Ask the Adviser: Investing for Retirement

Last month, we piloted a new type of podcast in which we directed your questions about money to one of the financial advisory firms we endorse. Based on the strongly positive response we received from listeners, we are going to make this a regular recurring feature.

In this week's podcast, Chris speaks with Bill Cole, Mike Preston and John Llodra: partners at the other firm we endorse.

A disproportionate percentage of the questions our readers have submitted are about retirement. So this podcast focuses exclusively on that topic, addressing such issues as:

  • If much of my retirement capital is within an employer-sponsored plan, what are my options?
  • What are the risks of keeping my money in a retirement plan for years to come?
  • Even though I'm not retired yet, should I cash out of my 401k/IRA?
  • If I withdraw early to invest in other assets, what sort of hit will I take? Are there ways to avoid early withdrawal penalties?
  • If I'm over 59 1/12, how should I determine my schedule for making withdrawals?
  • How can I hold precious metals in my retirement account?
  • What is a non-traditional IRA and what investments can I hold in it? How do I go about opening one?
  • What exactly are annuities? Do they make sense any more as a retirement vehicle?

As with last time, there wasn't enough time to make it through all of the prepared questions. We will address the remaining ones in a future podcast.

After last month's podcast with Bob Fitzwilson, we received a large number of comments from readers relieved to hear the perspective of an experienced adviser whose investing outlook is aligned with the Crash Course framework.

So if after listening to this podcast, you find yourself interested in connecting with Bill, Mike, John and the rest of their team to learn more about their advisory services, please use the form here to do so.

Transparency note:  As a result of our public endorsement, Peak Prosperity has a commercial relationship with this firm. The details of this relationship are clearly presented in writing during the referral process -- but the punchline is, our relationship does NOT result in any increased fees to those who become clients.

cheers,
Adam

It should go without saying: this discussion should not be construed as individual financial advice by those listening to it. The content should be taken as informational and educational in nature only. Investment advice must be tailored to your specific personal situation (which Chris and his guests are obviously unaware of) and should be obtained directly from a financial advisor you trust. Before acting on any of the statements made in this podcast, we advise you do just that.

 

Click the play button below to listen to Chris' interview with New Harbor Financial Group (47m:27s):

This is a companion discussion topic for the original entry at https://peakprosperity.com/ask-the-adviser-investing-for-retirement/

Chris and I are kind of stumped to see no comments on this post after several days.
So many of you expressed interest in hearing this kind of 'nuts and bolts' exploration of retirement options. Over twenty of you submitted your own questions.

We predicted this podcast would spark an unusual amount of discussion, as well as other retirement questions folks would like to see addressed in a follow-up podcast. But so far? Crickets…

Did we misjudge here? Or are folks just too busy soaking up the last of the nice weather before Fall arrives in earnest?

Speaking for myself, traditional retirement is a long ways off.  I would not be able to get SS for another 16 years, at least.  The world will be vastly different by then, and I know for a fact that the SS Ponzi will be defunct by then anyways.  Almost nothing a retirement-oriented financial planner could say would mean anything to me, since the future is so unknown, and I already take responsibility for the growth and maintenance of my own savings.  Here is the only thing anybody needs to know about retirement:  All you will have is that which you have saved in a form that cannot be printed away, nor destroyed via counterparty risk, period.  There is nothing more to say, and that is why I didn't even listen.  

Many takeaways for me, but especially the idea of owning land in my IRA. Some good solid advice on finding a custodian for a nontraditional IRA.  Also the clarification about the 28% tax on Gold.
These guys seem like the real deal. Thanks

 

No matter what kind of IRA, 401K, Roth, or other Gov't defined account you may have, there may come a time when the US goes Argentina and converts your assets to "special treasury bonds" for your own good - or so they will tell you.  The only viable option I see for myself is to run the self directed IRA up in value via leveraged plays (on the PM macro theme) like miners, AGQ, etc… then finally cash out, hopefully before we go Argentina, pay the taxes and penalties, and place the proceeds into hard assets that I own with no Gov't encumbrance.         

[quote=Oliveoilguy]These guys seem like the real deal. Thanks
[/quote]
I agree, one of the better interviews, a lot of helpful info for developing a personal stratagy or fine tuning/reinforcing confidence in an existing one.
I'd like to hear from these guys again. Thanks

[quote=Oliveoilguy]Many takeaways for me, but especially the idea of owning land in my IRA. Some good solid advice on finding a custodian for a nontraditional IRA.  Also the clarification about the 28% tax on Gold.
These guys seem like the real deal. Thanks
 
[/quote]
It’s worth noting I think that instead of an IRA if you (or your spouse) qualify for a 401K (if you are self-employed and get 1099 income for instance), you don’t need a custodian and you don’t need to setup a LLC to have full control of your self-directed retirement plan.  If PM is among what you want to hold in your self-directed 401K then you can use whoever you like to buy & store your PM.
That’s what I did a couple of years ago. I used this company PGI Agency in case somebody interested and they also have a lot of useful information.
 

I would not interpret a lack of questions or comments to mean that there was any probloem with the podcast although I was surprised there weren't any comments myself. I found the Q and A very informative and clear with respect to the risks and benefits of IRA's and 401/403 accounts.  I also saw clear indicators that holding tangibles is still a very good thing.
Perhaps I am just digesting what I found to be a very practical and understandable assessment, given in an ethical and honest manner, of what my options could be and what the potential risks and benefits could be.

I actually found the interview reassuring.

[quote=Jim H]No matter what kind of IRA, 401K, Roth, or other Gov't defined account you may have, there may come a time when the US goes Argentina and converts your assets to "special treasury bonds" for your own good - or so they will tell you.  The only viable option I see for myself is to run the self directed IRA up in value via leveraged plays (on the PM macro theme) like miners, AGQ, etc… then finally cash out, hopefully before we go Argentina, pay the taxes and penalties, and place the proceeds into hard assets that I own with no Gov't encumbrance.         
[/quote]
Agreed that "special treasury bonds" is a possibility, but IMHO that is out on the tail risk side for the next few years. (The Titanic didn't change direction quickly).  I don't go "all in" in anything. Always hedge. Moving my IRA from DBA shares to farmland is a step in the right direction.  Yes, I am going to cash out of the IRA at maximum advantage and ASAP.
My family is set to survive today if the SHTF, but taking leveraged equity bets has not brought me to this place of security. You are obviously a trader, while I am an investor. 95 percent of my day is spent building out my property and my future.  Maybe I spend 15 minutes a day looking at the markets. This is the balance I want in my life.
 
 
 

Just kidding, sort of.  It is the controversial that seems to attract the most comments regardless of the quality of the content.  I did think that there was a lot of good information in the interview, actually am contemplating giving New Harbor a call.  I have stopped contributing to my own 401K because of the severe restrictions against getting anything out, glad to see that they addressed that at some length.  It was the kind of presentation that sparks more thoughtful contemplation than comment I think.
This site can be a little surreal sometimes, you get everything from New Harbor advsing you to take that employer 401k match too preppers will die.  Not that I blame the site at all, you guys are doing an incredible job managing the wide ranging content, the times that we are in and the inevitable emotions that it raises leads to the wild diversity of opinions and interests.

The debate that I am having with myself regarding the whole investment thing is should I continue to invest in the "homestead", (e.g. solar hot water, hand pumped well, greenhouses, etc.) or tie the little extra cash I have up in investments.  So far investing in the "homestead" has won out.  Wonder if anybody else is dealing with the same dilemma and what side of the fence they have come down on?

I agree with Jim. I didn’t listen to the podcast. I’m 16 years away from early retirement. By that time the SS Ponzi scheme will have unravelled. 401k’s and IRA’s will be nationalized and more towns will have gone bankrupt due to unsustainable pension plans.
My focus is on converting to hard assets, growing more food, and decreasing our energy requirements.
Lynne

I listened and thought is was a terrific exposition on New Harbor's philosophy and expectations.  I, too, was surprised at the lack of response.  I think part of it was the weekend.  There seems to be little traffic on this site on weekends.
Also, I think the responses from Jim and Lnorris are representative of many people on this site.  They don't expect any financial assets to survive whatever is coming and they are still far away from retirement.  For those of us who are closer to that line are much more focused.

BTW, for those expecting SS to go away, I doubt it.  SS retirement is the core of the SS system with many people dependent on it.  It would be political suicide to get rid of it, and it requires relatively minor fixes to extend it indefinitely.  That is, of course, assuming the government survives.  There is also the question of how much those benefits will be worth in the event of high inflation, but I don't think the benefits will go away.  If you think fiat money will survive, then SS retirement will also.

Doug

Doug,  You are trying to make sense here vs. the simple mathematical unsustainability of SS;


BTW, for those expecting SS to go away, I doubt it.  SS retirement is the core of the SS system with many people dependent on it.  It would be political suicide to get rid of it, and it requires relatively minor fixes to extend it indefinitely.  That is, of course, assuming the government survives.  There is also the question of how much those benefits will be worth in the event of high inflation, but I don't think the benefits will go away.  If you think fiat money will survive, then SS retirement will also.

If you harbor any confidence in the future of SS.. regardless of whether currency retains some small modicum of buying power or not... read this recent piece by Bruce Krasting;  http://www.zerohedge.com/contributed/2012-09-29/ss-and-beach Oliveoil,  I do not consider myself a trader.. rather I am trying to position my savings for maximum growth with a longer term strategic plan, as described above.  One of the reasons I lean more toward a liquid form of savings vs more homefront investment now is that, a.  My homefront as it sits is in pretty good shape.. just lacking some supplementary solar, and b.  I am not sure I want to stay where I am.  I may want to get more rural, or leave the country completely.. am as yet undecided, but I am weighing the options.  I agree completely that we have more time now than we did before QE3 was announced... I think we have more of a stagflationary slow burn ahead, barring black swans.  During this time, I will continue to make incremental investments in my existing home, position, and reposition (I cut my GFI exposure immediately after the SA police shot up the first group of Pt miners) my portfolio around the PM investment theme.  I only wish I had not placed so much of my savings in the tax deferred vehicles over the years... it was supposed to be the smart thing to do      

Great discussion, please keep more podcasts like these coming.  I think there is a strong chance traditional retirement plans and SS won't be worth much by the time I reach retirement age.  I expect to always have to work in some form to generate income for the rest of my life.  I also think there's a possibility the systems at present will go on for quite some time albiet slowly declining.  No one really knows.  So you have to hedge against several outcomes, almost like saving double to get half back in the end at least.  And so that means no discretionary spending now for me.  And yet we are increasingly bearing the weight of financial repression with less and less means to save even if we knew how best to save.  

Chris et al,
Thanks for the podcast. I read the transcript as soon as I saw it was on the site. I felt like you were addressing the questions I asked, but there are too many variables in play - the curse of trying to shove a square peg in a round hole.

I was hoping that there would be a clear cut way to turn retirement money into something tangible (like farm ground) rather than taxes. There is a way to do it, but it comes at a non-monetary cost. I'm not comfortable with the stinky strings attached and will likely just pay the taxes/penalties and be free to spend my money as I see fit.

There ain't no such thing as a free lunch,

Grover

I develop a nasty rash whenever someone mentions "Tax " so I was reluctant to listen to the podcast. Sorry.
Perhaps you might like to hear what the extreme left hand side of the Bell curve got out of the discussion.

"Flexibility" and you can't trust the dear gentlemen at the tax office to play by the rules.

I have built up my Roth up over the last ten years to where I have a significant part of my diversity in gold and silver coins in it whith the idea of avoiding taxes and taking possession of coins from Fidelity, my investment house at some point in future. Barring any change in the tax laws am I correct in my investment plan? I also have some PMs in safety deposit box.
Thanks, David

 

This is a letter that was posted to Ann Barnhardt's website several weeks ago.  I take her posts, podcasts etc with a grain of salt.  That being said, this letter should be a siren call to everyone who has money that they have invested in 401k's, IRA's etc.  The examples in the letter are able to sourced on the internet.  The court ruling for Sentinel is posted online.  If I have time I will try find and post the link.  
 
My purpose in posting this to the site is to ask simply, "Do we trust our money with the system we have been told to believe in?"  I did so for the better part of 23 years.  
 
How many financial institutions will have to be added to this list before the the American public wakes up and realizes that it is all just a ponzi scheme.  John Corzine the CEO of MF Global walks the streets a free man today.  
 
The 10,000 baby boomers who are retiring each day from this year forward  for the next 20 years will be taking money out of financial institutions to fund their living expenses.  When do we reach the tipping point?  I don't know.  Maybe we're already there, with the court ruling that customer segregated funds are fair game when it comes to counter party risk.  
 
Please read the letter. 
 
Regards,
Lynne
 
 
To: [PLAN SPONSOR] 
[PLAN SPONSOR ADDRESS]
Dear Plan Sponsor,
I’m writing to petition that the [LEGAL NAME OF THE PLAN] be amended to allow in-service withdrawals. As the plan stands now, the only way for actively employed participants to retrieve money is through a 401K loan or a Hardship Withdrawal. Neither of these two options allow participants full access to their assets. While I understand the purpose of the [LEGAL NAME OF THE PLAN] is to encourage savings for retirement, I fear that my assets are not entirely safe from fraud and theft and will not be available to me at retirement.
Numerous recent examples indicate the financial markets are rife with fraud, often at the peril of the individual investor. From what I gather of recent events I do not feel that my money is safe and currently have no recourse to move my assets from the [LEGAL NAME OF THE PLAN] to other investment vehicles.
Examples of recent fraud and theft in the financial industry:
MF Global
MF Global was a global commodities brokerage that declared bankruptcy in October of 2011. It was discovered that approximately $1.6 Billion in customer segregated funds were stolen and used to meet capital requirements in the weeks leading up to bankruptcy. To date, no one stands to face criminal charges.
Peregrine Financial Group (PFGBest)
In July of 2012 it was discovered that PFGBest stole approximately $220 million of customer funds. While claiming to have over $200 million in bank accounts, it turned out that PFGBest held only close to $5 million. The fraud appears to have spanned multiple decades despite being regularly audited. The PFGBest government-backed auditors were not independently verifying the bank account balances and were instead using forged documentation provided not by the bank, but by the firm itself.
Sentinel Management Group (SMG)
In August of 2007, Sentinel Management filed for Chapter 11 bankruptcy protection. Investigators found that Sentinel leveraged over $500 million in customer funds as collateral for a loan from Bank of NY Mellon. This loan was used to fund in-house speculative trading. The National Futures Association (NFA) was the auditor of Sentinel, and has admitted to signing off on audits despite not fully understanding the books or the accounting method used. The NFA admits that it didn't audit SMG properly.
However, what is most frightening is the recent ruling in the Sentinel Management Group case by the 7th Circuit Court of Appeals. The court ruled that the Bank of NY Mellon be placed first in line ahead of customers seeking return of their money.
“That Sentinel failed to keep client funds properly segregated is not, on its own, sufficient to rule as a matter of law that Sentinel acted ‘with actual intent to hinder, delay, or defraud' its customers.” U.S. Circuit Judge John D. Tinder
This ruling shows that not only does the Bank of NY Mellon move to the front of the line, but that using customer segregated funds as collateral is no longer considered a crime, and that co-mingling customer segregated funds with proprietary funds is no longer considered fraud. This ruling implies that customer assets held at a bank or trust are the legal property of any counterparty to loans the depository institution takes.
LIBOR Rate Manipulation
Late last month, Barclay's Bank admitted that it tried to manipulate the LIBOR during the financial crisis in 2008. This rate is used as a reference for a range of financial products like car loans, adjustable-rate mortgages, student loans and credit cards. During the Barclay's Bank inquiry it was discovered that many other banks may have also been manipulating LIBOR rates. This means that hundreds of millions of consumers, investors and businesses have been paying a manipulated interest rate.
Guaranteed Retirement Accounts (Nationalizing 401K Assets)
In 2010 the Employee Benefits Security Administration solicited feedback from plan administrators and other fiduciaries on the idea of whether or not they “could or should enhance, by regulation or otherwise, the retirement security of participants in employer-sponsored retirement plans and in individual retirement arrangements (IRAs) by facilitating access to, and use of, lifetime income or other arrangements designed to provide a lifetime stream of income after retirement.” This idea has also been called “Guaranteed Retirement Accounts” and been proposed by Vice President Biden and others in the current administration, with preliminary Senate hearings having been held on this plan in 2010. The core of the proposal is to force IRA and 401K plans to offer an annuity of sorts so participants are guaranteed a return on their assets in perpetuity. The preferred investment asset would likely be United States Treasury notes. As America stares down almost $16 Trillion of debt, conservatively projected to increase to $20 Trillion in 2016, forcing 401K and IRA assets into Treasury notes would be a tempting solution to shore up our nation’s dire financial situation.
 
Source: http://webapps.dol.gov/FederalRegister/HtmlDisplay.aspx?DocId=23512&AgencyId=8&DocumentType=1
 
As you can see, despite stringent controls that were placed on the financial industry following the collapse of Enron (Sarbanes-Oxley) and the 2008 financial crisis (Dodd-Frank), rampant fraud not only still occurs, but has increased exponentially, and the regulators charged with protecting the investor are either complicit or negligent. When there is a collapse the individual investor cannot find justice through the courts.
 
I do not feel that my 401K assets are safe at this point and strongly believe that in the event of a collapse of the trustee [NAME OF THE TRUST WHERE ASSETS ARE HELD] I will have no recourse to recoup my investment. At this point I do not have the ability to withdraw any of my assets held by the plan. Therefore I petition you to consider adding an in-service withdrawal option to the [LEGAL NAME OF THE PLAN] that would enable participants like me to withdraw our assets entirely.
Thank you for your time and consideration. [NAME] [ADDRESS] [EMAIL] [PHONE]
 

Excellent job of describing my thoughts at present. Diversify your assets and skillsets. Hedge. Lower expectations. Remember that the PP community will do better than the majority individuals.
Adam, I would have responded to the podcast sooner but at present my plate runneth over. It was timely and hopefully the first of several installments.
Nate

Phew! Am glad to see we weren't off the mark in terms of what you all were hoping for. Thanks for letting me know.
Based on the feedback here, we will continue this series with our endorsed advisers. I think the format of having a focused topic for the discussion is useful in helping our guests and Chris drill down to truly actionable material. Our next such podcast will likely be in a few weeks & I'll post a heads-up on the site in advance so you can submit any questions you may have.