfort at a higher level of control on the spectrum of investments.

I'm not interested in hearing from those who disagree with the basic premises, I'm interested in the opinions of those who find that my experience and beliefs accord with their own, concerning their recommendations for present and future courses of action.

I do appreciate your civility, but I never do quite understand people who are SO distrustful of the government. Do I believe everything the government says? No way. But, for me that's a given.

There aren't just two types of people...those who cede authority and those who don't. There's a whole range in there, and you aren't even on one extreme end...unless you are holed up in a self-supporting shack out in the sticks somewhere, completely off the grid.

Just because you invest in retirement accounts doesn't mean you have ceded anything. I still vote. I still will exercise my right of freedom of speech if I strongly disagree with something. I still would take some sort of action depending on how laws could change in the future or even market conditions; for example, if we get back to 12% CD rates ever like we had in the early 80s, then I'll be buying a truck load of CDs.

When you are a citizen of ANY nation, you don't ever have complete control over anything. So, the best you can do (shy of being active to get laws changed) is to get as much control as you can while still doing the BEST for yourself that you can (this means that you still should invest in retirement accounts that consist of stocks typically in mutual funds).

The borrower is slave to the lender, so (as you have done), it's good to be debt free and own your house outright. That is a way of gaining some control over your finances. There still hasn't been a better-proven way for people of moderate means to become wealthy than investing regularly over time in the stock market. IF you believe the government will take more of that money when you retire than they say they will now (and I think that's a possibility) then you need to invest MORE than you need to today...which is what I do. This is a way of gaining control. I have enough invested today (actually more than enough) that I could stop investing at all and still be considered wealthy by most Americans when I retire. BUT, because of uncertainties of tax rates and inflation and what I might want to do if I just had even more money, I continue to invest regularly and still do more than experts say is necessary. It also enables me to potentially retire earlier than age 60 if I want to; right now 60 is the target.

clearly said, but kaitanen's posts were good ones - so I'll give the thread an 8/10 for entertainment/educational value.

your answers are out there on prepper websites of course, and you know that - if you post on lrc you're going to get an argument. If you don't want an argument, go back to prepper.com or the like.

Don't feel like reading through this sub-thread, but I would doubt that Romney has any IRAs. If you have modest success, you aren't permitted to contribute to them.

Rules for RIRA:

Rules for IRA:

agip--

I don't want to be a Prepper, only a small-p prepper. I don't believe an apocalypse is coming, but I do believe that substantially trying times are ahead. I have no interest in living in a bunker.

Mitt has over $100 million in IRAs. Many think that is utterly stupid financial plannin, but it's true.

basically, it is a fluke of compensation in private equity business.

So how did Romney do it? According to the private-equity executives I talked to, the secret is likely in the compensation arrangement the industry has cut with its well-heeled investors. In private-equity land, the general partners of, say, Bain Capital -- people like Mitt Romney and his cohort of 30 or so well-heeled Harvard MBAs who invest the limited partners' capital -- get what is called "carried interest," or 20 percent of the profits on deals, while putting up only a fraction of the equity needed to do a buyout. It's akin to getting "sweat equity," only with very little sweat. "Your carry is basically buying stock for five cents that other people have paid $1.10 for," explained one partner in a private-equity firm.

Here's how it works: In rough terms, if, say $100 million is needed for the equity account of a $500 million buyout of a company -- a typical buyout ratio of equity-to-debt -- Bain's limited partners -- essentially wealthy investors in its funds -- would put up $99 million of the $100 million. The Bain general partners -- like Romney -- would put up the $1 million balance. In return for that $1 million, instead of getting 1 percent of the equity ownership of the purchased company, they would get 20 percent of the upside. So even though the math would dictate only a 1 percent ownership stake, the Bain guys, like others in the industry, would get a 20 percent stake in deals despite putting up very little money. (Actually, over time, Bain's investors agreed to give the Bain partners 30 percent of the upside in some of their funds, but that's a different story.)

Maserati wrote:

agip--

I don't want to be a Prepper, only a small-p prepper. I don't believe an apocalypse is coming, but I do believe that substantially trying times are ahead. I have no interest in living in a bunker.

ja, I understand that, but it just feels wrong that you started an argument and just as it got interesting you walk away.

Flagpole, let's talk about the concept of "trust".

To me, trust is all about predictability, not about the belief that someone else will act in your best interest.

I do, in fact, trust the government--I trust that as long as there are public sector unions, the basic functioning of government will be run by shop stewards rather than by managers. I trust that until such time as there is significant campaign finance reform and robust voter ID laws, certain organizations will have a disproportionate effect on policy-making. I trust that the scope of executive authority will only continue to grow.

When you "own" the bundle of rights that is represented by the symbol of a share of a company, you have ceded control over not only the working of the resources you committed, but the very resources themselves. You have no say in the day-to-day operations and management of the company. You might get a vote at the AGM, depending. You are dependent on securities laws and exchange rules as to how you can reclaim your resources should you wish. The upshot is that you cede control of both the resources you commit, and the working thereof to (hopefully) generate wealth.

On the continuum of control, government-permitted investment accounts afford extremely little control relative to other types of accounts. There are controls on everything--contributions, withdrawals, actual investments, management--that are not found on other types of accounts. This loss of control is the price to be paid for some guarantee of return--that is, for a lower risk. Because of this lower level of risk, the potential return is never that good, and that is ensured by the control of the actual investments and the ceiling on contributions.

Again, you may be comfortable with that. As I have said, even I have some money in, for instance, a 401k and an IRA--but, relatively, not much. To me, my current contributions are more like testing the waters, should my tolerable risk change as I get older, and should I want to max out contributions later in life.

But there are lots of other options, nationally as well as especially internationally, especially using trust structures, that can have favorable tax implications, and that are not so tightly regulated.

It sounds like we are in the same position with respect to our finances, although I bet my primary residence is worth less than yours. Maybe I should buy a bigger one, plan on selling it, and hope for a tax-free capital gain exemption, and I might just do that as part of a larger strategy, if I find the right property.

Let me ask you a question to which I don't know the answer: assume a hypothetical devaluation of the US dollar to 10% of its current value, what happens to the value of your US-exchange-traded equities/bonds portfolio? What I'm trying to get at is, if the dollar went to, say, 20% of its value, would you still, for practical purposes, consider yourself "wealthy" and "able to retire"?

Or use 50%, if you wish.

Thanks for the discussion.

IRA = internal revenue account

They have control of it, and good luck getting out your money before dying, plus paying more taxes in the meantime, then it all goes to them. Heck, it's already theirs.

J.R. wrote:

IRA = internal revenue account

They have control of it, and good luck getting out your money before dying, plus paying more taxes in the meantime, then it all goes to them. Heck, it's already theirs.

you topped yourself, JR - every single thing you say in this post is false.

individual retirement account (or arrangement)

it is easy to get your money out - I do it every day for my clients

you pay no taxes in the meantime

it goes to your heirs when you die

the money doesn't belong to the government

Even coming from a guy who thinks drugs are all placebos, that's an impressive degree of wrongness. Bravo!

Maserati wrote:

I'm not interested in hearing from those who disagree with the basic premises, I'm interested in the opinions of those who find that my experience and beliefs accord with their own ...

of course. you're unwilling to listen to facts, and you continually make naked assertions based on anecdote that are clearly incorrect in the aggregate.

but i'm not really posting to convince you, that would be a fool's errand and lost cause. i'm just correcting your factual inaccuracies for anyone else who happens to be reading.

agip wrote:

Mitt has over $100 million in IRAs. Many think that is utterly stupid financial planning, but it's true.

thanks for posting this.

the key is that a "profits interest" in a partnership, as opposed to a "capital interest", is considered by the IRS to have no current value. so romney (and others similarly situated) were able to contribute their "speculative" profits interests in Bain partnerships, which as you rightly point out were entitled to the 20% carried interest, without exceeding the IRA contribution limits.

and yes, wealthy people heavily use IRAs. and unlike our OP, i will provide evidence for my assertion. here is one piece of evidence:

it shows in a single tax year, more than 10% of the country's taxpayers with over $1 million of income (i think we can all agree that that is wealthy) converted a traditional IRA into a Roth IRA, which i'm pretty sure means they have IRAs.

"Of the roughly 870,000 people who made such conversions in 2010, 57% had six-figure incomes; of people with incomes of $1 million or more, 31,602—or more than 10% of the nation’s million-dollar earners—made the move."

or this: "more than half of workers with income above $150,000 contributed the maximum in 2003"

1) I planted the seeds for retirement right from the beginning and did so HARD for 7 years right at the beginning, so at some point you hit a "tipping point" where short of a flat out never-before-seen catastrophe, you will be wealthy in retirement no matter what...I have hit that tipping point. Being able to retire isn't even an issue. I could just be very frugal and retire today if I really wanted to. I'm going to continue to invest and let the stuff grow for 12+ more years more than likely before retiring for good. Honestly, when you have enough to retire on, even very frugally, it makes working seem not as much a chore...because I don't HAVE to do it now. Very freeing.

2) We are all different...different personalities, different experiences, etc., but my advice to you would be to care LESS about the government. Take as a given that they will take some of your money (taxes) and that they can change the rules at any time, and plan accordingly. WORRYING about something you can not control is wasted effort and leads to a less-happy life. ALL you can do is MITIGATE any negative policy change by properly preparing...and that includes a proper level of investment in retirement accounts made up of stocks. I've found that people who are very fearful of or angered at the government or a particular party are people who aren't as happy as they could be. No need to bury your head in the sand, but a little bit of apathy is a good thing.

again, simply to provide information for others who are reading, you are giving an inaccurate impression of the limitations on eligible investments in an IRA. you can own stock of individual companies, ETFs, mutual funds, bonds, real estate, small businesses, etc.

and i love people posting on letsrun claiming to know some magical tax avoidance strategy that is legal using trusts. you don't understand the tax benefits or rules for IRAs/401(k)s but you are aware of a trust structure that allows you to legally reduce US tax? forgive me for doubting that. trusts do not reduce income tax (legally).

10% or 20% of its value compared to what? compared to gold? compared to euros? to a basket of currencies? a basket of commodities? what causes the decline? inflation? government default?

Relax katainen, I'm not unwilling to listen to facts, just unwilling to engage in debate with you concerning facts that are particular to my situation.

You have corrected no factual inaccuracies, because--and for the last time--I mistakenly used the incorrect term "rates" rather than the correct term "burden", a mistake which I myself identified, yet which you have assiduously ignored.

It appears that while I am soliciting information, it is you who enjoys most hearing the sound of your own voice.

Again, feel free to abandon this thread.

katainen, you obviously have some knowledge, but your problem is that you think you have all the knowledge. You create the appearance that you do, by artificially restricting your responses to situations that suit your convenience.

Let's not argue about it. I will assume that you KNOW that IRA's are more restrictive than a simple brokerage account, and that they are more restrictive in the ways in which I mentioned.

You seem to assume a certain structure in life--that is, the individual acting in his or her personal capacity. There are many other ways to structure one's affairs that can have significant tax advantages both for oneself, and notably, for one's descendants. There is nothing "magical" about a legacy trust in a particular jurisdiction enabling the avoidance or very-long-term deferral of, for instance, US federal estate tax. There is also nothing magical about structures in countries other than the USA, which structures afford significant tax advantages.

So stop arguing for the sake of arguing, and get with the program.

10% or 20% with respect to its current buying power. Say inflation causes it. Remember, however, that my question was directed not to you, but to Flagpole.

Again, I don't need to provide any evidence for either the fact that I know more than a couple extremely wealthy people, or the fact that none of them have admitted to owning IRA's.

Further, when I asked them why, they pretty much all responded with "Exactly, why would I? To save a couple of bucks while letting the government hold onto it?"

You may find this ignorant, but if you do, that is because you are once again seeing what you want. With some exceptions, these people know their own situations, and how to manage their own money. Notably, and amazingly, they all still work in some capacity. I know them personally, and I trust their judgment over your own, immeasurably, because I understand the basis for their judgment.

"So stop arguing for the sake of arguing...."

Good luck with that.