Thinking the Unthinkable

October 24, 2008

I remain convinced that McCain will win the election.

However, as a preparedness-minded person, I have to consider the ways in which my life would change if Senator Obama wins. Senator Obama has an admittedly Socialist outlook on the economy, and he would have a solid majority in the House and Senate. He has expressed the desire to spread the wealth around, and as the story below shows, the dems are already looking to raid 401(k)s of their tax breaks. During a recession, this is what’s known as a Very Bad Idea.

That’s at the macro level. At the individual level, I’m a big fan of financial guru Dave Ramsey. I’ve created my small emergency fund and paid off all credit cards. I have a car loan I’m paying extra on, which will be paid off in late 2009. That means I’m closing in on Baby Step 3–amass three to six months’ worth of expenses as an emergency fund.

It goes against all the beliefs instilled in me about 401(k)s and other types of IRAs, but if the Messiah wins, I’m seriously inclined to cash it all out, taking the penalties and the taxes. With rational leadership, it’s foolhardy to pull out of a 401(k)–taxes and penalties, you lose your employer’s matching money, and you lose the magic of compounding money. Even in bad times like this, you’re acquiring lots of shares, which translates into more wealth when the market rights itself. That assumes rational leadership, though, and none of the democrat (and precious few of the Republican) economic proposals I’ve seen are rational. I would have a full-up emergency fund (and then some) and be able to move onto step 4 (which, ironically, is saving at least 15% of your income for retirement), for which I would find programs the government is least likely to confiscate.

May it never come to this. The fit has well and truly hit the shan when people have to bail out of their private retirement plans lest they be nationalized by the government.

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