[ARCHIVED THREAD] - Delete or lock, OP request (Page 1 of 2)
Posted: 9/23/2008 3:01:28 PM EDT
| Delete or lock, OP request |
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I've considered it as well. But one of the golden rules of 401k investing is that one never pulls money out. Do it and you will incur more than a measly 10% deduction. You will also end up paying a sizable chunk of cash in taxes. I am pessimistically optimistic that in 30 years when I need the funds from the 401k it will be there and much larger due to tax-free growth. |
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Why would you want to pull money out of a tax deferred plan? Of course, you want to consider protection of capital vs return on capital, especially at this time. The savy people I know, almost all of them [not talking about deer in the headlights investors] have moved their investments out of equities and into safe treasuries or money markets with low interest but more importantly, safety. They will go back into the stock market when the down-trend, in their minds, appears to have reversed. Never stay in equities in a market down turn, always move to CD's, MM, bonds, etc and then move back into equities when the market starts to recover. The 'timing' that many say not to do isn't really hard if you pay attention. The 'investment advisors', at least most of them, really want you to stay in equities and annuities where they make FAT commissions while you loose your ass in a secular down market. ETA grammer and spelling |
+1 Quote from Hitchhikers Guide to the Galaxy: DON'T PANIC! I actually just increased my payday contributions to my 401K. Since the market is down, I am able to buy more shares. Eventually things will go back up and I will realize more return since I will have more shares. Same thing happened after 911. Keep a few things in mind.... 1. you are investing long term, watching the stock market day to day will drive you nuts. 2. Remember, you really have not lost anything except on paper. If you pull your money out, then you have a tangible loss. 3. If you are within a couple of years of retirement, you should not have your money in the market. DISCLAIMER: If you believe the end of the world is here, or the end of our financial system is here, get your money out now and put it in your mattress. |
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You should do some basic reasearch on the market. You will see there are patterns to it and there are good times to put your investment into the market and good times to have it out of the market. Now out of the market dosn't mean out of the 401K you can have it in cash waiting for the right time. Look at yearly quartes for the stock market, the summer sucks, the last quarter (the Golden Quarter) usually rocks. and then there are spring, summerm, fall, and winter patterns also. Learn when the market is rallying and falling. Dont stay in for the fall pull the money out to cash, then when it stops falling and starts to run back up, get back in. WHY ride the wave up and down when you can just ride the majority of the UP. Now i am a new person at this investment practice but my teacher (stock class) is correct in his analysis. I have done some of the reasearch to verify this. You Can do it with a little effort and practice too. There is no reason you should ride the market up 15% then ride down 10% then up 7% then back down 8%. If you get just the meat of the ups say 10 % and 4 % thats alot better then 4% you would have made staying in all year. It is a work thing, its not a get rich quick scheme. You have to be aware of what the markets are doing and act accordinly. You would only be in the market 2 mabey 3 times a year for weeks or a couple of months at a time. It will also greatly depend on what you are limited to do in your 401K. Some are require you to be 100% invested some not, some mutual funds only others not. SO YMMV As to the question by the OP You have to weigh the value of the Loas you may be taking vrs the growth potential of your new investment item ( PM, House, Food,etc) vrs also what the market is going to do when it starts to run again ( an unknown % rise). All Is Not UP in the Stock Market. And i will tell you, You Can usually make maney faster in a down market than an up one. Edit Now I look at a loss as a loss Paper or Not its no longer there. Also look at the richest people in the world they DO have there Money in the Market they just have been TAUGHT how to use it EFFECTIVLY. Learn To do what they DO. Also remember that the US has had a depression about every 80 years in its history. |
fascinating Have you (and all those posting so far) considered that what is happening now is fine and dandy compared to what is to come in the next 18 to 120 months? Bottom is a long way off... |
| Look at it this way. Stocks are crap right now. So if you are still paying into your IRA you are buying stocks on the cheap right now. Which means when the market corrects itself you will have more stocks in your portfolio because you bought them when they were low. This happens every 1 to 2 decades for different reasons. Remember 1974 or 1987? Shit happens, ride it out and make money. If you are near retirement age and your financials are now hurting then shame on you for having most of your money into stocks and not bonds. My bonds have earned 2% percent. Not too much, but far better than my stocks which has lost 17% ytd. But I'm not worrying because I have about 20-25 years before I retire. I also don't believe everything that the media is overplaying. |
| Don't even think about it. That is one of the stupidest moves anyone could make. You never sell low for starters, the DOW - over the long term - grows at 10% a year, you probably have a lot of yesrs left to watch it cycle up and down several times before you start drawing it out. Sit it out - your retirement will thank you. |
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I work in customer service in the investment industry - mutual funds and annuities, including IRA accounts. The real question to ask yourself is do you expect the market to exist in five years? Do you expect the American economy to exist? If you don't you shouldn't be in the market in the first place, or at least shouldn't be investing money you can't afford to lose. It should be in ammo, food, gas, generator, etc already. If you do expect the market to exist in five years then leave your money. In addition to the 10% premature distribution penalty the entire distribution is taxable. This may also affect your AGI and raise your tax rate for everything you're being taxed on, that's everything. So in addition to realizing a loss of whatever you have on paper at this time you lose whatever potential you have to recover the losses. I see a lot of people doing this, reacting to the market, and I'll bet most will be back when (if?) the market turns around. Personally, I hedge my bets. I am prepared for an economic meltdown but not willing to sacrifice my future if it doesn't. I also think we are teetering on the precipice of a global meltdown and am still unsure as to which way the ball will roll. Vivere Paratus means not only prepping for disaster but prepping for no disaster. I am not providing financial advice, I am not a financial advisor, past performance is no proof of future return, deposits are not FDIC insured, John has along mustache |
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Screw paying the government anymore than you have to. You can invest in something other than stocks or dollars, if you're that worried about the dollar crashing. Look into something like USO, GLD, or SLV. I'm sure there's a way to buy in to other currencies also. I don't own any of these and I'm not recommending them, just saying there are other options out there. |
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I'm glad this post is here. We just sent the paperwork in for 3 401k's today. Right or wrong I don't trust or believe that my money will be there when I retire. Plus they all lost more that a third of their value in the past month. If we have a financial meltdown in our country which I believe we will the run on the banks will close them and you will get none of your money. On top of the devaluation of our currencies ability to buy anything. This current crisis is not a cycle, if you believe that it it your about to join the Zombies. |
I hear you, and I respectfully disagree. If time is on your side (you are 45-50 or younger), no problem staying in equities, especially since you are dollar cost averaging. Nobody can time when a market has bottomed out or peaked. Get a sound financial plan and stick to it. Just don't look at it too often in a down market. It will cause you to make emotional decisions. Blake |
^This. Cash, cash equivalents, and T'bills, all short term, so you're ready, IF conditions warrant, to jump back in or ease back into equities on the bottom floor. |
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Steve you may be correct but I have chosen this path.... I put part of my preps into my 401k equivalent, this is matched by my employer dollar for dollar. This money is tax deferred. When I take the money out it is all taxable and if I take it out while I am still earning money this additonal income is 'stacked' to give me a much higher tax rate. To top it all, if I make the withdrawls now, I would incur not only the maximum tax rate of somewhere near 40 %, I would also incur a 10% penalty. So here is what I see, the market has taken a hit, reducing my value, I would lock in this loss and then pay higher taxes on the money I made, saved and was given and end up with basically nothing. So my choice is only A- wait for this portion of my preps to recover, or B- bail and remove any hope for my family should this not actually be TEOTWAWKI Please consider moving your money within the plan to investments you are more confident in. You will have missed most of the next recovery but at least you will not be taxed to death. Best of luck to you and your family in these interesting times. Also, some company plans are sensitive as to the percentage of employees that take advantage of the plan. If you bail, your employer may not be able to defer his income and no longer wish to have you around. I have seen these decisions made, it is very ugly. |
Good thing I'm in for 30+ more years. The ridiculously cheap shares I pick up during the next "18 to 120 months" will let me retire comfortably. Seriously people, some perspective is needed. Unless you're 100% convinced we are on the edge of TEOTWAWKI, and the market won't even exist in the future, don't liquidate your 401K. It's just foolish. |
I am going the opposite direction actually.  My company switched from a pension plan to a 401(k) plan recently, so we are getting to roll our pensions over. My mother is a financial planner, and in her opinion, it's about the best time to be doing this, although she wishes that everything was setup to put the money in a few days ago. I set up a new IRA today, and will roll over > $20k this week. |
| I'm leaving my money where it's at. Even with the mounting losses I'm still netting money in my 401k every month because of my employer's 5% match. If the system doesn't collapse and things do start to turn around eventually then I'll be glad that I left it alone. If the system collapses then it won't matter either way. Most of my preps are squared away. If I were to take the money out now then I'd just pay down debt or stash some cash away. What good will having debt paid off or a safe full of cash do if the system goes away? |
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You guys that think money markets are safe haven't been paying attention. The banks borrowed short term and invested it in higher yielding long term bonds. Those long term bonds are dead, the short term stuff is crap too and no one is lending. Why are you? Inflation is going to go through the roof so your 0% government stuff is a loser and so is your matching. The socialists are going to jack up taxes on anyone not on food stamps, so 10% now or 10% later, if your bank lasts that long. I have pulled some of mine. I would pull more except for the AMT. The golden rule, blah, blah, blah. If you haven't figured out the investment bankers are a bunch of lying, thieving bastards yet, you never will. |
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I have seriously considered it. The dilemma is that no investment is safe. Not the stock market, not bonds, Even T-Bonds will lose ground to inflation. Where I am living now, $80,000 after tax would buy you over 150 acres. I would prefer something tangible. I started a thread in GD about "Self Directed" IRA's This would avoid the 10% penalty plus the income tax repercussions. The only caveat is that you can't use the investment for personal use. Patrolling the land and predator/varmint control would fall under regular upkeep, I would assume. Apparently I stumped the Hive mind, nobody seemed to know about them. Specifically, I wanted to find out how much it costs to hire a lawyer to set one up. If anybody is familiar with Self Directed IRA's, I would appreciate any info. eta- I have a gut feeling that our economy might be poised on the brink of a recession that would shock even the most paranoid-chicken little-SF'er Something about the extreme comments from these normally bland economic experts, combined with the emergency actions that they have been taking on Sundays, tells me intuitively that things are probably more dire than most people realize. Hopefully, they will succeed in delaying the reckoning for a couple more years, but I'm not convinced. Anyone who is not profoundly concerned at this point has not been paying attention. |
Very well said, and I firmly agree with AROptics on this. I did a cost benefit analysis, and already made the decision (and acted) to pull my money. I have access to it when I need it, and it's much safer where it's at. Sure with taxes and penalties it'll cost around ~30%, but like AROptics said, if you believe we're living through the financial equivalent of August/September 1929, then take that hit before you loose 100%. I don't believe that the markets will/can recover in the short term, so 30% is nothing when you consider the prospects of your retirement account being devalued AT LEAST that much over the next year/few years. Like he already pointed out regarding everyone pulling their money out of retirement accounts, do you believe the government is going to let you have your money when the run actually occurs? Similarly if there's a run on the banks, do you honestly believe that banks have enough reserves (or that the FDIC can step in) and provide enough physical cash for everyone? The hysteria would be monumental. |
I am more in line with this statement than any other (minus the unemployment and mortgage part). I am praying for wisdom from above. |
If worst comes to worst, that money won't mean much whether it's in the IRA or out. Leave it alone. If you want to play with it, move it between funds INSIDE of the IRA. Don't take it out unless you're broke, unemployed, and starving. |
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When I quit my job in 2001 I had been at for 18 years I cashed in everything and paid off my house and all debt. Took the hit in taxes and never looked back. Best move I ever made for me. Not having payments or having to depend on a job is freedom. Some argue tax deferral but you are just gambling on what tax rates and are going to be in the future. Considering the way this gov eats public resources they are going to require more and more the worse this financial situation here in the U.S.S.A gets. We now put most of our money in things we need and buy ahead on everything from clothes to soap toothpaste food whatever. My advice is to make yourself as self sufficient as possible. pay off all debts and get your stuff purchased that you need to live for the next year or so. You can always start investing in the markets later. Just remember you gotta do whats best for you and your family. What I did lets me sleep well at night but that is just me. |
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Not only should you not keep your money in you shouldn't get involved in the first place. Regarding the dollar, people openly state its value is based on the faith people have in it. Not backing by gold and silver. That should cause a panic across this country and cause people to dump the dollar for tangible assets but it doesn't. Leeches, welfare, increasing debt, failing social security and wars costing billions if not trillions will keep you from having that money in 30 years. A few years ago you could of bought ounce gold pieces for $300. Today they are over $900. You could of sold them and bought an AR15 for $300 today! If you don't want to invest in silver or gold invest in brass. My Port 308 was $120 a case delivered. Now, when you can find it its $500. $70 wolf ammo is now $200. The market for ammo, gold and silver will not collapse. And I don't even have to cross my fingers and be ultra optimistic. Take some of that money and buy long term food storage also. That won't increase in value (well it could if there is a problem) but will feed you in 2018 at 2008 prices. Also if there is a financial issue you will eat. |
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I'm damn close to doing something drastic. With only seven years till retirement, I don' have a lifetime to make up for market trends. Right now the cash out options still doesn't make financial sense, or I think it doesn't the market sure is going down fast, my income level is still too high for it to make sense. No income and a new tax period, bang it would have been gone already. The whole Idea behind 401Ks and IRAs is when you draw it out your income level will be much lower thus your tax burden. That 10% penalty is the governments way of getting you to hold off till then but it should always be weighed against your overall tax burden. A higher income tax burden person could lose up 50% of that money through taxes which is why they set the loan value where it is. For many of us right now, its Catch 22, damned if you do and probably damned if we don't. Tj |
Yup, never even put the first dime in. I have always paid cash for everything, except my house and am working on paying that off early. If I needed more money, instead of a credit card or loan, I picked up a second job. Being debt free is the best thing you can do. I keep very little money in the bank, the bulk of it being in preps, gold & silver, firearms (not all kept in one place,either). Sharpen your survival skills and learn to live within your means, you'll be better off if something does happen. |
If the net worth of my 401K falls to zero, that means they don't get anything either. 
Now there's a sliver lining to a dark cloud.
That depends too on how you look at it. You may only lose 40% of that money but your tax burden on what you earned that year goes up as well since that money, gross number, then becomes income. If you follow that, if you have a lot in the 401K then that can be a hell of an income jump putting that much tax burden on your annual earnings. Kind of like, they held back 40% and I lost that but instead of getting a refund I now owe money. Tj |
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There should be a particular mindset when dealing with the stock market. Someone posted it above me. If you are anticipating that the US economy is done, withdraw now but also have a plan. If the economy is going to tank, you need to make purchases with every penny of that money. When to spend all of the money is when inflation gets to a point where prices are climbing outrageously. When that is, is anyone's guess. But if you are not anticipating the collapse of the economy, then the mindset of the stock market should be a long term mindset. Invest, but think of it as a 20 + year investment. Leave it alone. Add to it, but leave it alone. The life of the stock market is such that when people "play it" they almost always lose. Now, you should have liquid funds that you can move around more easily. They say you should have at least 3 months of your earnings in a highly liquid account, but I recommend 6 months. |
That is absolutely, undeniably, unequivocally wrong. Since when is openly socializing America's financial institutions part of the regular cycle? When in America's history has there been a bail out of this size? I'd also like to point out that if the Federal Reserve were eliminated there would be virtually no inflation and no cycle of boom/bust. Look at this history of the dollar value before 1913. |
There were plenty of boom bust cycles before the fed was created. They called them panics back then. |
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If you think the market is going to tank (further), look into some of the ETFs that SHORT a specific sector (IRA, ROTH). There are a ton of them out there. If you're referring to your 401k, you probably don't have that option. Go into cash or sort term Treasuries. My 401k switched from Fidelity to another firm. There was going to be a "dead" period. I didn't want to be unable to switch, so I had Fidelity move me into cash and that was transferred to the new firms cash account. I've been there since, with the company matching me to their limit. I'm up about 4%, plus what they've contributed. I'm cool here. When the market settles down I'll start nibbling again. |
I've got just about 40 years to go as well. I'm putting more money in now than I have been. Buy 'em cheap and grin a little when dividends get paid. |