Episode-439- Conventional and Unconventional Investing — 14 Comments

  1. I really enjoyed the show today Jack!

    I know you say a lot of people don’t like these types of shows but I have to tell you I really look forward to them and truly enjoy the shows you do on economics, investing, money, living debt free, etc.

    I hope you are able to do another one soon to cover the things you had to gloss over today due to the time.

    Thank you for your show. It has changed my life and my husbands life and given us motivation to keep “living that better life – if times get tough, or even if they don’t!”

  2. I haven’t had a chance to listen to this episode yet, but it is worth looking at metal prices from before the 70’s. Most charts start after the massive crash that happened in gold and silver value that happened during the 70’s. If memory serves the drop in gold and silver value was more than half. Even modest 401(k) accounts didn’t do that badly.

  3. Roth IRA\’s are too good to be true. The rules will be changed and the money will be taxed. If you think that the U.S. government will not do this because of rioting then go talk with the people of Greece.

  4. @Cureofars There is zero comparison to be made with Greece. In Greece the money for pensions is government money. In the U.S. the money in the roth is private funds.

    Stop looking at advertising creatives of Obama and pay attention to the magicians left hand, that is where the quarter really is already. You don’t have to go after the existing accounts, you simply devalue them and drive the money into something new, with a new promise.

  5. @Inbox485 You really should listen before making comments like that. Also the way you describe a 401K account isn’t really accurate. A 401K is a vehicle not really an “account” the accounts are inside the vehicle. The accounts are what profits or not, not the vehicle.

  6. My comparison to Greece was just towards the argument that fear of riots will stop the government from changing the rules and raising taxes on the capital gains of IRA\’s. Devaluing the accounts and then making new promises is a lot harder to orchestrate than just raise taxes on them. Especially when a good argument can be made that it is not fair when regular 401K accounts are going to get slammed by the higher taxes of the future. But if believing this makes me a kook so be it.

  7. I just heard Glen Beck say that the stock market is like Vegas, I think he has been listening to you Jack.

  8. Well I did a little reading to become a little bit more informed and this is what I came up with in regards to the potential risk of a Roth.

    You Can’t Assume The Tax Structure Will Remain The Same

    In the last few years we’ve already seen people suggesting alternate means of taxation to do away with the monstrosity of income tax and the Internal Revenue Service, to go with a flat tax, or a value added tax, or some other form of non-income related tax. What if we did go to something like that? Well, the benefit of a Roth IRA is that you pay the income taxes now so you don’t pay them on disbursement and if there was no income tax then you lose that benefit. If let’s say we instead instituted an automatic 20% national sales tax and abolish the income tax, then your Roth IRA would in essence be double taxed. Now, if we were to make a change, I’m sure there would be some grandfather clause so that no one was penalized but maybe not!

    Roth IRA’s Are Not Incredibly Better Than Traditional IRA’s

    Often times when you hear someone talk about Roth IRA’s, they talk about how they’re ridiculously better than Traditional IRA’s, except they’re not. With traditional IRA’s, you have a bigger piece of pie to invest now with the spectre of taxation in the future; with Roth IRA’s, you have a smaller piece of pie to invest now but without taxation hovering over your earnings. While it sounds nice to not pay taxes on your earnings, it really works out to be approximately the same if your rate of taxation remains the same. The reason this is so is because what you pay now in taxes on your Roth IRA contribution would be otherwise invested and make up for the amount in taxes you’re skipping out on by prepaying. Hopefully that made sense… [/quote]

    Thanks for your podcast Jack, I have learned a lot from you.

  9. @Cureofars That is batting about 500 or 50% and good points there.

    On the tax change that is a risk. Honestly say we did away with income tax in favor of a consumption/sales tax. All the taxes you paid on the roth are spent and the shelter is gone. Much more in line with my points to your first comment now isn’t it? This is a risk, one I would gladly endure to free my nation of income taxes. I would do this so fast your head would spin. I don’t think it will ever happen but if it did the rewards outweigh the loss 10000 to 1.

    Now your second point about roth vs. conventional take into account something that mathematically works but NEVER actually happens. People look at this and say well if I allocate 5K a year for my 401K only say 4000 dollars goes in because I have to pay 20% effective tax on my money. So more money goes in and more money earns interest.

    Nice theory but in practice people set contributions with a fixed dollar amount or fixed percent. When you take out the fake front end voodoo the Roth always wins, it has to. The myth is the conventional contributor gets more money into the account, the reality is it seldom if ever happens that way.

    Once the same money goes in the roth will always pay more out. Call Dave Ramsey and ask him, he will explain it the exact same way.

  10. Note the reason I stated the following above

    “but if it did the rewards outweigh the loss 10000 to 1.”

    Is because I put the good of my nation ahead of my personal gain or loss. If this happened right as I retired I would technically loose, a loss I am willing to accept. Also a loss that is easy to take as I wouldn’t feel it in the slightest.

  11. @Lenwood,

    Click on the little triangle next to the microphone. If that doesn’t work it is a browser issue on your end.

    You can also click on download and that will let you play it with your browsers default player or you can right click on download and save the show to your hard drive and play it with anything you want.

  12. I found the episode interesting and thoughtful. Personal finance is just that… personal.

    Gold/Silver… Does anyone think that manipulation is not taking place? Did anyone think that oil was really $140 a barrell. How much of that was manipulation? A lot of eggs in one basket…

    I agree with the advice of investing in physical food/plants,(even medications), debt free real estate, and cash for day to day, month to month living.

    For my retirement accounts, I trust food stocks, pharma, defense, and other large cap multi nationally diversified companies.

    Even without options, there are endless mutual funds and ETF’s available for shorting and profiting markets, sectors, and currencies in a general collapse.

    That said… I’ve tried to diversify among many asset classes.

  13. Yeah I figured it was a browser issue. That is why I was wondering if anyone else was experiencing it. I use the latest version (3.5.9) of firefox but there must be a bit of a glitch… I just was not able to pause it. No big deal.