money in 401k. take out incur cost, ride it out or stop funding?

[Lord Xar]

Inevitably I feel another crash is coming... last time I had a 401k and at the time I was not putting
anything in it.. lost nearly half during the crash.

This time ive been contributing but like I said, its coming...

Do you stop contributing?
Do you stop contributing AND take out the balance of the 401k?
Or keep contributing and ride it out?

Opinions?

[brandon]

If you kept your money invested you would have regained everything you lost plus a bunch on top.

dont take advice from bpeople on the internet. Especially dont take advice here.

Your level of risk correlates with your age. Figure out what is right for you.

Im 30 and long all stocks and holding steady.

[Seraphim]

He should then ignore everything you said.

If you kept your money invested you would have regained everything you lost plus a bunch on top.

dont take advice from bpeople on the internet. Especially dont take advice here.

Your level of risk correlates with your age. Figure out what is right for you.

Im 30 and long all stocks and holding steady.

[ILUVRP]

like said above , it really depends on your age and how much money you are talking about , if you are talking about hundards of thousands of dollars try and protect most of it . when in doubt and want to sleep better do 1/2 , how safe is your job , money in the bank , how much are your debts , kids in school .

i have always though of the market as a crap game , now with the fed pumping money its more of a game .

now days its not how much you make just don't lose . one way to look at it is if you lose 50% , it has to go up 100% to get you back to shore .

[brandon]

He probably should anyway, but I didn't offer him any specific advice on his finances.

[Seraphim]

As all things in life you must assess the risk and come to your own conclusions.

Do you think that keeping the money tied up in the market at the behest of government regulations is worth the risk?

Would you rather build your wealth in avenues that are accessible to you whenever you want without having to pay an enourmous pre retirement tax?

Do you trust the gov't not to nationalize private retirement funds to bail itself out or some "TBTF" institution?

None of us can make a decision for you, or even know how to advise you because we don't know your life, situation, risk tolerance etc.

The above questions are starting points for you to figure out what you need to do.

Inevitably I feel another crash is coming... last time I had a 401k and at the time I was not putting
anything in it.. lost nearly half during the crash.

This time ive been contributing but like I said, its coming...

Do you stop contributing?
Do you stop contributing AND take out the balance of the 401k?
Or keep contributing and ride it out?

Opinions?

[Jordan]

How to allocate is up to you. Honestly, I just try to forget I have any investments. The more attention you pay them, the easier it is to make dumb moves. Then again, I don't check the value of my portfolio that often at all...like weeks, maybe.

Anyway, I can say that removing money from a 401k account is just plain stupid. Tax consequences are awful, plus penalties, AND you are limited to the amount you can contribute each year, so if it comes out, you might not ever get the shot to put it back in. Go to cash if you want, but don't withdraw the balance from the 401k account.

[cubical]

IMO

I wouldn't remove money from the 401k. If you are concerned with a crash, can't you move to a short term bond fund or cash?

[Tod]

I rolled my 401k into an IRA when I started my own business. Up through July 19th it was invested in mutual funds. Since then it is in a C.D. If things really start to look bad (like they might confiscate), then I will consider pulling it out, but until then I am trying to avoid the tax penalties (income taxes + penalty)

[oyarde]

IMO

I wouldn't remove money from the 401k. If you are concerned with a crash, can't you move to a short term bond fund or cash?

That would be the lowest cost option.

[Nic]

Well run companies will still be well run companies regardless of whether we have a crash or not. Would you rather own a piece of a company that may take a hit but will bounce back or a worthless piece of paper that may or may not be used 20 years into the future?

[torchbearer]

Well run companies will still be well run companies regardless of whether we have a crash or not. Would you rather own a piece of a company that may take a hit but will bounce back or a worthless piece of paper that may or may not be used 20 years into the future?

if consumers wealth is wiped out, it doesn't matter how well a company is ran.

[erowe1]

If you're pessimistic about your investments, you could put it all in a cash-fund, couldn't you?

Maybe it depends on the options available in your 401k.

[Acala]

My understanding is that Germans who owned stock in solid manufacturing companies and held on to it ended up okay through the Weimar hyperinflation. So if you are thinking LONG term, owning good stock is probably not bad. But owning it inside a government-controlled vehicle like a 401k adds another layer of risk. A stroke of the pen and you may find your 401k assets on "loan" to Uncle Sam.

Also a serious market crash is going to make the tax penalty look insignificant.

[V3n]

Any fear that the government is going to confiscate all 401k money and wipe everyone out within the next 50 years?

Will the money still be there when you retire?

I know it's supposed to be your money and guaranteed, but what if Pres. Zorkulan in 2048 says "We need to do this to avoid a major crash. All 401k money becomes property of the State. Those that depended on their 401k for retirement can apply for stamps at this website..."

I'm afraid of that. Am I too paranoid?

[Seraphim]

True, but it should be noted that "consumer staples" are a bit different.

A well run grocery chain on the low-medium budget part of the market will always do well, short of a Zombie Apocalypse.

if consumers wealth is wiped out, it doesn't matter how well a company is ran.

[cbc58]

Any fear that the government is going to confiscate all 401k money and wipe everyone out within the next 50 years?

Will the money still be there when you retire?

I know it's supposed to be your money and guaranteed, but what if Pres. Zorkulan in 2048 says "We need to do this to avoid a major crash. All 401k money becomes property of the State. Those that depended on their 401k for retirement can apply for stamps at this website..."

I'm afraid of that. Am I too paranoid?

Generally, your 401k and IRA are NOT guaranteed by the FDIC. When you make a deposit into a bank or investment account you are technically giving them ownership of your money (it is now theirs) and you get a demand deposit right in return. Until you withdraw it or direct it into a mutual fund or what have you (also not insured) they can use it for whatever reason they want. When you get a bank statement saying you have 6k in the bank - you technically don't. You have no money in the bank -- only an accounting entry that says they owe you 6k. Just ask the folks who invested in Jon Corizones company...

2048? more like 2020 if that long. Think how easy it would be to do this... a few keystrokes on a keyboard.

[torchbearer]

True, but it should be noted that "consumer staples" are a bit different.

A well run grocery chain on the low-medium budget part of the market will always do well, short of a Zombie Apocalypse.

true, that and utilities will be the last staples.

[Lucille]

Inevitably I feel another crash is coming... last time I had a 401k and at the time I was not putting
anything in it.. lost nearly half during the crash.

This time ive been contributing but like I said, its coming...

Do you stop contributing?
Do you stop contributing AND take out the balance of the 401k?
Or keep contributing and ride it out?

Opinions?

http://www.jsmineset.com/2013/10/01/jims-mailbox-1364/

Jim has advised that all Western countries face the same outcome as they are inextricably linked to each other. He feels the BRICS and quasi BRICS will do better but the nature of the world’s economies is such that we will all be affected in one way or another. You would do well to adhere to Jim’s GOTS advice irrespective of where you are in the world. You can be assured that desperate governments worldwide will be looking at retirement funds as a font to house worthless sovereign paper thus giving them access to your money. It is a fact that in some countries, such as Australia, that you cannot exit retirement accounts but that does not preclude people from taking the other GOTS advice and affording themselves with at least some degree of protection from the Great Levelling. You should assume that what has happened in Cyprus and Poland will happen to you and act accordingly.

Ask yourself the question, ‘What do I have to lose by acting now and exiting the system ?’. Then compare that to what you could lose in the Great Levelling. It is all about risk and reward and Jim is pleading with us all to exit now whilst we still have an opportunity to do so. In particular you should not keep gold or any other valuables in bank safety deposit boxes. There are many alternatives but unfortunately many people will not take the action required until it is too late.

As a reference please see Jim’s GOTS list:

1. Your equities are held in certificate form.
2. You have no Federal retirement funds.
3. You have no CDs and investments in bonds.
4. You have modest money deposited among selected BRICs countries.
5. You store your own precious metals.
6. You have no mortgage obligations.
7. You keep cash on hand for 6 months expenses.
8. You have no consumer debt at all.
9. You have a small hobby farm for protein and veggies outside of where you are living with no mortgage debt, set up green.
10. You have a gas, diesel or electric car with high fuel mileage for the farm.
11. You have a generator with large fuel capacity for the farm.

[Seraphim]

It's uneasing how accurate this is when it comes to the legallity of bank/security desposits.

Generally, your 401k and IRA are NOT guaranteed by the FDIC. When you make a deposit into a bank or investment account you are technically giving them ownership of your money (it is now theirs) and you get a demand deposit right in return. Until you withdraw it or direct it into a mutual fund or what have you (also not insured) they can use it for whatever reason they want. When you get a bank statement saying you have 6k in the bank - you technically don't. You have no money in the bank -- only an accounting entry that says they owe you 6k. Just ask the folks who invested in Jon Corizones company...

2048? more like 2020 if that long. Think how easy it would be to do this... a few keystrokes on a keyboard.

[MRoCkEd]

Inevitably I feel another crash is coming... last time I had a 401k and at the time I was not putting
anything in it.. lost nearly half during the crash.

This time ive been contributing but like I said, its coming...

Do you stop contributing?
Do you stop contributing AND take out the balance of the 401k?
Or keep contributing and ride it out?

Opinions?

Many here had a "feeling" the stock market was going to crash, and it went on to hit record highs. People who sold during the last crash got screwed, while those who kept contributing did quite well. Save yourself a lot of headaches and don't try timing the market. Just stay the course with a well-allocated portfolio, continue contributing, and shift your holdings according to risk tolerance and years until retirement.

[Zippyjuan]

What would closing it cost you? Quite a bit. Let's start with $10,000. First there is the 10% penalty. You are down to $9,000. Then that money gets counted as income and you have to pay taxes on it- as far as I can find, that is the amount before the penalty. If you are in a 25% tax bracket, you will lose another $2,500 and are down to $6,500 out of your original $10,000. Just to get back to where you are right now, you need a return on that $6,500 of 53% (no I don't have this number backwards- you need to get $3500 out of a $6500 investment) which is a huge return. And we are not including any fees or taxes (like capital gains) associated with this return. Looking at it another way, if things do go bad, your investment needs to fall by more than 35% to be worse off than leaving your money where it is.

Other factors to consider- do you get a match from your employer on 401k contributions? If yes, you are passing up on free money- a guaranteed return.

If you don't get any matching and are concerned (and don't need the money for an emergency) I would leave the money there and simply stop contributing to it and put that money into something you think will be a better return. Depending on your company, you may have other investment alternatives you can shift your 401k money into.

Nobody know for certain what the economy or investments will do in the future but 35% declines are extremely rare.

[brandon]

Any fear that the government is going to confiscate all 401k money and wipe everyone out within the next 50 years?

Will the money still be there when you retire?

I know it's supposed to be your money and guaranteed, but what if Pres. Zorkulan in 2048 says "We need to do this to avoid a major crash. All 401k money becomes property of the State. Those that depended on their 401k for retirement can apply for stamps at this website..."

I'm afraid of that. Am I too paranoid?

I couldn't imagine them ever outright confiscating 401ks. I wouldn't be surprised if they do change the rules of the plans at some point to negatively affect people that are saving a lot of money. Another possible risk is that income tax rates and brackets will be adjusted so that you end up having to pay more tax when you withdraw in retirement than you would if you paid it up front. All in all the 401k is still one of the best investment accounts for just about everyone.

[amy31416]

My 401k's been doing fine. However, I have looked into pulling out and a person can get away with only a 10% penalty if you use it for "emergency" purposes--generally things having to do with housing. I think you still have to look into what tax bracket it'll put you in though.

[helmuth_hubener]

You think there will be a crash.

There may be.

When?

What kind of crash? Inflationary? Deflationary? Will bonds do well? Will cash? Will gold?

Answer to all of the above: we don't know.

I recommend Harry Browne's 25%/25%/25%/25% split, so that you're ready for any situation.

25% stocks
25% long-term bonds
25% cash
25% gold

If a crash in stocks comes, that's OK. Let's say stocks crash huge, say 50% down. That's only a 12.5% hit to your portfolio, and that's if nothing else goes up! Depending what kind of crash it is, one or more of the other assets will probably be doing terrific. This "Permanent Portfolio" rode out the great crashes of 2000-2 and 2007-8 with stunning success.

I am no accountant, but it seems like a low-tax way to switch to this strategy would be to take and allocate the 401k as 33% stocks, 33% long-term bonds, 33% cash (treasury money market). Then take and buy enough physical gold coins outside of the 401k to equal the protions of everything else, thus making a 25/25/25/25 split. Someone else may have a much better idea how to do this and avoid tax consequences, etc. If you do, I would also love to hear it.

[Kelly.]

is it possible to move your money into a self directed account?
If so, most will have a money market account, where you can park money until you feel its time to reenter the "market"

its what i did.

[krugminator]

1. Don't look to an in internet forum for financial advice.

2. The doomsdayers have been wrong 100 percent of the time throughout history. I remember reading some of the crap Ron Paul wrote in the early 80's about the phony stock market. Listening to him would have missed the market going from 800 to 14000. I assume you didn't listen to the doom and gloomers over the last 4 years. If had you had your post would have been about whether you should kill yourself to help pay your losses.

3. If you are going to make a bad decision to take money out of the market, don't compound it by taking money out it out of your 401k.

[Zippyjuan]

Often the best time to get in is when you think things are the worst. Prices are usually at or near their lowest points. The time to be cautious is when things have had big runups.

[helmuth_hubener]

2. The doomsdayers have been wrong 100 percent of the time throughout history.

No, doomsdayers have only been wrong when doomsday didn't occur. That is, people predicting dire reversals are wrong when prosperity ensues instead.

Their more fundamental error is to predict the future at all.

An even worse error than that is to believe that there is any reason at all to think that they know the future and to invest accordingly. What makes them so smart that they know the future?

Prosperity does not, however, always and everywhere ensue, krugminator. Sometimes crashes and recessions and depressions occur. People who believe that the stock market will always and inevitably go up may be wrong, just as people who thought that about real estate. There could be a long period of time when stocks produce little to no real returns. From 2000 to now, for instance.

By putting all or most of your money into stocks -- like, say, the Bogleheads MRoCkEd references -- is really making a bet: that prosperity will continue. The Bogleheads in particular advocate a buy-and-hold philosophy, which is good, but they are still making the bet that long-term, prosperity will triumph. But, we really don't know. It may not. Sometimes "doomsdayers" are right. Frequently. Whenever a bear market comes around again.

[Danke]

1. Don't look to an in internet forum for financial advice.

2. The doomsdayers have been wrong 100 percent of the time throughout history. I remember reading some of the crap Ron Paul wrote in the early 80's about the phony stock market. Listening to him would have missed the market going from 800 to 14000. I assume you didn't listen to the doom and gloomers over the last 4 years. If had you had your post would have been about whether you should kill yourself to help pay your losses.

3. If you are going to make a bad decision to take money out of the market, don't compound it by taking money out it out of your 401k.

It depends on your snapshot.

I started investing in PMs over a decade ago thanks in part to people like Ron Paul.

The DOW returns since 1999 (13 years) -- the dot-com bubble year-end peak: 3.4%

PMs have done much better.

My PMs don't charge an annual fee, but of course I also don't get a dividend.