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401K

Posted: Sep 12, 2011

With the economy I am rapidly losing money. I don't know whether to put all my stocks into retirement bank account or what? Any suggestions? Thanks so much.

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401K - vera

[ In Reply To ..]
The same thing happened to me years ago. I lost over $5000. I dropped out of 401K. I was listening to some of those financial advisers on the Today Show and she mentioned opening a Roth account. I am going to check into when I get extra money. Right now I have none to spare.

401K - mt2

[ In Reply To ..]
Thanks! I can only switch it to retirement bank account as am still employed. I guess all of us are in the same boat that is sinking.

By retirement bank account do you mean an IRA? - Happy MT Robin

[ In Reply To ..]
Or do you mean some sort of savings account?

Very, very different animals.

Everyone who had anything in the stock market is losing money, but now is NOT the time to sell out unless you want to solidify your losses. Leave anything in the stock market alone for at least a couple of years until things calm down and you may recoup some of your losses.

An IRA is a retirement account and you have investment options for that money. Sometimes it's stocks, it can be bonds, it can be mutual funds... it all depends on who the IRA is with and what investment choices you made.

A Roth account is an IRA, but with a couple of differences.

In a traditional IRA, all of the money that you put into it is pre tax, so for the years that you contribute to the IRA you have a slightly lower tax burden. You then pay taxes on the distributions from the IRA when you start taking it at 70 and 1/2, which you are legally required to do. You may be in a higher tax bracket, you may be in a lower tax bracket, but you are taxed at the current rate you're in when you take the distributions.

In a Roth IRA, all of the money you put in is after taxes, so you don't get any benefit on a yearly basis on your taxes. However, all of the distributions are considered nontaxable income (because you already paid taxes on it before you put it in) and any money that is earned within the confines of the Roth IRA is not taxable income. So, when you start taking the distributions from the Roth IRA, you don't have to pay extra taxes on it and the tax bracket that you are in at the time doesn't matter.

A 401k is very similar to a traditional IRA and, in fact, if you have to move a 401k to another type of account, it can only be rolled over to a traditional IRA or another 401k.

It's wise to sit down with an investment counselor for an hour or two and go over what you currently have, what your plans and goals are, and what is the best way to get there.

I agree w/ above poster. - sm

[ In Reply To ..]
In a downtime for the market, I would never pull, and if I could put more into the 401K, I would.

That said, my hubs owns his own one-man business, thus no 401k. When we do our taxes each spring, our tax guys shows us what we would save by putting anything extra into an IRA. We do ours through our bank, and the interest isn't great, but it still saves us X amount~ depending on what gov't decides to let us deposit each year.

I'm far from a genius at math (the reason we have a tax guy), so please take this w/ a grain of salt. I only know what I gather from online and my tax guy (BTW, I was a babysitter for his boys when I was a kid, so I'm pretty sure he wouldn't screw me). Talk to someone professional, please.

Do your homework - Learn as much as you can

[ In Reply To ..]
Do get some good advice and read up on financial markets. Understand the options within your 401K. If you are closer to retirement, you may need to shift out of stocks and into safer securities. I have done a lot of reading and watch the financial news almost every day.

For example: I was concerned about the economic indicators and moved my money out of stocks last spring and put it into a cash account for the summer. When the market did, indeed, drop, I put the money back into the stocks when I felt they were cheap. I now own more stocks than I did last spring (sell high, buy low) The only thing is that stocks have sold even lower lately,and I wish I would have waited just a little longer to buy back in. I am sure they will go up again, though, and I will see a good increase in value. You can do this too, but you need to be consistent with watching the market and understand how to move your money between accounts. Professional advice is a good thing, but you need to know the right questions to ask and protect yourself.

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