Financial experts: Cash out our 401Ks, or let it ride?

The DOW is steadily dropping, and deflation is the near term problem for some time to come. I thought dumping Trillions into the banks would cause inflation, but it only seems to be filling vast chasms of loss.

If the DOW drops even 10% (it's dropped more than 50% so far), that offsets the 10% hit you take when you cash out your 401K. If we had $100,000 in 2007, our 10% hit would've been $10,000, but we would have $90,000 in the bank.

If the 401K money was now $50,000, our 10% hit is only $5,000 and we're left with $45,000.

If the DOW goes to 6,000, we're left with $44,000. My guess is the DOW will continue to steadily drop through the end of this year. To what, 5,000? If so our 401K would be $36,500.

[edit on 3-3-2009 by Dbriefed]

The 10% hit is just the penalty tax. There are also regular taxes since the money withdrawn is treated as income - at least it's like that in a non-Roth IRA.

My brother had nearly 800,000 dollars in his retirement fund at the beginning of last year. He had less than 200,000 when he took it out finally two weeks ago - AGAINST his brokers' advice, who were begging him to keep it in.

Let it ride. There has never been a 15 year period in history where stocks have lost money. Just keep it there.

You've got to have your money in stocks LONG TERM to benefit. Just ride it out.

Originally posted by Jadette
AGAINST his brokers' advice, who were begging him to keep it in.

Brokers are not on your side. They need you to be invested or they have nothing to do.

I have to wonder, what would brokers advice have been when the DOW was at the peak? I had a bad experience with Merrill Lynch where their broker gained higher commission offloading bad stock on me from bigger customers.

The question would be in what form should your money be in. Stocks & Bonds? Gold? Commodities? Cash? T-Bills? Other currencies? I'm thinking 401Ks will take another plunge if any sort of catastrophe occurs (major: Hurricane, earthquake, new war, terrorist attack, flood, lengthy riots, etc).


[edit on 3-3-2009 by Dbriefed]

Though I am not a rich person by any means, I have lost over 100k in value over the last year or two from my 401k, and losing more every day.
But I am taking the contrarian route---leaving it in and looking for highest return over time investments, which, BTW, are the ones losing the most currently.
As I have over a decade before I can even touch it without penalties, and almost 2 decades before I *should* need any of it, I am betting that those formerly high dollar instruments that I am now paying mere pennies for will turn around and become profitable----very profitable--- when the new economic model arrives and becomes viable and sustainable.
I would remind everyone that during the "Great Depression", very many people panicked and lost everything, and a few became the wealthiest people in America by riding it out and buying up instruments at a very cheap price.

What would you gain by cashing out? Gold and silver are becoming wildly variable in price, paying off your house is a noble ideal, but not when the government is paying it for those people who can't or won't, and what value is a house anymore? You can't use it as an asset for credit, and if the power, water, and jobs have all left, you get the picture.
If the government continues throwing trillions of dollars at everyone but us (and I would argue it is already too late), tangible, tradeable assets may show a high dollar value, but so will food and everything else you may need to purchase to survive.


My plan is to leave my investments where they are and ride it out, if they are lost, so be it, because they aren't worth much now anyway.

A little patch of land----10 acres or so out of the way can be had, by many means fair or foul, and a dozen chickens, a couple pigs and rabbits, a small trailer stocked with canned veggies and crop seeds, is not a very expensive endeavor for survival.
Don't forget a nice axe for the chickens, a good long blade for the pigs and rabbits, and a gun of some caliber for large game if needed to supplement your diet. (among other reasons)

You would be surprised at how easy what you never thought you could possibly manage becomes routine when your are starving, broke, homeless, and no prospects for employment.

Don't expect the new administration to bail you out, they have already shown whom they really care about saving.

Originally posted by NightVision
Let it ride. There has never been a 15 year period in history where stocks have lost money. Just keep it there.

You've got to have your money in stocks LONG TERM to benefit. Just ride it out.

misleading factoring in inflation they have indeed

you are making some fat asset manager very happy. anyone who needed their money in the next 5 years or so should have sold in 07, and yes.....some people were calling this.....Eric Janzen from I tulip for one


better opinion = www.marketoracle.co.uk...

but should you still be "fully invested" and have time to wait it out....then wait it out

HOWEVER odds are we will see a very good bounce at some point this year probably sending the dow back up to 86-9200 and that will be a good time to CASHOUT for a couple years cause the recovery will not be fast, especially if they try to temporarily revive the dead patient (consumer spending securitization market credit)

[edit on 3-3-2009 by cpdaman]

Originally posted by NightVision
Let it ride. There has never been a 15 year period in history where stocks have lost money. Just keep it there.

In 1929 the Dow crashed and stayed under it's 1929 high until 1954. That's 25 years.

Each individual person needs to decide that based on thier situation.
All IRA's etc are not equal. For example...I cashed out in 07...

My broker said that was a bad idea. Well he was either lieing, or wrong. My account was with of all folks, AIG! So not only did I avert that crisis, I would have lost at least half the value. I did pay penalty & taxes, but no where close to the loss I would have incurred if I had left it in say...till mid 2008.

This is a totally new ballgame. Not the last 15 years, not the last 25.
Whole new game altogether!

Originally posted by Jadette
My brother had nearly 800,000 dollars in his retirement fund at the beginning of last year. He had less than 200,000 when he took it out finally two weeks ago - AGAINST his brokers' advice, who were begging him to keep it in.

Wow.. your brother just made the worst mistake of his life. He took a 600k hit because the markets have been down for a little over a year and a half? .. What's the justification? More losses? .. He should be thinking LONG TERM in regards to retirement..

I could understand if it was a mutual fund or a college savings or even a fund you use for income purposes.. but retirement? You don't need the money now, and there is no reason to take it out, suffer the losses AND pay the taxes.

He went from 800k to probably about 130k for no reason at all.

My advice, and it's only my opinion, let 401k's ride it out. at 6,700 we are probably near the bear market bottom, it's already over 50% down from highest levels, a significant correction. The likelihood that it will rebound significantly in the next 5-10 years let alone 20-30 years is obviously likely.

-------------------------

If you cash out at the top, by all means, good on you, I hope you continue to invest wisely. If you cash out at the bottom, you're @# your self. If you have lost over 50% of your retirement.. forget the money is there, the damage is done, it's best to not even look at it at this point. It's like buying high and selling low, it makes no sense.

reply to post by cpdaman


We should also note that funds invest in very, very, very diverse stocks.. not all funds for instance invest in DOW companies, or even S&P companies.. just depends on the fund, depends on the risk levels, and your goals.

The funds hit the worst right now where ironically low risk financial stocks (no longer low risk I s'pose) .. funds that invested a good portion of it's protfolio in financial stocks.

You should especially look at your funds, what ever kind they are, and evaluate if the stocks they are investing in (and money markets, bonds etc) are in line with your risk tolerance.. I would suggest moving funds around, shifting to new funds, rolling over etc compared to taking funds out of the market this late in the game.

But of course, just my humble opinion.

My friend is taking his out. He is not rich by any means and he understands the loss he would take by doing so. But he says something is better than nothing and looking at the current economic situation I would have to agree.

All it would take is one very bad terrorist attack causing panic and it would be BB bar the door.

And now even your deposit in the banks is not safe. This is common knowledge since they made it a law the banks don't have to cover your deposit, and if the FDIC is unwilling or unable to pay you back within a decent amount of time what would you do?

Take it out is the best advice I can give.

Originally posted by Rockpuck

Originally posted by Jadette

My brother had nearly 800,000 dollars in his retirement fund at the beginning of last year. He had less than 200,000 when he took it out finally two weeks ago - AGAINST his brokers' advice, who were begging him to keep it in.

And if yoiu lost your job and need to pay the bills and put *food on your family...what would you do?

*-One of my favorite Bushism's


[edit on 4-3-2009 by TH3ON3]

I'm looking at the DOW at 6,726, and predictions just a month ago that the DOW (around 8,300 then) would hit 6,000 before the end of the year sounded far fetched.

I stopped by Sears and Orchard Supply before 7pm and it felt like I was shopping at midnight, hardly anyone in the stores. I'm beginning to see quite a few empty commercial and retail buildings. I've heard rumors that commercial real estate was to be the next 'September' drop in the stock market, and AIG was being hit primarily by commercial real estate.

Something for me to think about.




[edit on 4-3-2009 by Dbriefed]

Ever $ left in an CD, IRA or a 401K right now is helping to finance these leech pigmen.

If we take our FRNs and hold them ourselves, the bad banks WILL HAVE NO CHOICE but to come out in the open and fail.

Remember, they COUNT ON your *untouchable* deposits when they start the leveraging game that has gotten us in this mess.

Half of something is a whole lot better than all of nothing.

And FDIC insurance?? Well it can take 6 months or longer for you to get reimbursed by the FDIC - IF they stay functioning.

Are you stocked up enough and ahead on your bills enough to be able to wait out 6 months or more to get your money?

I had to face this difficult choice.

People around me at work are young, but moved all money to bonds/money market within 401k months ago.

I'm in it for the long term so I didn't care, just left my 401k/SEP loaded. I knew it was going to get worse, but still hurts everyday to hear about it.

I made the hard decision to move to money market this week. I was advised by financial advisors to not do that very strongly since I could miss out on a bounce and things are at a bargain right now, but they've been saying that since Dow 10000 and I'm down over 32% since then.

I'll go back in at Dow 4000.

See this image:



Clearly, if we have a full correction to the historic levels, and we if we have an overshoot that's consistent with historic overshoots, then we could fall to about 3000 for the DJIA. That is, unless they can reinflate the bubble.

I'm no expert, and I'm not giving advice, just trying to share information.

[edit on 4-3-2009 by theWCH]

If your wealth is not invested in something tangible, something real, something that you can touch, something that you can use to support your existence here upon Earth, then it is essentially VAPOR.

It really doesn't matter if your wealth is in investments, or cash (a.k.a. funny/fiat money), because when the economy crashes it ALL looses value.

The best thing you can invest in right now is in anything that is REAL! Buy farm land, buy food stocks, buy tools, buy anything people will NEED more than fiat PAPER!

I think anyone selling at this point is irrational. There have been plenty of opportunities to sell since summer of '07. If you're still invested and thinking of selling, you should wait for a Bear Market rally to sell into. It astounds me that people remained fully invested in '08 after all the madness. Did they really believe the shills who were saying this was just a blip?