Should we be converting our 401k's and other retirement/kid's college money into cash?

[Fuzz]

[Marrah_G]

1. I have a friend who is closing out all her accounts but one for paying bills.

[adigal]

2. I have been thinking about that

Actually, I have been thinking about taking the $ out, taking the penalty and tax hit, and buying more land. You know, in case we can't get food and things to live on, at least we can grow stuff.

[Fuzz]

4. I'm a little ignorant on this stuff, but can't you tell them (whomever you've invested with) to just

sell the stock at the prices now and keep it in the account but as cash?

I'm thinking that the stock market is going to take a huge hit in the next month.

[bvar22]

14. We did that in 2006/2007,

and are glad we did.
The decision was a little easier for us to make since we have no dependents,
are essentially unemployable due to age, are getting close to Social Security,
and this is something we always wanted to do anyway.

We figured we could beat a low wage job by investing our Sweat & Skills into building a Sustainable/Organic/ReadyMade refuge.
We may market it in a few years, or live here forever.





See post #13 below.

[fascisthunter]

3. I lose more than I gain from my 401k...

I seriously think 401k's are bullshit.

[Fuzz]

5. Depends on who you invest with I guess, and of course the market.

[rucky]

6. Can't really count on cash, either.

no, I'm not hocking gold

but if US debt is downgraded, then bonds may be the way to go

:shrug:

[NeedleCast]

7. No

[NNN0LHI]

8. Be better to negotiate a defined benefit pension plan through your employer if possible

I thought the 401k was a scam when they first came out.

http://en.wikipedia.org/wiki/Defined_benefit_pension_plan

Defined benefit pension plan

In economics, a defined benefit pension plan is a major type of pension plan in which an employer promises a specified monthly benefit on retirement that is predetermined by a formula based on the employee's earnings history, tenure of service and age, rather than depending on investment returns. It is 'defined' in the sense that the formula for computing the employer's contribution is known in advance. In the United States, 26 U.S.C. § 414(j) specifies a defined benefit plan to be any pension plan that is not a defined contribution plan where a defined contribution plan is any plan with individual accounts. A traditional pension plan that defines a benefit for an employee upon that employee's retirement is a defined benefit plan.

<snip>In the United States, private employers must pay an insurance-type premium to the Pension Benefit Guaranty Corporation, a government agency whose role is to encourage the continuation and maintenance of voluntary private pension plans and provide timely and uninterrupted payment of pension benefits.

[CTyankee]

28. I think defined benefit plans are a thing of the past, except for some union members.

Sayonara...

[CountAllVotes]

30. I'm in a defined benefit plan

I retired early for health reasons. I get a tiny pension I will admit. However, I have some very good benefits attached to it.

The place that retired me is doing well. They've recovered most of their losses from the crash.

I am still in the union and I still pay dues.

UNION YES! :D

[FreeJoe]

43. I'm not union,

but my company offers a defined benefit pension, a 401K, and retiree medical. Well, they stopped offering the last one for new employees, but I'm still good. I work in an industry that has very high revenues per employee, so they can afford to offer really nice benefits.

[elleng]

9. No, Hold, know when to Fold.

Watch PBS' Nightly Business Report for decent current info.

[lapislzi]

10. Not as easy as it sounds

There are penalties for cashing out both. I'm not sure I'd want to give up a large chunk of change for the privilege of doing that.

[CountAllVotes]

11. why are you thinking of doing this?

And where will you put the cash?

:shrug:

[smirkymonkey]

25. Most 401K's have a Money Market option, so you can convert

your equity/bond options into the cash funds without having to pay a penalty by taking it out of the fund or pay taxes on your withdrawl. It's just considered a transfer. That's what I did just before the last crash and save a huge amount of money (by not losing a ton, since I was in very aggressive investments). I keep meaning to start dipping my toes back in, but I just don't trust the market these days. There are too many variables.

[CountAllVotes]

26. well, I can't blame you

It is very iffy right now at best. I wouldn't trust it either.

It is a good thing you managed to get out of those aggressive investments you were holding before the whole thing went belly up.

I'm not in it myself but I am struggling with what to do with my IRA CDs that are all coming due within the next few months. The best rate I can find at the moment is 2.63% ...

Too bad Bernanke doesn't realize that this is the reason there is no spending going on. With dividends so low, I for one am sure spending a whole lot less!

Best of luck to you whatever you decide.

[smirkymonkey]

29. Thanks! However, I am making absolutely zilch too, but at least

I don't have to worry about losing everything. I'm not even keeping place w/ inflation. There doesn't seem to be any good options these days. Even gold has supposedly topped out. Good luck to you too :)

[Scuba]

12. I converted all mine from the stock market into bonds in 2007....

...which saved my retirement. Your manager should have bond investments to which you can convert with no fees or penalties.


Since then, I've been earning about 2 1/2 % annually. Not much, but I didn't lose half in 2008 either.


If the corps can get a "tax holidy" on money they're holding overseas, why can't we get a tax holiday on our 401 withdrawals? I'd pull all mine out in a heartbeat were it not for the taxes.

[JoePhilly]

33. If you held from 2007 to now in Stocks, you didn;t lose half.

That's just silly.

The only way you "lost half" in 2008 is if you SOLD at the BOTTOM.

Let's take 3 data points ....

At the start of 2000, the DOW was at about 11,700.

At the end of 2006 it was about 12,300

And today it is at about 12,400.

Now, the only way you LOST money, is if you SOLD during the DROP that occurred from June of 2008 to Jan of 2011. If you held, GASP, really notihng happened.

And, more importantly, if you are regularly contributing to a 401k let's say ... during that DIP, you were buying LOW.

I have a friend who intentionally max his 401k contributions for him and his wife when the dow was around 7500. That means he invested about 32k when the dow was around 7500, and the dow is now around 12,400. So his 32k, became roughly 50k in under 3 years. Not bad.

Oh ... and as for putting your 401k into cash. Most 401k programs allow you to select some sort of basic money market account, which is essential cash. That creates a way for you to grab some gains, convert them to "cash", and then reinvestment later if you see an opportunity. But this depends on the 401k plan in question.

Regardless ... if you did not sell EVERYTHING during the dip you did not lose HALF. And if you sold nothing, you lost nothing.

[Scuba]

35. You may be technically correct....

...but I'll call it splitting hairs. After watching my statements reflect a 50% drop in value following the spring 2000 tech crash, I was being very cautious. And yes, I started making withdrawals in 2008, following retirement.

Only if one held the 401's until they recovered their value did one not "lose". And of course there was no guarantee that they would recover their full value. Additionally, the 401's lost their inherent earning power when they were at a lower valuation.


If I've not understood this part of your arguement, I welcome your further input.

As for cash withdrawals, no problem, just pay the taxes. What I advocated for was a tax holiday on 401 withdrawals.

[JoePhilly]

37. OK ... some more on this ...

I started my 401k in 91. And started to fully contribute by 94.

Given the run up from 91 to 99, the 2002 crash was short and tiny. To see this, bring up a chart on the DOW and draw a line from 93 to around Jan 2004. Sure, there is a DIP in that spread, but if you rode that out, it had almost no impact.

Now, draw a line from there, to today on the same DOW graph. Again, there is a large dip in the picture, but if you rode it out, you did just fine. The DOw goes from about 10k to about 12k.

Now ... having said this ... the closer you get to retirement, the less you should be playing this game. Look at the Dips from say 1995 to 2011. They last about 2-4 years. That means, when you are about 7 years OUT from retirement, you should start to HEDGE. You don't have the TIME to ride out the dips.

And then ... you mention "inherent earning value" ... I think you are talking about the comparison between gains you might get here, versus gains you might get in other places. That is always a consideration, part of creating a "diverse portfolio".

But ... think of the example I gave earlier. The 2 dips in the DOW from 1995 to 2011 create opportunities to BUY LOW. If you were actively adding money to a 401k during those dips, the shares you purchased helped to grow your portfolio. One could argue that your money could have done better somewhere else ... but where, certainly not real estate!!

My view ... the closer you get to retirement, the more you need to shift 401k money to FIXED returns. If you are more than 10 years out, you can take more risk.

And as for a tax cut on 401k withdrawals, I definitely support that for anyone who lost their job, at a minimum. I also support it for college money. I think that would encourage more people to invest in their kids education.

On edit ... NEVER trust investment advice from DU!!!! These are MY personal views.

[Scuba]

39. Thank you. I think we're basically in agreement. I've been retired....

...for 3 1/2 years now so my gambling days are behind me. My biggest fear is inflation/devaluation of the dollar.



As for investment advice, I trust one close friend. And while I appreciate his knowledge and ideas, but don't I hold him accountable for my decisions.

[JoePhilly]

41. Makes sense .... and good luck ...

[bvar22]

13. I can't offer you any advice,

but I will tell you what we did.

In 2006, we cashed out, took the penalties, sold everything else,
and bought a few Bubble Proof acres in the rural south (Ouachita Mountains, Arkansas),
surrounded by National Forest. In October, 2006, we left the Big Northern City (Minneapolis),
and now live In the Woods.
Our drinking and irrigation water comes from a Spring, and it is clear, cold, and plentiful.
We keep Chickens, HoneyBees, Fruit Trees, Berries, Grapes, and a BIG Veggie Garden.

We buy almost nothing NEW.
What we can't make ourselves,
we buy or Barter 2nd Hand or Salvage,
and make it work, or do without.

We have one account in town with a locally owned bank,
and have one credit/debit card with the same local bank.
Out taxable income is very low,
and property taxes here are also very low.

Our primary focus has become local Humanitarian Issues,
and finding new ways to deny funding to the War/BailOut Machine in Washington.

This is NOT for everybody.
My Wife & I have no dependents,
and we are both healthy and strong.
We also have a compatible skill set to make this fun (most of the time).
We are Living Well on stuff we learned in the 60s.
:hippie:

We realize that we are very fortunate to be here,
and able to do this. We are grateful for every day.
Less IS More.






I posted this yesterday in the Rural/Farm Forum
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=268x4762

[adigal]

20. You sound like my friend, who is convinced with global warming,

we need to find a place with water and a way to grow food to live on. I am learning to live on less and less money every month. I like it!

[bvar22]

23. We aren't really "survivalists",

and we pray"The BIG Crunch" never comes,
since that will make things harder on us too.
We came here for a lot of reasons, but mainly because we attracted to this lifestyle,
and the food sold in the Supermarkets tastes like cardboard.

The BIGGEST motivation factor for me was directly experiencing the aftermath of Katrina in New Orleans in 2005.
When I returned to Minneapolis I told my wife, "Its time to go",
and we started the planning and research.

[adigal]

27. I hope The Big Crunch never happens, either!!

Because it will be nothing but pain for everyone, death for some. But it is still nice to save money and eat well off of your own hard work and land. :)

[napi21]

15. I spoke to my broker about that very thing and he said O. He's with Edward Jones,

and he said they are not afraid that there will be a meltdown. SOME agreement will be reached and life will go on.

[slackmaster]

16. Yes, and you should sell me your house for 50% of its present market value

You won't be needing it much longer, and you can use all that money for hookers and blow.

[Fuzz]

19. Wow, is that an over-reaction.

You do know that some accounts you can transfer your stock holdings to cash for a while, not withdraw it, just change what the account invests in, or not.

The money would still be in the account and if you predict a stock market downturn, you can then buy back in at a lower price.

[Incitatus]

24. I like the idea, but I don't think my wife will agree to it. nt

[Swede]

17. Only if you need all the money today.

And by today I mean August 15th,2011. If not,let it be.

[scheming daemons]

18. After two rounds of quantitative easening... and another maybe coming... cash is a bad place to be

[truebrit71]

21. Are you talking about taking it out (and paying the penalties) or are you talking about...

..realigning the positions in your retirement accounts?

Two very different things.

[Dappleganger]

22. All my savings is in my Retirement Pantry.

:evilgrin:

[RebelOne]

32. Mine too. Put mine into my savings account until I can find

something to invest in. I was laid off my job in 2010. The stock market was tanking, so I took all of my 401K and IRA monies and put them in my savings account. At least, I knew the money would not be decreasing. Savings accounts pay very little interest, but it is better than losing money. I am also collecting social security, so I am not hurting financially right now.

[girl gone mad]

31. I would keep stop losses close..

with everything that's occurring in Europe and the threat of monetary destruction here.

[cottonseed]

34. Sell it all and buy cattle. As much cattle as you can get our hands on.

Do it as soon as you can.

[RebelOne]

36. I don't think I will be doing that, as I am a vegetarian

and do not want to encourage others to eat meat. I would rather invest in gold.

[bvar22]

45. Not gold, and especially not now.

Several reasons:

1)Gold doesn't taste very good, and is hard to chew.

2)If you look at the chart for the price of gold over the last 8 years,
you can SEE the bubble. I personally believe that gold is vastly overinflated.
(Of course, I thought it had topped out 2 years ago, so what do I know).

3)Gold is a Controlled Market with a couple of Middle Eastern Muslim Kings holding vast reserves.
They can Bring Down the Great Satan anytime they want to.
As long as you don't mind your future being in the hands of our international relationship with a country full of religious fundamentalists in the Middle East, go ahead.


We looked at gold,
but bought dirt instead.

OTOH: If you look at the economic crash in Argentina in 2000,
gold (chains & coins) was better than money as a medium of exchange for food or ammunition.
There are some very sobering 1st accounts of Argentina 2000 on the net.
http://www.silverbearcafe.com/private/10.08/tshtf1.html

[Ilsa]

38. It depends on how soon you think you'll need the cash.

I don't have much confidence in continued gains in the short run, that is, next few years.

[JVS]

40. Not cash, bourbon. Lots and lots of bourbon. The bottled in bond 100 proof stuff.

[FreeJoe]

42. I don't think so

You should make sure that your retirement savings is appropriately diversified for someone your age and in your financial condition. We're mid 40s and have about 20% in foreign equities, 30% in US equities, 20% in bonds, 15% in TIPS, 10% in a REIT, and 5% in a money market fund. When we were younger, we had a higher percentage in equities. As we get older, we'll move more into more stable investments. Trying to time the market is harder than it sounds. Most people that do it sell during dips and buy during peaks.

[LibwithGuns]

44. The Best Investments One Can Make Now are

Food
Water
Guns
Ammo, LOTS

It is going to get real ugly real fast soon.

JMHO

[leeroysphitz]

46. Yes, absolutely and then you must use that cash to buy gold. As much gold as possible.

My friends at RTM Trading can show you how.