401K's a sinking ship? Options Anyone?

[ultrarunner]

I've almost always worked for myself and still do to a lesser degree.

About 10 years ago, I was offered a benefited employee position at the Hospital where I had been doing a lot of work.

In exchange for a pay cut, I would receive paid vacation, profit sharing, 401k, Employee Stock Bonus Plan and health insurance... Never had a job with paid vacation or paid medical... it was a hard concept for me to grasp...

I still have paid vacation, but all of the other benefits have been reduced or eliminated.

The 401K no longer has a match and 5 years of gains have been wiped out ALONG WITH 5 YEARS OF MY BI-WEEKLY PAYROLL DEDUCTIONS and my employer's match contributions.

Intellectually, I know the "Experts" say to ride out the storm... My fear is the 401K ship IS sinking AND taking me down with it...

The plan administrator has changed several times and is now Hartford. I called Hartford and after 5 calls was actually able to reach the person administering my facility... I told her to Cash me out... something is better than nothing...

She said what I'm asking isn't possible and will meet with me next week to explain my options.

Any advice on what I should be asking and what I should expect?

I don't understand how the Bank CD I opened in November can yield 4.75% and my closest 401K money option yielded 1.2% at that time. The Mutual Fund disclosure lists Fund costs of 2%, on average...

Hartford makes money, irregardless of what happens to my money and without risk.

My parents and grandparents are products of the Depression and they never had any money in the Market period... for them the Depression was all to real and they had plenty of stories of folks and neighbors living high on the hog and then loosing everything.

Hartford continually advises us to Max Out our 401K's so that we will have more for retirement.

I don't know about the rest of you, but the more money I put in my 401K, the less money I have.

5 years of Salary Deferral would have more than paid for that shiny new Kubota b26 I've had my eye on... and implements to boot!

 

[Travelover]

Ultrarunner, don't panic! We are going through one of the deepest recessions in the last 75 years. Once you sell your stock funds, you are locking in your losses. I know that it is hard to believe right now, but things will get better and those that hang tight will be OK. Those that convert to cash will take years to get back to even, if they ever do.

You are right to be concerned about fund expenses and 2% is excessive. Talk with your 401(k) representative and see if they have index funds that are less than 1%. If not, you may want to save in the future in IRAs at a low cost fund company like Vanguard for Fidelity.

Here is how I look at it. Historically, stock funds have paid out about 10% per year, on average. CDs and bonds paid half that or less. Why the difference? Because stocks go up and down, often dramatically.

Hold on, you'll be glad that you did in a few years.

 

[SnowRidge]

Isn't there a penalty for cashing out at 401K? Don't do anything without talking to a good tax person and an independent financial advisor.

Don't be the person who buys high, sells low, and makes up the difference in volume.

 

[Double Orange]

I believe this is the time to buy.
Friday I p/u 250000 shares of BAC at a total cost of only $1775600.
Next year I'll be laughing my XXX off about this or picking up cans on the side of the road.
Good Luck My Friends!

 

[ultrarunner]

My background is engineering and people come to me and expect precision...

I find it interesting that the entire 401k industry seems to be built on faith and each presentation starts and ends by saying there are no guarantees... and then they bring out all the charts and graphs and proceed to tell us what we should be doing.

I double checked my company 401k investment options...

The fund fees range from a low of 1.75% for the PIMCO Bond Fund to 2.16% Fidelity Mid Cap Fund...

More questions...

Is there any reason to continue with the company plan now that my employer match is gone? They previously matched .25 for each dollar I put in up to 3% of my wages.

Wouldn't I be better with an IRA or something through Schwab? Plan fees would be significantly less and investment options greatly increased.

Turns out my plan has a secret Stable Value 3% Money Market Option that is NOT listed anywhere in print... it is only available if requested... seems Unethical at the least and Fraudulent at the worst to with hold this knowledge?

 

[ultrarunner]

Isn't there a penalty for cashing out at 401K? Don't do anything without talking to a good tax person and an independent financial advisor.

Don't be the person who buys high, sells low, and makes up the difference in volume.

I'm told I can't cash out, unless I'm no longer employed or hardship and then I would be subject to a 10% penalty... I'm already down 50%... the 10% is looking good.

 

[SnowRidge]

I'm told I can't cash out, unless I'm no longer employed or hardship and then I would be subject to a 10% penalty... I'm already down 50%... the 10% is looking good.

The 10% is on top of the 50%. Virtually everyone in the country with a 401K is in the same boat. IRAs too. As was pointed out, if you get out now, you will lock in your losses and be required to pay income tax on the entire amount plus a penalty. As far as the statements that nothing is guaranteed, they are required by law.

Again, talk to tax and financial advisers before jumping. You don't even have to pay anyone to get general advice on this subject. There is a ton of stuff on the web from experts with no financial axe to grind.

 

[scott_vt]

I'm told I can't cash out, unless I'm no longer employed or hardship and then I would be subject to a 10% penalty... I'm already down 50%... the 10% is looking good.

Good Afternoon Ultraunner,
If you recall I was laid off from Pitney Bowes back in Nov of 2007. I was a modelmaker for them for almost 20 years and in the trade for 35 at that time. My 401K was with TRowe Price through Pitney Bowes. In January of 2008 I was able to roll my 401K funds into a defined IRA. I had another retirement account through Oppenhiemer, and choose that company to roll over those funds. I ended up putting most of the money into fairly secure money market funds, through ING. Looking back on it I wish I had just put all the money in FDIC insured CD's. I lost some money, but I got out of the market when it was close to 14,000 and we all know where it is now ! I do have some other retirement money in some Alger mutual funds, and i have lost a fair amount of money in those accounts ! At this point I think Im committed to riding out the storm with those funds, even though I have lost a bunch allready ! In the end, if your to the point where you cant sleep because of the present situation, then maybe its time to put it to a close ! It really boils down to what your tolerance level is ! I wish I could offer more help than that, but unfortunately I cant !

 

[bhostasa]

Don't forget about the taxes that you'll have to pay (at your current income level) on top of your 10% penalty and the losses you've already taken.

I have lost about the same percentage on my holdings. If you're close to retirement, then cashing out is an option. If retirement is still a ways off, you should be able to make back your losses and hopefully even gain some over time. As everyone knows, the economy is cyclical and will come back. You just have to decide if you have the time to wait it out.

That said, good luck to everyone in 2009. America is going through a major struggle right now but we have always fought back to even greater levels of prosperity.

 

[LMTC]

I too "wish" I had the foresight to get out when the DOW was above 14,000, but I didn't. Now losing it all is still a secondary concern for me (if that happens, we're all in it so deep the part I could salvage by selling now really wouldn't make much difference), and my main concern remains being IN the market when it does begin to recover. I believe even the beginning of recovery could be 3-5 years, but I am not willing to lock in a 50%+ loss. I honestly think the last 2 thousand or so of loss was due to the folks who simply didn't have the stomach to stay invested any longer. I simply don't believe I can predict when it will turn up for the next several year bull market, and missing it by even 6 months could mean more than what I could earn in CDs for 5 years or so. Thus I sit. Not comfortably, but I sit nonetheless.