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Old 03-11-2009, 04:38 PM
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Default 401k

Here is the situation. You have a 401k that has lost 15-30 percent of it's value. You are still considered an employee, although part time. This prevents from requesting a roll-over, but also prevents you from receiving a company match.

You watch your money continue to dwindle. The only option avaialbale is to move it to a money market (least aggressive) fund.

What do you do?

Fund manager is T Rowe Price.
Old 03-11-2009, 04:58 PM
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I've dropped my contribution to 10% and am going to pay off some stuff with what the gubmint will let me have with my self provided 5% raise.

I'm also moving all future contributions to money market.
Old 03-11-2009, 04:59 PM
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If you only lost 15-30% of the value, I'd say you are doing okay compared to most others.
Old 03-11-2009, 05:00 PM
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I just heard Clark Howard on the radio talking about this. There is a way to roll it over into an IRA and then covert it to a ROTH. I don't know what it is, and there are some taxes involved, not at the same rate as if you cashed it out. Howard said it applied to people making less than $100k, don't know how that fits into the scheme. Maybe someone here can expand on this for you.
Old 03-11-2009, 05:03 PM
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Originally Posted by t5killer View Post
If you only lost 15-30% of the value, I'd say you are doing okay compared to most others.
I will agree to a point, but if the funds are still losing, it is almost like they are holding your money hostage. It would cost less to take the penalty for early with drawl. They are still taking the same amount for fees and servicing.
Old 03-11-2009, 05:34 PM
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Rolling it over to an IRA will require paying taxes on the amount you are pulling out, and also possibly any penalties that will be have to paid as well.
Old 03-11-2009, 05:40 PM
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If you have "only" lost 15-30%, I assume you have a pretty conservative asset allocation. Does your 401K plan offer any other investment alternatives between where you are, and a MMF?

Are you still contributing? Many people view this to be the buying opportunity of a lifetime...
Old 03-11-2009, 06:02 PM
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I keep throwing $200 a week into mine, buy buy buy. When it rebounds, it should do so with gusto. Why pull the money out now? You still own the same shares and your money now buys a lot more. Let it ride. If you pull out now, you really will have lost your shirt.
Old 03-11-2009, 06:03 PM
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I moved my money to the least aggressive fund ( lost 4%). I am checking hers, they suggested the MMF for the wifes money.
Old 03-11-2009, 06:10 PM
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I'm down around 40% over the past 12 months. I still put in the maximum last year and plan to this year too. $15,500 for 2008, $16,500 for 2009.
Old 03-11-2009, 06:15 PM
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Originally Posted by t5killer View Post
If you only lost 15-30% of the value, I'd say you are doing okay compared to most others.
Me too
Old 03-11-2009, 07:59 PM
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Kingair

How old are you? If you are 591/2 you can do what is called an in-service withdrawel. Like all Qualified funds, you have 60 days to roll it over to an IRA without taxation.

Also check your plan to see if they allow any other kind of in-service withdrawals. Some plans do.

Also, another trick, and but you can not roll it over using this method.You could take a loan if the interest rate is right. You will pay yourself back the loan money plus interest. In the meantime you are sitting on the cash and it gets the money out of the market. One problem, how do you invest the cash you know have from the loan? That is the problem in this market.

What differance does it make if it makes 2% in a money market within the Plan or if you put it into a savings account at 2%. Its still 2%. So I would say think about working within the plan.

If you are young enough you will see this comeback. Like someone else said, buy cheap and right now you can buy cheap.
Old 03-11-2009, 08:03 PM
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I am 44
Old 03-11-2009, 09:40 PM
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Your plan may have a hardship withdrawal option. Also, there may be an advantage to you being an independent contractor instead of an employee.
Old 03-12-2009, 03:25 AM
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See,I preached for over a year ago this market would crash.Guess what?I pulled all funds and had put them in bonds and money market funds back in Oct 07.My lost up to date is 0!I'm going on 51 and had played the market real hard the past 8 years day trading after the so called pro's lost a couple hundred grand back in 2001 for me.People need to take charge of the moneys.Read up!

I drop in max every year plus the extra 5 grand for catch up becouse of my age.I am looking at retirement with in the next 2 years and my plan is working.
Old 03-12-2009, 03:30 AM
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Originally Posted by kingair View Post
I am 44

Heck, I'm 46. I've lost about the same value of my combined rollover, roth and trad. ira accts as you have. Converted my 401k and SEP to rollovers a few years ago when I quit my job and opened my own business. At our age you've still got 15-20 years or so before you can do anything with that money anyway. Let it ride!!!! If the SM doesn't recover after 15 years, we've all got a lot bigger problems anyway! In the meantime, I'm doing the same as the other poster.... throwing money in there as fast as I can while it's cheap. As he pointed out, you ain't lost nuthin' till you take it out or convert it. It's only numbers on a piece of paper.... till you convert it... then the loss becomes real!!

If I was 60+, I'd be PISSED! As it is, I look at it as a real possibility for a home-run over the long haul. Of course I am also hedging that bet with other money invested in things like real estate (rentals, etc.)

I can tell you what I have learned from all this. When I get closer to retirement, I will be converting all my stuff to more stable, conservative investments like bonds and such.
Old 03-12-2009, 06:14 AM
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Since you can't use the money today you are basically trying to time the market by pulling out now. It's lost 50% since it's high 2 years ago, do you think it will lose another 50%? I hope not.

At your age I'd let it ride and hope it comes back. Like others said, if it does not then we have greater problems then we think.
Old 03-12-2009, 06:19 AM
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Bear in mind, not all plans allow you to "roll it" very often. This is not a common restriction but you should check with your administrator before taking action. I doubt that the market is going to "ZOOM" upwards so fast that you will be cloberred by a month's or a quarter's delay.

That's all I think I know about that. Good luck!
Old 03-12-2009, 06:22 AM
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Keep your fingers crossed that the "O" team doesn't step in and "help" you take your 401K off your hands. You know, for the good of the country. This has been thrown around for a few months now, google it.
Old 03-12-2009, 06:25 AM
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Originally Posted by kingair View Post
Here is the situation. You have a 401k that has lost 15-30 percent of it's value. You are still considered an employee, although part time. This prevents from requesting a roll-over, but also prevents you from receiving a company match.
If you are not able to recieve a match then why participate in the 401K? You can use Traditional IRAs or Roth IRAs which do not have as many restrictions. Between IRAs for you and your wife and tax free government bonds for additional savings you can somewhat shelter your savings.

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