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Pros and Cons of a Life-Savings in Preps vs a 401K

I have a few friends that are quite well off, even at a relatively young age. This is in large part because they have good jobs, invest wisely, and basically live life as American and the modern would says they should with regards to money. When they retire they will be set for life. I, on the other hand, have stopped living life as society expects me; at least with respect to traditional jobs and investments. Sometimes I do wonder whether I’m on the right track or woefully mistaken. I often ponder, “Should I go back to the way everyone expects me to live? What happens if I’m completely wrong?”

The question is essentially a simple one: where does one think we will be in 10, 20, or 30 years from now? Will society and life be as it has been or will life be drastically different? Sadly, I’m betting on drastically different. That said, I thought it would be interesting to compare my strategy, a life-savings in preparedness items, versus a life-savings in a 401K. Let me clarify. It’s not like I spend all of my money on preps, just as much as I can! So, here’s my list…

Pros to 401K/IRA

  • Money available to draw from during retirement age
  • Compounding effect from money invested early on
  • Tax advantages
  • Potential for employer matching contributions
  • May be able to borrow funds from an IRA as a loan to purchase a home, education, and more
  • No scrutiny from family, friends, government because you’re doing things the normal way
Pros to Preps

  • Will have hard assets (food, water, gold, etc) to fall back on in emergency and long-term disaster scenarios
  • Most preps will be used eventually (e.g., food stores) if rotated and used properly
  • Will learn life skills that most people never have or knew existed
  • Will not need to rely on the government or others for handouts
  • Unlike retirement accounts, you can take full advantage of most of your preps now
Cons to 401K/IRA

  • Limited investment options (in most cases) to mutual funds or stocks; that is, you may not be able to invest in gold and silver, for example
  • IRA’s may NOT be completely sheltered from lawsuits
  • No hard assets to fall back on in difficult times (gold, silver, food, etc)
  • Difficult–perhaps impossible–to withdrawal assets to pay for basic necessities, such as food and water, or anything else if the grid is down
  • Must wait until age 67 to take full advantage of funds or pay penalty
Cons to Preps

  • No money available to draw from during retirement age
  • May never need your preps; money wasted that could have been used for retirement or for other needs
  • Some preps may be purchased solely for emergency scenarios (e.g., gas masks or retreats) and therefore be money “lost”
  • Others will see you as THE go-to resource if things get bad

The most obvious benefit of investing in an retirement plan, especially early on, is the compounding that occurs from good investments. If you did well and continue to contribute then you should expect a descent amount of money awaiting you upon retirement, money that can be used to live off of for the rest of your life. If you’re wrong, however, your 401k or other retirement vehicles may not be what you planned on and you could be in trouble. The major downside to investments is that you cannot access your funds (without penalty) for many years down the road.

The major benefit to preps, on the other hand, is that they can be used now and will probably be used throughout your life if you do things right. The major drawback to preps is that money spent on preps cannot be compounded in investments such as stocks that could appreciate significantly over decades and be worth many times what your money is now.

Of course, none of the aforementioned points take into account the effect that inflation has on the value of money and preps. In most cases, the value of money will be less (perhaps much less) decades from now whereas the value of food purchased now, for example, may be worth much more. I’m no mathematician, but I can understand that simple fact.

As much as I prefer to believe that I am right in my actions–who doesn’t–there are obvious pros and cons to both strategies. And, like I pointed out in the beginning, the question is simply where do you expect us, as a society, to be years or decades from now? If you truly believe that life will generally be as it was then you should probably follow the 401K route; if not, then follow the preps route. Maybe the best strategy overall is to do both if you can afford to. For those of us that can’t then it’s a call you will have to make.

19 comments to Pros and Cons of a Life-Savings in Preps vs a 401K

  • Bobo

    Simple: your preps will be there until you need them, your 401k will be worthless and/or confiscated by the time you need it.

  • AGeorge

    I’m 25 years down Howard’s path to a happy retirement, I hope. I cut back on the 401k contributions in 2007 and started adding more to preps and purchased some additional property. I’m still on the lookout for more property, but I think they’ll be more ‘blood in the streets’ (figuratively) for real estate soon, so waiting for the next decline to buy. PM’s were already covered from purchases made between 97-2002.

    One ‘con’ I’d add to the 401k column would be that the rules for it can change on a congressional whim. They can change the withdrawl age, increase the taxes/penalties, or force you into certain investments with a simple majority vote. When they run out of other ideas to steal your money, they will start looking at the billions in 401k savings as a way to fill the gov’t coffers and enrich their banker buddies at our expense. Something like this maybe: http://jessescrossroadscafe.blogspot.com/2010/01/us-government-is-eyeing-your-401ks-and.html That said, I still wouldn’t dump my 401k entirely.

  • mohlohko

    I have been prepping since 2004. I have not invested in my 401k at all since then. Eveything extra went into prepping. I have a whole bunch of a lot of stuff. I believe incrimental inflation on the things we NEED is not noticed over time. One example – I bought Scott toilet paper at Costco in 2007 for 13.87. It is now over 21.00 My freeze dried food is up average over 25% since 2009. This is a much better return than my 401k has generated and I sleep well- Just my 2 cents(sorry) BTY , this is the first time i have ever blogged

    • Thank you for you input, mohlohko. Looking at the cost of inflation versus potential return on an investment is a very useful way to determine which strategy is better, after all, it’s what investors do!

  • I have been prepping for over 40 years and am now retired. If I had put everything into preps i would still have to work. You need some income. I have invested in both preps and property and am now quite comfortable. Don’t put all your eggs in one basket.

  • Paul

    The three most important rules to investing are: diversify, diversify, diversify. Food is good. Cash is good. Tools are good. Gold is good. However, if you have a large amount of only one of them, your options are limited. By the way, if our currency is going to be worthless in the near future, why are they still accepting it in exchage for gold? Just wondering.

  • Virginia

    I’ve got 6 more years before I can tap my IRA without a penalty…..Have been keeping my fingers crossed that the bottom doesn’t fall out BEFORE that. I fully expect to withdraw every penny the first year I am eligible–just in case!

    Investing in FOOD looks like the best thing I can do right now, and I am calling that my NEW retirement plan. Rice costs only 36 cents/pound in 50-pound bags at Sam’s compared to $1.39/lb at the grocery store. That’s a way to quadruple your money in one day…….I can bake a loaf of bread for a lot less than $1 when using wheat I buy in bulk and grind myself. Use a solar oven and there’s no energy spent on it either……

    • Living more frugally (and probably better) is definitely a plus for the preps category that I don’t think I mentioned. I truly believe more people will begin to figure out what you have already and we’ll find that the cost of basic foods such as wheat to make bread will increase in price faster than they otherwise would.

    • GoneWithTheWind

      A Roth IRA can be “tapped” after 5 years without penalty. You can convert a regular IRA to a Roth by paying tax on the gain.

      My answer is not to choose one or the other but both preps and retirement investment.

    • Dan

      I’am with you. We must be about the same age. My wife and I have been investing in food storage. We buy some stuff at the local stores and the hard to find stuff like powdered butter, freeze dried chicken and beef, etc. at http://www.srmarketplace.com The gal that has the website always has super specials!

      • I’ll have to check out that site. The best deals I’ve seen thus far on powdered butter and such is beprepared.com. Of course, I’ve been accused of being quite cheap and trying to dehydrate that type of stuff with little success. :(

  • Hammer

    These days I’ve gotta go with preps!!

  • RoyG

    Prepping is an investement in the uncertain future just as a 401k is… i think a balance has to be made where you have enough money to get the preps you need and a cash retirement fund… after al like one of your articals stated what will you do with all your preps if you dont ever need them…? reality here is we really dont know what will happen but in the end a 401 k will actually go farther with the established preps/skill you have now and in the future so i believe their is room for both and and a balance has to be struck that is realitive to each famiy and individual..

  • John

    Some prep investments will compound, such as guns and ammo. Items I bought 20 years ago are worth more than double now, ammo included. If well maintained, they will last forever.