401k - If stock recovers today - Should I sell everything & pay penalties?

[V4Vendetta]

401k - If stock recovers today - Should I sell everything & pay penalties?

I am tired of seeing the serious losses I am taking. Then it recovers, only to fall again. From my understanding of history, this means that collapse is about to happen.
Better to cash out my 401k if it recovers, then take the risk of losing it all correct?

 

[hazek]

I'd call Peter Schiff's firm and ask them for advice. Personally the only asset besides paper money that I own is physical gold.

 

[V4Vendetta]

what do they normally charge for advice like that?

 

[Lafayette]

Personally i don't trust the stock market its rigged and not in your favor, though i do own some gold mining stocks.

I would not have my money in a 401k, period. Know too many people who lost big in 2008.

Talk with your family about it , get their opinion too, its your choice in the end though so do what you think is the safest thing to insure your retirement.

 

[ILUVRP]

i am retired , not rich at all , everything depends on someones assets and age , anymore its like the old addage , its not about how much you make just don't lose.

bottom line , you would face a 10% tax for early removal, i guess on a 401k taxes have allready been paid , depending on the size of the 401k i would remove it and buy a small farm if possible .

the only people in america that have any kind of freedom are farmers.

i don't think i would touch gold at these levels ( coming from someone that sold his a $1100/oz ) , much of golds big jumps now seem to be short covering , as everyone that is short gold is losing money and they cover ( have to buy ) which in its self causes the price to increase more , which causes more short covering , sort of feeds on its self. it will correct and when it does we will see down moves of 200-300/oz as every one tries to get out and the shorts take over again .

 

[brandon]

How old are you V4Vendetta? If you are under 45 you should look at this is a fantastic buying opportunity and hope the markets hit new all time lows. If you're a bit older then you should be taking part of your money out of stocks and putting it somewhere with less risk. This does not mean taking it out of your 401k. Don't do that. Just put it in more conservative assets.

 

[brandon]

I would not have my money in a 401k, period. Know too many people who lost big in 2008.

Like who? The markets have almost completely recovered since then. Baby boomers have made a complete killing in the market over the last 40 years.

 

[Cowlesy]

You can buy AT&T with a 6% dividend yield. I still think in the next 10 years, people who didn't buy AAPL under $400/sh will be kicking themselves.

 

[Zippyjuan]

Not only would you have to pay a 10% penalty but you would also have to pay taxes on the money you took out (unless you are in a ROTH 401k)- so you could be looking at a 35% loss for cashing in. That is a pretty big hit. If you think another asset may do better than what you are presently in, you can change your investment options. http://www.401kplanning.org/top-401...swers/what-are-the-401k-withdrawal-penalties/

10% Penalty for Early 401k Distributions – The main 401k withdrawal penalty is the 10% additional tax that is incurred for taking an “early distribution”. An early distribution occurs when 401k funds are withdrawn before reaching age 59-1/2. The 10% penalty is in addition to the regular income taxes that must be paid on amounts withdrawn. (Remember: you did not pay income tax when you contributed funds to the 401k plan so the IRS gets its share when you take money out.)

Lets say you had $1000 in a 401k. You get hit with the ten percent penalty plus a 25% income tax payment due or 35% total. That means you are down to $650 to re-invest. Just to get back to where you were before the withdrawl, you need to get a 53% return on that $650 ($350- not counting any costs of the investment or capital gains taxes on it). That will be hard to acomplish.

Another option would be to halt contributions, leave the money in there, and use the money you were investing in it to put someplace else. Does your employer offer any matching funds to your 401k? That is something to consider as well- that is free money and you should continue to contribute enough to get maximum matching if you can.

 

[moderate libertarian]

Your individual goals would dictate best strategy for you but when I researched funds recently, found this PIMCO income fund to provide solid double digit returns during normal periods and avoid sharp losses like many other regular stock funds when markets dipped. Another option to consider for diversification if your plan offers it rather than moving to all cash or worse cashing out of plan with hefty penalties.

http://finance.yahoo.com/q/bc?s=PIMIX&t=5y&l=on&z=l&q=l&c=

5 year comparison with DOW and popular Fidelity Freedom Stock fund:

http://finance.yahoo.com/q/bc?t=5y&s=PIMIX&l=on&z=l&q=l&c=FFFHX&c=^DJI

 

[Seraphim]

Dr. Ron Paul's deep understanding of economics and his knowledge about the direction of the world has him holding gold and buying more when he can.

Stop looking at the nominal prices...look at the conditions with which these prices are reflecting. The massive expansion of base legal tender money and bad credit has gold currently in a reverse bubble. It is ready to pop UPWARDS. Sub 2000$ gold will be revered as a gift from the gods not too long from now.

There is so much stagnant money floating around right now, it's home will eventually find "good" money. One of leaders of the pack for GOOD money until as far out as 2020 will be GOLD.

Agricultural, energy, precious metals. Smart real estate.

Nothing else is needed.

Money is seeing it's very nature shift as we speak. Gold's pillar of strength has been removed, but that NEVER lasts long. The flight back to the anchor of credit (strong capital, gold) is going to be EPIC and HISTORIC in size.

The shear number of people around the world this time around, the shear number of units of currency...the QUALITATIVE nature of the aweful debts being shifted around. It's laughable. Selling measures of STRONG CAPITAL (gold, for example) is NOT the right path right now.

Any one in their mid 40's and above should be moving 30-40% of their savings into hard money right now. Even at the tax expense. You'll be paying taxes on it when you take it out during retirement anyway - just at a lower marginal rate. You are NOT losing 30% of your retirement account if you take it out now. You are currently deferring tax payment for a promised lower payment in the future. Have you seen government balance sheets recently? Do you REALLY trust their fiscal judgement and capability of promising you a lower tax rate in the future without destroying the value of these paper promises?

I was telling my parents about 3 months ago to cash out their RRSP's, take the hit and invest is precious metals, energy production for their home and SELECT commodities stocks. That was when the TSX was at 14, 000. Now it and the DOW are much lower....gold/silver much higher...the kicker is they INCREASED their stake in their RRSP's connected to their over valued assets. Last night I received a call from my mom saying YOU WERE RIGHT. Yup.

Currencies are on their last legs, bringing down the bonds and credit markets attached to them.

The whole world has been liquored up on cheap/bad credit.

THE KONDRATIEFF WINTER IS UPON US. Prepare. It's going to be a bumpy ride.

i am retired , not rich at all , everything depends on someones assets and age , anymore its like the old addage , its not about how much you make just don't lose.

bottom line , you would face a 10% tax for early removal, i guess on a 401k taxes have allready been paid , depending on the size of the 401k i would remove it and buy a small farm if possible .

the only people in america that have any kind of freedom are farmers.

i don't think i would touch gold at these levels ( coming from someone that sold his a $1100/oz ) , much of golds big jumps now seem to be short covering , as everyone that is short gold is losing money and they cover ( have to buy ) which in its self causes the price to increase more , which causes more short covering , sort of feeds on its self. it will correct and when it does we will see down moves of 200-300/oz as every one tries to get out and the shorts take over again .

 

[Pyruuub]

Peter Schiff has consistently lost people money. Calling him for advise would be as bad as calling Bernie Madoff.

He might be right, but he obviously doesn't know how to make money in the stock market. The greatest importance in the market is timing. Sure, you may have a correct bias - but if your timing is off, you lose the ability to profit from that bias.

 

[asurfaholic]

My 401k grew 18% the first quarter this year... I was pretty happy with it. Its only a real loss after you cash out and make the loss permanent. I would suggest keeping the 401k in there, just reallocating the funds to safer investments. If you are still contributing while the market is bad, you are buying cheap stocks, and if things recover, you will make out good in the end.

I am very very far from an expert in the field though...

 

[LibertyEagle]

You can buy AT&T with a 6% dividend yield. I still think in the next 10 years, people who didn't buy AAPL under $400/sh will be kicking themselves.

Don't you think it matters quite a lot what happens to Steve Jobs?

 

[Danke]

Peter Schiff has consistently lost people money. Calling him for advise would be as bad as calling Bernie Madoff.

He might be right, but he obviously doesn't know how to make money in the stock market. The greatest importance in the market is timing. Sure, you may have a correct bias - but if your timing is off, you lose the ability to profit from that bias.

There has been at least one thread about the performance of investing with Euro Pacific Capital.

My dad invested with them after I introduced him. He initially lost ~10%, but is now well over 70% in gains. That is around a three year performance.

 

[Tarzan]

401k - If stock recovers today - Should I sell everything & pay penalties?

You really need to make that decision according to your own financial condition... including penalties, etc. You would also want to work with a financial adviser who really understands the current conditions and where the economy, and especially the market, is headed. Some pie in the sky, everything's gonna be OK adviser could be a disaster.

I posted this in another thread as tongue in cheek... but honestly expect this is what will happen. The timing may not be exact but all the signs have been clearly pointing in this direction. Basically, I expect a serious crash of the stock market over the next several months... again, my timing may be off.

http://www.ronpaulforums.com/showth...thing-on-RPF&p=3484336&viewfull=1#post3484336

So, I would say get the hell out... but, seriously, don't listen to me! This is a tough decision you need to make with a competent financial person involved.

(and, get yourself a roll of silver dimes, you'll be able to buy bread when the even greater collapse happens a bit later)

 

[ababba]

If you roll the 401k into an IRA you can invest in anything a brokerage account will allow you to buy. This includes many securities linked to gold and different types of bonds that will perform much better than stocks in a major downturn. If there is a chance you are leaving the company soon, this is a better option that paying the penalty. If you aren't planning to leave the company soon and you have a ton of money in the 401k, then this should make you more willing to leave the company to free the money up than you otherwise would have been.

Another option might be to hedge the risk outside of the 401k. For example, if you own the stock market in the 401k and then short the stock market in a taxable account, then you have a neutral position in the stock market.

 

[angelatc]

Personally, I think this is a fantastic buying opportunity.

 

[Paul4Prez]

Baby boomers have made a complete killing in the market over the last 40 years.

The stock market has been flat for the past 11 years. (With a few ups and downs.) The 70's were pretty bad too.

 

[libertarian4321]

I would not have my money in a 401k, period. Know too many people who lost big in 2008.

The only ones who "lost big" were the ones that got in late (at the market peak), then panicked and sold when the market fell. It's the same story every time the market goes down, the ones who lose big are the ones who sell in a panic. Those who hold on do fine in the long term.

I can't count the number of times I've seen it happen in the last 25 years- Black Monday in '87, the Russian Crisis in '91, the Asian financial crisis in '97, '98 Russian financial crisis, when the tech bubble popped in 2000, after 9-11, the 2008 financial crisis, the 2010 flash crash, and other's I'm sure I've forgotten.

Five or 10 years from now, the "crash of 2011" will likely be just another blip on the chart- just as all those other crashes are. Those who panic will get crushed, those who hold steady will do just fine.