Posted on 11/07/2008 5:41:54 PM PST by Libloather
Schwab Offers Six Tips For 401(k) Investing in Today's Volatile Market
Friday November 7, 3:13 pm ET
6. Treat your account like a lockbox
This year has been tough for many working families. In times like this, it's tempting to tap into your retirement savings accounts but the penalties and taxes will cost you in the short and long term.
Treat your retirement accounts as a lockbox, only to be opened when you reach retirement. Every one of us encounters unexpected financial difficulties at one point or another during our lives, including unexpected medical bills. In order to build sufficient wealth so that we're able to retire we need to, as much as possible, emulate the saver we looked at earlier. That saver built wealth because through thick and thin, the contributions continued and he resisted the urge to withdraw from the account when times were tough.
**SNIP**
I do think, however, that withdrawing money from your retirement account should be a last resort.
Withdrawing money from a retirement account is very expensive, and, therefore, is a costly source of money. For example, if you withdraw money from a 401(k) prior to age 59½, not only do you need to pay taxes on the amount you withdraw, but you also owe a 10% penalty for withdrawing early.
Think about that for a moment. Imagine you have a $20,000 balance in your account and withdraw it all for some reason. You don't get to keep the full $20,000. If you're in a 20% tax bracket, you have to pay $4,000 in taxes plus another $2,000 in penalties. Suddenly, your $20,000 has shrunk to $14,000.
(Excerpt) Read more at biz.yahoo.com ...
...before the gubmint does.
There is no proposal in Congress to take away your 401(k) savings account.
Yet.
Hearing on 401(k) plan grows to urban legend (MSM preparing people for government seizure of 401K!)
1. Don’t
2. Don’t
3. Don’t
4. Don’t
5. Don’t
6. Don’t
I am kidding but folks really better know what they are doing, or they are going to hurt themselves.
bttt
Or you can cash out and keep the RATS from getting it all.
“...I can borrow against my 401(k) and pay it back...”
- - -
Mine too, but most of the financial advisors are dead-set against the idea,
but after a financial mess, it seemed like the right thing for me to do.
So 2 1/2 years ago, I borrowed a tidy sum from myself on a 3 year pay back
at 8 1/2% interest and I am nearly done paying it back in.
But the way my luck runs, just as soon as I think I have a little something set aside,
some unexpected expense pops up from out of nowhere and spoils my plans.
Been that way all my life.
I must have bad karma from something terrible I did in a former life.
bookmark
This is extraordinarily bad advice.
Unless and until they are at your door taking it, leave it where it is.
If you take money out of your 401k, you are going to pay full-up taxes on it PLUS a 10% penalty.
Giving that money away without bullets flying after it is utter stupidity.
No contribution limits
No age restrictions
No tax on growth
No tax on pay out
No stock or mutual fund
Guaranteed 1% growth, no loss of principle
Tax free death benefit
Out ran S&P last 10 years and last 25 years
Tax-advantaged Indexed Universal Life Insurance.
Taxes will always be imposed. Having the RATS take the entire account leaving only an IOU behind would be called, what - insane?
I’ve tried to read everything that’s available on the “supposed” plan, and from what I’ve read, you could keep your 401K, the contributions, however, wouldn’t be pre-tax.
As far as safety, we moved all our funds into a stable fund under our 401K and haven’t lost any money. We did this about 3 or 4 months ago, when we figured things were going to get chaotic. I’ll note we haven’t made any money (well maybe 1 percent) but we haven’t lost either, at least not yet.
I wouldn’t cash out because the penalty plus tax hit, at our income bracket would be huge. As long as it’s stable, and not going to be nationalized, we’re staying put. At the first sign of nationalization, we’d yank the funds, but I think that’s unlikely.
Here’s why. Both Republicans and Democrats were equally against the bailout. If they try to touch the 401K’s (I think this will even come down to the issue of eliminating the tax deduction) the outcry from both parties will be huge, and the folks in Congress do want to be elected next go. 401K’s are used by such a large segment of the population now that I think this particular plan will fail. (I think there was talk of this same thing a few years ago and it failed to materialize.)
At that point, coming soon, the program no longer works for me.
I wouldn’t cash out because the penalty plus tax hit, at our income bracket would be huge.
If you were forced out next year, what will be the tax hit? Another unknown. (Remember - RATS are in charge now.)
At the first sign of nationalization, we’d yank the funds...
Too late. The RATS are WAY ahead of you. $12 TRILLION in 401Ks that they are DYING to get their hands on? Hold on tight.
...the outcry from both parties will be huge...
Just like the amnesty bill - or the bailout bill? Don't forget, RATS are in charge.
Hysteria is always the wrong time to act.
Keep your powder dry and your eyes wide open.
Nope. The RATS telegraphed their punches. 25% reduction in the greatest military force ever? Collecting retirement loot into one giant fund? Taxing the 'rich' to pay the poor?
They won elections, and gained majorities, with these nitwit ideas. And their leader is a left wing extremist? Grab your nuggets and hold on tight.
This baffles me, help me puzzle it out.
Let's say I want to finance a new car for $25k. I can pay GMAC 9% interest, or borrow against my 401 and pay myself 7% interest. Seems like the only downside would be if the $25k would have earned more than 9% in the 401, which doesn't seem realistic. (And borrowing against my 401 doesn't show up on my credit report and lower my FICO score.)
Either I'm missing something here, or the truly smart financial advisors have taken their own advice, made a pile of money, and don't have to work as financial advisors anymore.
In the program in #9 you can become your own bank and avoid non-preferred debt. You dont have to pay the money back if you’re willing to decrease your death benefit.
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