401ks

[Cooter]

if one beleives the best thing to do would be not have so much money in a stock market thats going to go to shit, what would you sugged to people who have money in a company 401k? im 34 years old so ive got a good 34+ years to retire and ive got less that 20k in the company 401k, but i checked about getting money out and they talked about all these heavy penalties and fees. so im guessing im pretty mush stuck with that money there and while i plan on investing in goal in the very near future any suggestions for people with 401ks? just leave it alone? stay with the max that the company matches? decrease the amount and put that money towards gold?


thanks

 

[icon124]

Does your 401k make you invest certain ways? If you have to invest in the stock market, you should think about "short selling" or maybe even buying options. If you can invest in whatever you like, then gold would be a good answer.

Also I don't know if you know to much about the market, but usually during times like this metal stocks (Gold mining companies, Silver, Copper, etc.) seem to do good. You may also want to look into companies that make stuff you must have during a recession or depression. Also, sad to say but when we are in a serious recession gambling and Liquor companies do good. I just invested in Coors (TAP) recently...they had a really good quarter, even with prices rising, and they are in talks to merge with the 3rd biggest company in the beer industry (Coors in #2 and Bush is #1)

Just some ideas. There are others as well, agriculture and equipment suppliers, I mean the list goes on. So you can make money in the stock market. Good investors make money in a bubble, but make more in a bust.

 

[AceNZ]

Unless you have full control over what your 401(k) invests in, I would take the 10% tax penalty and get out. With an understanding of current market conditions to guide your investments, you will more than make up for the loss very quickly. I did that myself about a year ago, and I'm very glad I did.

 

[Pianist4Freedom]

Unless you have full control over what your 401(k) invests in, I would take the 10% tax penalty and get out. With an understanding of current market conditions to guide your investments, you will more than make up for the loss very quickly. I did that myself about a year ago, and I'm very glad I did.

I have around 3K in my 401K at the moment (my first job didn't start all that long ago)... so you think I should take the penalty and perhaps buy some more gold and silver with it? I found my old coin collection and I have a bunch of silver coins in it, and I just bought a few more today, but I don't think that handful will really protect my wealth all that well. What do you think?

 

[Primbs]

There are some good foreign stock funds. Russia, middle east and certain other countries are going to do well because they have lots of commodities and oil.

Oil services should do well for a long time.

Certain international mutuals funds are looking for these types of investments.

 

[JSutter]

You can roll your 401k into a Roth IRA with Sterling Trust in Austin, TX and use the Roth to buy physical gold and silver and have it held by a third party custodian. Any profits you make on it would be tax free.

Personally I'd wait a bit longer before I panicked and yanked my retirement funds out totally because when you canyt touch something you're less likely to spend it and end up having nothing in retirement.

You also dont want all of your money in gold and silver, you want to be well diversified so you keep the opportunity for capital growth. Gold and silver are great stores of wealth but it's hard to make profits with them unless you buy and sell with the ups and downs of the market. A few short sells at the wrong time and you can really screw yourself.

Any money you have in bank accounts or savings you miight want to put in gold and silver so you don't lose money through inflation but you should leave your retirement funds alone for the time being unless you're retiring in the next 5-10 years and are worried about losing wealth you've already accumulated

 

[Pianist4Freedom]

You can roll your 401k into a Roth IRA with Sterling Trust in Austin, TX and use the Roth to buy physical gold and silver and have it held by a third party custodian. Any profits you make on it would be tax free.

Personally I'd wait a bit longer before I panicked and yanked my retirement funds out totally because when you canyt touch something you're less likely to spend it and end up having nothing in retirement.

You also dont want all of your money in gold and silver, you want to be well diversified so you keep the opportunity for capital growth. Gold and silver are great stores of wealth but it's hard to make profits with them unless you buy and sell with the ups and downs of the market. A few short sells at the wrong time and you can really screw yourself.

Any money you have in bank accounts or savings you miight want to put in gold and silver so you don't lose money through inflation but you should leave your retirement funds alone for the time being unless you're retiring in the next 5-10 years and are worried about losing wealth you've already accumulated

That's about what I figured would be the right way of doing things---I shouldn't put all my eggs in one basket. I like what you say about buying gold and silver instead of having nothing but money sitting in savings accounts---I was thinking I should do just that. Each time I get a little extra money to save, instead of putting it straight into my savings account I should go to the local coin shop and buy some more. I actually had a small collection when I was a kid, had a few nice silver and gold coins...so I've started up again! I bought a few American Eagles, one really nice proof one, and some canadian silver half pieces too. I'm pretty sure the guy had reasonable prices...if the spot price is around 18$ as is being reported on several websites, he only charged me 19$ for an american eagle. seems pretty reasonable to me.

 

[JSutter]

$19 is a heck of a price.

I personally put all of the money from my savings accounts into silver and gold as well as my tax refund check. Like I was saying personally I don't want to keep any more paper cash as savings than I have to. the $100 that I leave in the bank I get a nickel a month in interest. Inflation lately is more than that so I'm actually losing purchasing power by having that $100 sitting in the bank.

The gold and silver I have is easily converted into cash if need be and at least lately it's been keeping up with and actually outpacing inflation.

My 401k and IRA I'm leaving untouched because I don't miss the money that rolls into it and now is a good time to be buying stock in certain assets while the market is down and they're more affordable. if I lose money I'll write it off and owe less in taxes next year.

My plan is to keep accumulating gold and silver with every spare dollar I save until I get about a years worth of income in that form then slow down on buying physical metal and get into some mining stocks with about a third of what I'd be spending on physical metals.

I've really been learning to live frugally. I sold my car in September and take the bus everywhere now because it runs me $35 a month and I was spending more than that in gas every week not to mention maintenance and insurance. I'm also not eating out because I can buy food and fix meals at home for about $3-4 a day when eating one meal out can cost two or three times that. I'm not buying anything I don't need. I drink water instead of sodas to save $2 a day.

Just doing little things like that has freed up about $500 a month to go into savings. I figure if things do get worse at least I'm already accustomed to penny pinching and will not be hurting as much as most folks and having the savings will really help out a lot.

 

[AceNZ]

I have around 3K in my 401K at the moment (my first job didn't start all that long ago)... so you think I should take the penalty and perhaps buy some more gold and silver with it? I found my old coin collection and I have a bunch of silver coins in it, and I just bought a few more today, but I don't think that handful will really protect my wealth all that well. What do you think?

It's hard to provide a meaningful answer without knowing a lot more about you and the details of your financial picture.

In general, I would say that precious metals are likely to outperform stocks and bonds for quite some time. If your 401(k) limits your investment choices to a handful of mutual funds, then I would definitely pull the money out (in fact, I took my own advice, and did that myself).

Where to invest is a more difficult question. Coins are good, but they have high buy/sell spread compared to other forms of metals. Whether they're right for you depends on things like your ability to safely store them, how comfortable you are with paper assets vs. physical possession, what your debt profile looks like (pay off credit cards before making investments like this), whether there's a strong chance that you'll need the cash within the next few years, etc.

Potential alternatives to coins include: commodity ETFs, vaulted bullion stored offshore through firms like BullionVault, a gold or silver ETF, or possibly foreign dividend-paying stocks if a little extra income is important.

 

[Primbs]

Look at some long term charts of commodities, the stock market etc. Many of the sectors tend to go in long term cycles. Gold and silver just came out of twenty year bear market starting with the crash in 1980.

Then the stock market tended to do pretty well for certain periods and then real estate did well during certain periods.

Over the long term, the stock market tends to do well, but you have to buy the S & P 500 or the total stock market or the Dow.

I would invest in all thee sectors if I could. Some real estate, some stock, some commodities.

With the growing world economy and the industrialization of India and China with 2.5 billion people, companies that own commodities should do very well. Companies that own forests, wood products, mines and farmland may do better overall than other companies.

The stock market as a whole is a very good investment over the long term if you are diversified.

 

[scooter]

The stock market as a whole is a very good investment over the long term if you are diversified.

I am glad to see a lot of rational discussion in this thread. I would NOT pull your money out of a 401k. Even if we went into a very prolonged recession you will be fine if you are retiring in more than 20-30 years.

The stock market has proven to be an inflation-beater over the long term. In fact, the stock market has kept pace with inflation much better than gold in the long run. Do not panic and get out of it entirely just because we're hitting a rough patch. Just avoid the bad companies and buy diversified companies who will be around through any of this turmoil.

Commodity producers and consumer staples should do well, but beware that a lot of the commodities have been on really great runs the past few years. Oil, gold, and agriculture should be fixtures in your portfolio, but not ALL of it.

Check the funds in your 401k. A lot of company programs have a gold fund in there.

 

[JohnCrabtree]

I would keep my money in the 401K and keep putting in the fulll amount for the match. If your workplace does not match, then I would Roll it into a Roth IRA. In a Roth IRA you contribute after tax money, but it is not taxed when you withdrawl it after you are 591/2 years old.

If there is matching funds don't throw that away. That is an automatic 100% return. and they will keep matching, no matter what the dollar is doing.

If you have the option of a Low cost index fund, I would put my money in that. Over the long run you will do well. Buying in the Bear market is much better than selling in the Bear market. Dollar-Cost averaging will work out. every week if you put in $40 and your employer puts in $40, sometimes you'll buy low, sometimes high, but it will workout.

I have the Vanguard Total Stock Market Index Fund in my Roth IRA, the cost is like .29% .

 

[JSutter]

The ING guy that came and set me up for my 401k said a retirement account is like that rotisserie oven they sell on TV. He said you set it and forget it and let the profits, dividends, and compound interest do the work. He said other than rebalancing your portfolio when you get too heavy or light in one area there is nothing else you should be doing.

 

[rancher89]

There's a lot of good advice here in this thread.

 

[jonahtrainer]

I am glad to see a lot of rational discussion in this thread. I would NOT pull your money out of a 401k. Even if we went into a very prolonged recession you will be fine if you are retiring in more than 20-30 years.

Sometimes the DOW is cheap sometimes expensive. If you are looking at investing over the long-term then it is best to look at the long-term trends.

Currently, the DOW is at 12450 and gold is at 950 for a ratio of 13.1. The crash continues and we may see a ratio of 10 within a month or two. The time will come when the DOW is cheap .... at about 1-3 ounces of gold.

In the meantime, why would you invest in general equities? In addition, Congress can and has changed 401K and IRA rules. As SS is empty the 401Ks and IRAs are being raided through inflation. Why keep your money there? Talk about a bad allocation of capital. Your savings is evaporating.

Do not panic and get out of it entirely just because we're hitting a rough patch.

The first rule of panic is to do it first. Now is the time to remove all the layers of counter-party and payment risk between you and your purchasing power. That means take physical possession of share certificates, have your bullion in allocated storage, etc. Ironically, I think I remember reading how about 1/3rd of the seats on lifeboats from the Titanic were empty. The US economy is the Titanic, it has hit the Subprime iceberg, is taking on ice-cold water that is deflating everything from the bond market to Auction Rate Securities to the stock market but not tangible assets and the ship is going vertical. There will be massive bank failures, commercial property is the next to deflate and the Depression is already here. The USD is headed to .5 and gold is headed to $1,650.

I hope you are enjoying the band .... I'm watching from afar in my lifeboat and have been while all this chaos ensues. My portfolios and assets are doing just fine. When analyzing an investment if I don't earn at least 30% per year in USD terms then there is no reason to take the risk to invest in it. How does that compare to your returns?

 

[slantedview]

You can roll your 401k into a Roth IRA with Sterling Trust in Austin, TX and use the Roth to buy physical gold and silver and have it held by a third party custodian.

How can you buy physical with an IRA?

 

[jonahtrainer]

How can you buy physical with an IRA?

GoldMoney should be offering the capability within the next month or so. Not sure I would want a 'custodian' though as I am sure they work for Uncle Sam and not you.

 

[Cleaner44]

No reason to take the money out of the 401k and pay the 10% penalty, just take the money out of any stocks or funds that will be losing money. Keep the money inside of the 401k and look at other options like bond funds. If nothing else just let it sit there invested in nothing for a while.

 

[Primbs]

The ING guy that came and set me up for my 401k said a retirement account is like that rotisserie oven they sell on TV. He said you set it and forget it and let the profits, dividends, and compound interest do the work. He said other than rebalancing your portfolio when you get too heavy or light in one area there is nothing else you should be doing.

I wouldn't forget about it. It is possible to time the market by following business cycles. The Fed has a lot to do with it. When the Fed starts raising rates like crazy to slow the economy down, you can bet the market will drop six months to a year after they begin to slow the economy. Less corporate profits means falling stock prices and a falling P/E ratio.

Plus higher bond rates attracts money away from risky stocks to more secure bonds that pay higher.

When the Fed drops the interest rate, they are trying to pump up the economy and raise P/E ratios and increase stock prices. Bonds pay less and people go back into stocks.

Some people sold out in Jan 2000 right before the Nasdaq dropped sixty to eighty percent from 5000 plus points to around 1200. You could see the signs of a stock bubble in the tech sector.

Make sure you diversify. We don't know which bank stocks are going to blow up due to the subprime mess.

 

[jonahtrainer]

No reason to take the money out of the 401k and pay the 10% penalty, just take the money out of any stocks or funds that will be losing money. Keep the money inside of the 401k and look at other options like bond funds. If nothing else just let it sit there invested in nothing for a while.

From Reuter's article:

Asked what form such collective action may take, [Juncker, who chairs the Eurogroup -- the monthly meetings of euro zone finance ministers and the European Central Bank -- told the Luxemburger Wort newspaper]:

"Whoever has a strategy, should not set it out. Otherwise it will lose its effect if it is explained."

With the G-7 threatening Exchange Controls without notice I would be extremely wary. The 10% penalty may seem extremely small compared to the cost you will pay once the Exchange Control Trap is clanked around your capital. Thailand did it and their stock market plunged 25% in one day.

I would not be surprised to see Exchange Controls within the next 6-8 months.