Ever since the first big Dow drop I've been wondering who in their right mind would sell at a low and now I think I have the answer (other than the computer driven hedge funds and all the ultra sophisticated economic reasons.)
The last couple of days there has been a lot of talk about the possibility of the government "offering" to take over our 401K investments for an assured 3-5% return on investment which would be added to the social security. Various qualifiers such as getting half the value, not having to pay the taxes, etc., etc. ad nauseum. This, of course, is the socialist way of taking what is yours and putting it to a "better" use. The Dems are testifying right and left on the Hill about how to equalize and redistribute our wealth.
So, I was thinking.........If you sold a good share of your 401K now, on which you will have to pay a tax when you take the distribution either now or in the future, since the amount is less your tax obligation will be less and you could then re-invest it in a Roth IRA since you just paid the tax on it. If the law precludes you buying back what you just cashed in, that shouldn't be a problem. There are plenty of good American companies out there just poised to come back strong.
I will double check with a really smart guy I know who is a tax expert and if there is a flaw in this, you know I'll post it as soon as I know. Otherwise, let's hear what you're thinking. It appears that the Dems are counting on the White House, a filibuster proof Senate and gains in the House so they can pass this legislation as soon as they take the oath of office. You know that they will make their program as close to 100% mandatory as they think they can get away with.
ps-Just talked to the tax guy I know who reminded me of two things: one is to take into account whether you are still working or retired and what the tax would mean to you which I guess I assumed we would all take into account and the second is that there are apparently other states who along with Michigan do not tax 401K distributions unless they are taken out earlier than what is mandatory. So that state income tax in Michigan which Mark Schauer voted for would add another 3.4(?)% to the mix. I'm still thinking that each individual has to consider whether the government can be trusted to do what they are saying today. Right.........