What to do with a 401K

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Tim_P's picture
Tim_P
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Posts: 298
What to do with a 401K

Hi Folks,

My wife and I are trying to decide what, if anything, can be done with a 401k.  Currently, we hold two 401k accounts and the larger is through my current job.  My thought is that these will become worthless in the not too distant future and we would like to preserve some value while we can.  I have been reading up on the rules on the one with my current job and see that it is not possible to simply cash out and accept the penalty and taxes.  I can do a withdrawal as a hardship, but then only to cover actual expenses of that hardship.  Currently, no hardship exists, but my eldest is entering college this fall.  Even with that, the hardship could only be exercised once all other money on hand has been used.

Currently, my job is stable, but I fully expect to be laid off within two years due to the economy, job off shoring, etc...  If I could, I would love to cash both plans out and pay the mortgage off and invest the rest in precious metals.  I think that would put us in a pretty stable position to weather the storm that's coming, but I may be wrong about trying to go debt free right now.

Is there anything that can be done with a 401K to preserve its value other than redistribute the shares to something more stable?  Right now, I don't have much confidence that there is anything in the market that may qualify as stable in the coming years.  At 45 and 46 years old, we have a while before we get to the age where we can access the money normally.  We are too young to count on it lasting until 59 1/2 years, but old enough to have a significant value stored which we cannot afford to lose.

I'd appreciate any thoughts on what others have done to protect their retirement investments.

Thanks, 

Tim

Cloudfire's picture
Cloudfire
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Posts: 1813
Re: What to do with a 401K

 

Hi, Tim;

This topic is well under way at the following forum:

http://www.peakprosperity.com/forum/cash-retirement-accounts-rise-income-tax-rate-check-my-thinking-please/15892

 

Some pretty smart folks have reflected on this and posted their ideas there.

 

Tim_P's picture
Tim_P
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Posts: 298
Re: What to do with a 401K

Thanks for that link.  I'll start reading that thread and hopefully come away with some ideas.

 Thanks,
Tim

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Woodman
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Re: What to do with a 401K

You're right, I'm struggling with this too, you can't just cash out a 401K anytime you want like a personal retirement account, unless you leave your job.  But if you expect you will be losing your job within the next 2 years then at the time of separation you will be able roll it into a personal IRA or Roth IRA.  Then you can withdraw your money if you feel there are safer or better investments even with the 10% penalty.  But if you end up keeping your job and its income, that's still probably the best outcome.  I wouldn't be in a rush to pay your mortgage off early at this time, but get savings into assets that will preserve wealth so you'll have the option of paying off the mortage later or doing other things.

For me, I'm not anticipating leaving or losing my job anytime soon and I'm getting a company match on contributions so I'm continuing my 401K at the minimum for the match, because even if there is a significant dollar decline its still a better return for me than anything I could do by taking the money after subtracting the marginal tax rate and the company match.   But I am hedging with other savings outside my 401K in other investment classes not available within my 401k.

Is your other 401k from a previous job that could be rolled over/withdrawn into something else you have more control over?  That's essentially what I did.  Are you making future contributions to your 401k or considering other options?

Just some thoughts to get you thinking, please do your own due diligence.

 

Tim_P's picture
Tim_P
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Re: What to do with a 401K

The second 401K is from a former job, so I think that money is accessible.  The current 401k is very conservatively invested and is actually doing Ok right now.  At this point, I'm thinking I may cash out the older account and put it into either precious metals or some other asset that will store the wealth it has remaining.  The thing that has me worried is that the current account may dwindle by the time the job ends.  I really don't know if there is anything I can do with that one outside of trying to manage the allocations to keep it afloat.

Tim

SPM's picture
SPM
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Posts: 241
Re: What to do with a 401K

Yes, you have access as long as you are no longer employed with the previous company. I took a 32% tax deduction. If it is something you decide to do, call H&R Block or your tax guy, and he can give you a better idea of what you will be taxed, it is based on total year income. I will maybe get some back as a refund next year.

I would rather not say yes or no, as far as whether you should cash out your 401. I think ultimately it is a decision you have to make.

My 401 wasn't extremely large, but I did cash it out. I moved what I had into physical precious metals. My logic was, whether things tank or not, in 20 yrs, it will still be worth a lot more than it is now. I also have more control of it, and no capitol gains taxes.

tx_floods's picture
tx_floods
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Posts: 155
Re: What to do with a 401K

I tried to get to the link c1oudfire listed above, but no luck. I got an error message; This topic is extremely important to me, too. Is the thread listed for paid members only? Does it still exist?
Thanks.

Cloudfire's picture
Cloudfire
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Posts: 1813
Re: What to do with a 401K

..

jerrydon10's picture
jerrydon10
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Posts: 442
Re: What to do with a 401K

Tim,

Protecting estates is what I do for a living and I can tell you what people are doing with their retirement accounts right now.

They are moving them into fixed, gold or indexed annuities with the more stable insurance companies. There is a good reason for this.

During the economic collapse in the early 30s, it was these companies that had the money when the banks and other institutions were broke. If these guys go bust, TS has HTF and there will be no economy left to need money for.

I'm not that hyped on gold annuities right now as personally, I feel that gold will go down in the next few years because of the deflationary cycle we are in. But fixed annuities, where you place your 401 as investment for several years are paying around 3.75%. Not bad.

Equity indexed annuities tie your 401 to a market index such as the S & P 500. That index is very low right now and if this index goes up, your investment will go up with it. But if it goes down, your investment does not go down because you are guaranteed that you can never lose money in this type of investment.

The insurance companys buy put options to protect themselves should the market go down.

When you reach 59 1/2 years of age, you can begin to take a monthly check off this type of investment if you wish to.

The key to this investment is vetting the company to insure it has enough reserves to repay investors should they go belly up, that it has not invested in mortgage securities etc.

Mr. Fri's picture
Mr. Fri
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Posts: 220
Re: What to do with a 401K

TX_Floods, where are you located?  I'm just north of Austin.

tx_floods's picture
tx_floods
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Posts: 155
Re: What to do with a 401K

We're in El Paso.

haggis's picture
haggis
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Re: What to do with a 401K

Tim,

I am in the exact same situation as you.  I really want to cash out, because I do believe the rules are going to change on retirement accounts (assuming they are not nationalized completely).  But I have the same restrictions as you.  However, I did just find out that my brokerage (Fidelity) does have something called BrokerageLink which is designed to offer a much larger range of investment options to people who want to actively manage their own accounts.  Instead of only being able to access mutual funds, I now have access to virtually all of the ETFs - so I can get into certain commodities and currencies at least indirectly.  I can also get into individual stocks, and even foreign equities through ADRs.  Maybe you have something similar in your brokerage.  Hope that helps.  Haggis

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SteveS
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Posts: 358
Re: What to do with a 401K
haggis wrote:

However, I did just find out that my brokerage (Fidelity) does have something called BrokerageLink which is designed to offer a much larger range of investment options to people who want to actively manage their own accounts.  Instead of only being able to access mutual funds, I now have access to virtually all of the ETFs - so I can get into certain commodities and currencies at least indirectly.  I can also get into individual stocks, and even foreign equities through ADRs.  Maybe you have something similar in your brokerage.  Hope that helps.  Haggis

I've got a self-directed Fidelity IRA (mostly in cash) as well and have been thinking of ETFs for some short term trades.With silver and gold taking what I think will be a short-term dive,what is the wisdom on the list about getting omto PM (or even oil) ETFs? The thinking is buying when they are (hopefully) low and cashing them out when they rise? Am I right in that ETFs trade like stocks so one can bounce in and out them with just paying trading commissions (and capital gains eventually)?

 

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