Posted: 3/6/2009 2:52:40 PM EDT
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I do not really know anything about my 401 except that when I retire that will be my
cushion,I work for a Fortune 500 Co. that is doing well in these times.My question is If I cash out 50K I know I will be eaten alive by taxes,early withdrawl,and nothing to retire with but stock,or whats left of it.Do I sit back and watch it shrink with hopes of recovery, or take the hit and settle debt? Am I the only one that thinks about this? I will probably work another 20+years with same Co.Any advice would be great Investments-stock not my strong points thanks in advance. |
I would not stop my contribution during the current time. In fact, I personally have upped mine to 10% and am getting my full company match of 6%. I look at it like this, the market peaked at 14K over a year and half ago and now were under half that. The market will not remain here forever, it will eventually go back up. I'm throwing money at it with the thought of I don't care if it drops further, this is one hell of a buying time. I'll buy all the way down and then all the way back up. Think about this little fact: historically the S&P in the year after a recession hits its bottom has recovered 46% of its losses. I don't plan on missing out on that... 
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Quoted:
I do not really know anything about my 401 except that when I retire that will be my cushion,I work for a Fortune 500 Co. that is doing well in these times.My question is If I cash out 50K I know I will be eaten alive by taxes,early withdrawl,and nothing to retire with but stock,or whats left of it.Do I sit back and watch it shrink with hopes of recovery, or take the hit and settle debt? Am I the only one that thinks about this? I will probably work another 20+years with same Co.Any advice would be great Investments-stock not my strong points thanks in advance. 1) before wasting thousands of dollars due to early withdrawal penalties and then pay thousands more in income tax on your 401k contributions, you should probably purchase $30 in books about investing. for example, "The Four Pillars of Investing" by W. Bernstein would be a great start. another is "The Bogleheads Guide to Investing", by T. Larimore. and finally, "All About Asset Allocation" by R. Ferri. these are not math books; they are simple to read and present straightforward advice and planning approaches towards long term investing. 2) a 401k is a container, not an investment. the container is unique in that it shields your annual contributions and any investment gains from the IRS. when you retire, you will generally be in a lower tax bracket and the money is withdrawn then. that said, what you do INSIDE that 401k container drives your investment returns (or losses). in addition to an array of stock-based mutual funds, EVERY 401k plan has some type of a "stable value" fund option which invests in money market funds or some type of cash equivalent security. if you had the perfect crystal ball and one year ago moved your entire 401k balance from stock or bond funds into the stable value fund, you would have not lost a dollar due to recent market fluctuations. in summary, if you fear that the market will continue downward, you can simply transfer OUT of stock funds and INTO the stable value fund. this can be done with a single phone call to your plan administrator, and in most cases with about 5 clicks at the website of your plan administrator. all this movement happens INSIDE your 401k container and no taxes or penalties are incurred. later, should you feel that the economy is righting itself, you can move some or all out of the stable value fund and back into the stock market. 3) if you are 20 or more years from retirement i would suggest maintaining if not increasing your 401k contributions. summary: i implore you to read at least one of the texts i note above, and get a handle on how a 401k (and/or the related tax-advantaged containers such as a Traditional IRA and a Roth IRA) works. this is your money inside the 401k, and protecting it while growing it requires a degree of educated attention –– just as your garden vegetables do. ar-jedi |
Sounds like you guys are doing the same a I. I have 10% contribution, at 20 years service, and about 50k invested also. Are any of you fellas Teamster 401k members, by chance?? My buddy is an investor for Edward Jones Investments, he is telling me to stay the course, cause realisticly I am going to have at least 10 more years of service.
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