There is so much hype about 401K but being young (under 40) however I must ask why bother on the 401K?In today's rules if your 401K is under xxx amount of dollars and you have left the company you have 90 days (and sometimes less) to roll it forward.In my case, I had $3000.00 invested into my account (not including the matching) I filled out the paper work to roll it to an IRA (hounded is more like it) and then by the time they come around to cutting the check I have lost $1000.00.Now explain to me how losing money I will not be able to recover since I was forced out of the plan makes the 401K plan SO beneficial???Like many others, we do not stay at our companies for more than 5 years. This risk along with market fluctuations seems to loss more than it gains from money taking out of my salary pre-tax dollars.JTS
You sold in your 401k at a most inopportune time. To take money to roll to IRA, the investements that were already in it had to be sold. For over a decade people in the same situation made lots of money. The last year and a half have been the first bear market in over a decade. Historically markets go up much more of the time than they go down. The fact that YOU terminated your employment at the wrong moment as far as the markets were concerned doesn't make investing in an IRA or in a 401k wrong. Of course, if you could have had perfect foresight, it would have been better to have not made the investment. Of course, the 401k investment was made with before tax money. Uncle would have collected more tax had you not made the investment, so he is a partner in your loss even though it is not tax-deductible. The odds, over time, of the 401k turning out to be a good deal are very high. The probability is that if you do the same thing with your next job, it will be a profitable decision. Best wishes, Chris
My luck was the opposite of yours. I requested a rollover check from my former employer, over the phone, about 4 days before the disaster. As a result, I missed the record decline last week saving myself at least 25%.A couple of tips:1) Before requesting a rollover check, transfer the funds to a stable value asset such as money market, or cash if possible, to eliminate the risk of them cutting the check after a decline. You may miss some upside but risk reduction is more important.2) Don't fill out rollover paper work and mail it using U.S. mail to your employer. Do it online or over the phone if possible to gain as much control as possible.Best of luck next time.
Please explain how $1,000 of your pre-tax earnings, fully-vested into the companies 401k plan were taken away... they can't just disappear! Are you sure it wasn't an employer's discretionary amount or some other such nonsense that you weren't vested in yet?? In that case you really didn't lose anything... it was never really yours to begin with. Just trying to better understand your scenario...-Bill
Please ignore previous post... my mind wasn't in the right place. He never actually mentioned "selling," and I wasn't thinking straight. So basically, my previous post is useless and stupid :)
Someone once told me that if you invest $2000 in an IRA every year for ten years from the time you are eighteen to the time you are twenty eight and then stop, you will have $1,000,000 by the time you are sixty five. That is why I wish I invested when I was one. The reason I want to participate in a 401k when I am under 40 is so that I don't have to save as much when I am over 40. It is by the magic of compound interest. Also there is the chance that my employer will give me some money (for me it is three percent of my pay if I put in six percent). I also don't like giving Uncle Sam any more than I have to and if I can legally avoid paying taxes, I'm all for it. The next time you are considering a 401k plan, please look at the investment options. Some are riskier than others. Even if you are young, if you don't expect to be invested in the fund for more than a few years, you might want to consider choosing a more conservative alternative. When you have more than $5,000 in an account no one can hound you to take out the money. Finally, is there anything you can learn from this? If so, it might be the most well spent $1,000 of your life. If you are under 40, your retirement alternatives are not going to be that great. They keep increasing the social security retirement age and talk about cutting back the benefit. Good luck.
I recently RE, and had about 250K in an index 500 fund (its initials are Vanguard ;) . Between the time I requested rollover (into the same fund in the same Co. -- and still, it took 2+ weeks for execution!), the value had decreased by about 5k.In retrospect and with hindsight, it would have been smarter to have first exchanged the index fund into the available money-market fund, and THEN done the rollover. Of course, if the market had happened to go up instead of down in the interim, I would have "lost" $$ this way!If only I/we could predict the future <vbg> !!Best to alljtr (who continues to wonder if he made the right decision)
In my case, I had $3000.00 invested into my account (not including the matching) I filled out the paper work to roll it to an IRA (hounded is more like it) and then by the time they come around to cutting the check I have lost $1000.00.That loss was from market movement, wasn't it? If so, the 401(k) investments were sold while down and you will probably buy assets inside the rollover IRA with the prices still done. That means you still have the money "sheltered" for retirement. It looks bad now because of the state of the stock market.More often than not, the market would be going up, so you would more often be moving money form a 401(k) with its investments up to a rollover IRA with up prices.If you plan on doing a lot of job hopping, when you have to move money out of an employer's 401(k), move it into a "rollover IRA" and use that "rollover IRA" as your long-term investment place so, except for the transition time from a 401(k) to a rollover IRA, the money can stay in that IRA in long-term investments.
I posted: I recently RE, and had about 250K in an index 500 fund (its initials are Vanguard ;) . Between the time I requested rollover (into the same fund in the same Co. -- and still, it took 2+ weeks for execution!), the value had decreased by about 5k. In retrospect and with hindsight, it would have been smarter to have first exchanged the index fund into the available money-market fund, and THEN done the rollover. Of course, if the market had happened to go up instead of down in the interim, I would have "lost" $$ this way! If only I/we could predict the future <vbg> !! Best to all jtr (who continues to wonder if he made the right decision)Oops...I neglected to mention a crucial fact necessary for understanding the point of what I said above <embarrassed frown>. The lost 5K resulted from the fact that there was an after-tax component to the funds in the 401K. This could not be rolled over, and had to be refunded to me. Therefore, shares of the index 500 fund had to be liquidated for this refund. Since the fund price declined before the rollover was completed, a larger number of shares had to be liquidated, and therefore fewer were left for the rollover.Sorry for the mystification!jtr
Why bother????????Because when you get to 65 or any other retirement age, you will be glad you bothered!!!!!!
The lost 5K resulted from the fact that there was an after-tax component to the funds in the 401K. This could not be rolled over, and had to be refunded to me.If possible, I would recommend sticking to pre-tax 401(k) contributions, after-tax Roth IRA contributions, and skip the after-tax 401(k) contributions (at least until the Roth 401(k) becomes available).
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |