Difficult decision….401k or preparedness?

Loyal reader Kevin left a comment related to making a decision on whether or not to cash in his 401k to fund his survival supplies. No doubt Kevin is not alone in contemplating a similar action.

Of course this is deeply personal and there is a lot that needs to be taken into consideration. I am not financial advisor however I will provide my opinion.

The short answer is “no” – don’t do it. I prep with a philosophy that something “may” happen – not that it will happen. Will the economy collapse? I don’t know – and neither does anyone else. We all have opinions. Will there will a nuclear war? Some are 100% positive that there will be. Regardless – that is their opinion as well. I prep just in case. I invest in my 401k and I am sure Kevin does as well for a very likely retirement for himself when he gets older.

I have also thought of discontinuing my monthly contribution in my 401k. I have come close to stopping it all together especially when I truly consider what might happen in the future. I keep coming back to what if nothing happens and that money is needed when I get older?

My own personal decision has been to continue to add to my 401k at work AND prep as I can afford it. Something else I have done which aides in my prepping is every 5 years I take a loan out from my 401k. Many financial advisers would frown on such and action but it is my money and the interest goes back to me. It is a loan from myself. Doing this has allowed me to purchase many supplies I otherwise would not have been able to.

So – that is my opinion and it will not work or fit for everyone. Contributing to 401k is one variation of preparing for the future – just not one most “Doomsday Preppers” are concerned about.


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  1. As someone who is out there, age wise, I want to caution your readers that getting money out of an IRA or 401K once can be an arduous process riddled with gotcha’s, arduous rules and taxes. As a means of forced savings, they are fine but – and this is a big but – there are no guarantees that the stock market will go up or that your underlying investments will be safe. Quite the contrary – many a baby boomer has lost a big chunk of their retirement savings due to the shenanigans of Wall Street. I am not saying don’t do it, only that you should go in with an eyes wide open approach and don’t be fooled by investment advisors. Even if they are fee-paid (and not paid on trades in your account) , they have no personal interest in your future – just their own bottom line.

    One more thing: you have no control over the investments in a mutual fund. And just how many of our citizens were invested in AIG, Washington Mutual and others? Well, all I need to mention is that while the executives got huge bonuses, the shareholders including the mutual funds, lost it all.

    I will now get down off my soapbox. Thanks, Rourke, for letting me air my view on this important topic.

    — Gaye

  2. An excellent assessment – one full of common sense. It is something SO lacking in our society these days and I applaud you for expounding on what should be at the core of prepping for anyone. Use your head and some common sense! Prepping should be about the preparation – NOT a single aspect of some disaster that may or may not occur. Thank you!

  3. Prepare for the worst, pray for the best – like most folks you’ll probably wind up somewhere in the middle.

    Making investments in one’s future is critical unless you have high hopes of winning the next Power Ball or inventing a cure for cancer. Everyone’s future has an immediate or short term component (this afternoon, tomorrow, next week, next month) and a long term component (some X factor of months or years from now). It is vital to plan for both. I need food, water, soap, clothes, ammo (going to the range this afternoon), and puppy chow to get through the next few days and weeks; I need monetary investments (stocks, bonds, precious metals, and a 1968 Mustang I am currently rebuilding) to supply my needs over the next 2 or 3 decades.

    It is not impossible to stick with both a retirement and prepper investment plan. It may require some effort and sacrifice (sorry Starbucks, I need to stock up on batteries today), but it’s doable.

    However, if you have an inside track on that Power Ball or cancer cure idea let me know and I’ll help you carry the dough to the bank (mattress, bunker, whatever).

  4. I am not a financial adviser, so anything that I say is not supported by an expensive education. From what I do know about investments, many of these retirement plans are stock market based. People lost billions in their pension plans when the market tanked in 2008 and 2009. Consequently, I don’t have any money in a 401K plan. I am an Army retiree. My family lives off of a military pension and disability payments from the Veterans Administration. I feel that the government will cut folks like me off WHEN the economy collapses. As I see it, there is no “IF”, only “WHEN”. I believe it is far better to have a stock of food, water, medical supplies and ammunition. Any monetary investments for future should be in land, gold or silver. They will maintain some value whether the SHTF, or not. Again, I am no authority. I think that prudence dictates the theory “Never put all your eggs in one basket”. I wish my “Prepper” friends the best of luck, no matter what the future holds. God Bless and Guide Us!

  5. Just a personal opinion here as I definitely don’t have all the answers myself. When I started getting prepared a couple years ago, my sense was that we might be getting short on time to accumulate some of the basics my wife and I felt we would require to sustain ourselves. The 401k was an option, but not a good one given that my company has a good match. I also wasn’t interested in minimizing our cash flow by having to repay a loan. My wife and I decided to back off the 401k contributions to the point where we got the full match from my company and then used the difference to accumulate supplies. We also have a taxable investment account and chose to sell some of our investments in this account and pick up a few of the more expensive preparedness related items we desired with some of the proceeds. So as to not feel as if we were impacting our ability to retire too significantly, we also used some of the proceeds from the taxable account to purchase some precious metals.

  6. Ok … I’m no lic. holding broker either. I sit here at this ‘box’ and watch what the professionals are doing with my IRA funds … and I wonder. There seem to be a number of blogs, sites, pundits that give more than a hint about what to do with ‘qualified funds’. I have decided to take the tax hit and covert %5 of my ‘qualified IRA’ into physical silver. I did this today at 11:30 a.m. I did this 11 years ago. I’m up average X7. My choice .. works for me… Oh goody.

    I surf SGTReports, Drudge, etc. (my connect the dots tour) and find legislation writin to ‘monitize… moneytize.. Fed pension plans’. WTF! I listen to ‘Pros?’ in the banking industry talk….. talk about the possibility of ‘moneytizing’ qualified 401s/IRAs and other personal accounts in order to promote liquidity in the system. WTF! Is the sky falling? I hardly think so. Are hard assets for everyone? I hardly think so. Can I actually trust…. trust the market? I hardly think so. Does our nebulus financial system protect the ‘retail’ investor.. (Me and probly U)? I hardly think so. It would seem prudent to spread your assents. Butttt as long as the IRS has a charter allowing them to use any force nessesary to ‘Collect’…. I’ll leave enough ‘qualified funds’ right where they are.. to pay the taxes.. and HOPE the market floats.. as well as some other things I can think of. No need to panic folks … thats not to say ya stick yer head in the clouds or in a dark place and not see whats happening around you.


    Isn’t it great living IN the history we’re making…..

  7. It would depend on the account. I had rolled mine into an IRA when I left my last job, 2 years later the account was flat, a bit less than I had started with. I cashed it in and paid a year of house payments, and used the rest for Junk silver.

    I would say we are looking at a stock market collaspe and many of the companies your 401k is invested in may or may not return silver could play as an important in barter, or will my future 401k/IRA

    • The Duck –

      Right now I am taking advantage of the company match and placing my money into a very safe bond fund.


  8. Rourke, in my mid-forties, I do something similar to you including borrowing from my 401 for preps. I think you’re completely right about really not knowing and therefore need to plan some level of retirement. Here’s what I would recommend to Kevin: If you don’t follow Dave Ramsey’s Baby Steps, contribute to your 401 just enough to get the company match (if any). Then, look at opening a Self-directed IRA with investments in precious metals. For individuals, it’s up to $5k/year or couples 10k. This way, at least you’re more diversified and investing in something more tangible than fiat currency. If your 401 has no match, then frankly you’d be foolish to stay in it as there are much more options on the outside with the same tax shelters. Seek solid financial advice from a CFP or equal.

    Good luck –

  9. Don’t forget that by taking out a loan against your 401k you are also removing that amount of risk from your portfolio. For example, with my plan I can take a maximum of 40% of my vested balance in a loan, at 5% interest (paid to myself, of course). So in my case, I took out a $40k loan and used that money to clean up my financial house – paid off all the credit cards and the two car notes, and used the remainder to get my preps in order. I’m repaying it back over 4 years, at 5% interest, and all the while the principle balance on the loan is no longer held in mutual funds, so I’ve essentially removed 40% of my retirement fund from the risk of loss in the stock market. As soon as that loan is paid I’ll immediately take out another for 40% so those assets are again protected from loss. Even if it just sits in a savings account, or gets converted into gold, silver, or other liquid assets, they are safe and readily accessible if SHTF or some emergency comes up. In the 2008-2010 market crashes I lost about $28k – that amount would have been closer to $55k had I not used this method to protect my 401k assets.

    It’s all about advancing your financial AND preparedness positions. As you can see, it is possible to do both if you look at the instruments available to you and then develop your own toolbox. Just don’t ever do something just because an “adviser” says you should or shouldn’t. Most of them don’t know a thing more than you or I do.

    Self-reliance = Liberty,
    Liberty = Life,

    – A.W.

  10. Have you considered investing in some high end firearms? Quality firearms in good condition are NEVER going to go down in value, and there is ZERO risk in them except (loss and destruction) that the government outright bans them, in which case the S will have HTF and you will have to decide whether to sell them for a lot of money on the black market, keep them and wait for Lexington, or turn them in to be melted down and refashioned into your slave collar….

    Also ammo, is a) useful and b) is never going down in value….

  11. Kevin if I were you I would follow Rourkes advice. Our only stock is grazing in the field- smile. If your pantry is bare
    then use some funds to fill it now while you can. If theres a crises you wont be able to get your money out of the bank to then prepare.
    Your question is an exc. one. We had a little savings and we have used most of it for preparing. There is really no such thing as security -there never was .Its an illusion. An existentialist would have the money under the mattress so to speak. I havent any financial training but it seems that balance is important and that we are living in VERY
    UNCERTAIN financial times as is the entire world. May your decision be fruitful for you. Arlene

  12. hi
    having lived in a country with volatile currency and the constant threat of hyper inflation have taught me that investing in silver and platinum and diamonds is the only true investment that can stand the test of time .. and investing in debt – others debt – loansharking and other forms of investment are actually very lucrative not sure what the legality is in your area , but loaning money out to others in a pawn system for their jewelry ( as security ) will provide better returns then anything else you can invest in .

  13. I agree with Rourke, save and invest. You will have a vehicle or major appliance break down and need to be repaired or replaced. You can’t pay the mechanic in dry goods, well at least not as of right now.

    When you or someone you love needs prolonged and expensive medical care you can’t pay the insurance company in ammunition.

    I look at it as a balancing act, prep as best we can for what “might” happen and save/invest for what is very likely to happen.

  14. I stopped saving money in retirement funds (really tax deferred accounts) back in 2002, but I have been saving money in non-retirement accounts. Consider that the dollar will continue to lose value, retirement ages will rise, and taxes will go up. Its also very likely that the gov’t will change the rules on retirement accounts long before you reach retirement age (unless you’re nearly already there). I do have existing savings in retirement accounts that I hope to roll over into Roth-IRAs. Currently because of restrictions on Roths and my empolment, I am unable to roll over my existing retirement accounts into A Roth. Hopefully the rules or conditions will change at a future date.

    If you take money out now, you face the current tax rate, plus a 10% penalty for early withdraw. If you make under the limit for a Roth IRA, you can switch over and avoid the 10% penalty (if you leave it in the Roth IRA for 3 to 5 years, I don’t recall the exact length). When you convert a 401K, SEP, etc to a Roth, you pay the current tax rate when the transfer is made, but the money you widthdraw is no longer subject to the early withdraw penalty.

    I don’t think it will be wise to convert retirement savings into preps. First the preps you buy might expire (food, medical supplies) by the time you need them. Perhaps in the future, you may choose to relocate and that money will come in handy, or you may have an emergency expense. At this time having money is more valuable than preps.

    I also do not recommend converting it into Precious metals. While I have no doubt that the value of PMs will rise. Consider that currently there is a federal 30% capital gains tax on PMs, and some states also have their own Capital gains tax on PMs. Its also likely that as times get tough, the gov’t will change the rules, perhaps making private ownership of PM’s illegal or simply raising the capital gains tax on PM’s to something riduculious like 99%. Then there is outright theft, Consider MF global clients robbed of their PMs when clients thought there PM holdings were safe. Its likely that future incidents like MF global will be come the norm, since the gov’t does not procecute banking theft and fraud if its perpetrated by banks and financial insiders.

    The best advice I have to offer is to save as much money as you can over the next couple of years. Cut out all non-essential expenses, such as cable TV, golfing, stop eating out at resturants, stop going on vacations, etc. Instead use the extra-time (no-longer watching TV, eating out) to put together a long term plan, and learning how to be more self-reliant. Plant a garden (with seeds instead of purchase plants). Plant different varieties so you can understand how they grow, how to deal with various pests and plant diseases. Beans, Potatos, Corn, Broccoli, Onions, Wheat, Barley, Carrots, Beets, Sugar Beets, Rasberries, Blueberries, Strawberries, Carnberries, Melons, Peanuts, Peas, Peppers, Lettuce, Spinach, Different varieties of Tomatos, Herbs and Spices, etc. Learn about home repair: can you fix a leaky pipe or facet?, repair a broken draw or Door? Replace a broken circuit breaker? Can you mend a ripped pair of jeans or shirt? Can you CAN fresh foods for long term storage? Build a small chick coop and raise a few chickens (assuming local zoning laws permit them). Get in shape if you are over weight or simply unable to endure long periods of physical activity. On Meds? Learn if you can make changes in your diet and lifestyle so you are not dependant on them or not as dependant on them (obvious consult with your doctor on any planned changes to avoid long term health risks). Wood Working, Metal Working, electronics\electrical repair, etc.
    Self-reliance Education is probably more valuable than any preps you can buy. Once you understand the basics of self-reliance, you will be better educated to make smart purchases and avoid purchasing expensive items which aren’t necessary or not worth the investment. Hopefully by the time you manage to educate yourself, you have substantially more savings for your plans. If you plan was to survive on stored preps, what happens when they run out, or if they are destroyed (fire, flood, pests, theft, spoilage, containation, etc)? Do you have a backup plan if you can’t use your stored food preps? Can you grow and store two or more years worth of crops in one season (assume that at some point an entire season crop is lost due to bad weather, pests, disease or other unforseen events), and you’ll need a backup.

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