What to do with a 401(k) now

[DTS]

I wanted to get a feel from some of you that deal with this all the time, as to the best thing to do with a 401(k) or any other retirement accts now.

Is it best to leave them alone, move them into something safer, cash them out?

Thoughts and ideas on this?

D

[MLINDER42]

I wanted to get a feel from some of you that deal with this all the time, as to the best thing to do with a 401(k) or any other retirement accts now.

Is it best to leave them alone, move them into something safer, cash them out?

Thoughts and ideas on this?

D

How many years till needed ? If over five years if diversified leave alone and ride it out.

[joanmcq]

Its too late to cash out; if you do that now, you lock in your losses. Better to ride it out. Time to buy..remember dollar cost averaging and 'buy low, sell high?'.

That is, if you are diversified. If all your 401(k) was in WaMu, you may be SOL either way, depending on what the buyout means to the stock?

[Beth]

What to do with a 401(k) now

I am assuming the person is no longer employed. Over or under 59 1/2?

Certainly one should look at his or her investments to see how they have been performing. Also check to see if allocations are right for the goals and time until needed.

Are the investment choices within the 401K good? Is there enough in the plan not to get forced to a rollover. Assuming all is good, leave it alone.

Also can consider a rollover to a traditional IRA and MAYBE then a roth IRA. This would allow more choices for investmement, and the rollover can be to several companies.

I too would not sell now, but MAYBE swap within the plan if investments have been performing poorly OVER TIME.

[DTS]

401

The client is going to retire in 1-5 years, but the sooner, the better I was told. Likely, next year.

I don't know how things are doing in this acct, as I got a VM last night and wanted to ask you all before I answered the call. I will talk to her later today and get that info.

Thanks for the input!

D

[Zee]

Be careful of this type of question from clients

Are you a financial planner and a tax preparer? If not both (and compensated for each), I'd avoid answering questions on how to position investments.

There are too many liability issues and no payback. Haven't you noticed who is driving the Mercedes? It's most often the financial planner selling annuities after a dinner seminar to a 95 year old.

It's interesting how often client's ask their tax adviser where they should invest their money for the best return. I've been asked the question thousands of times. We all have. But, is it wise to answer?

[DTS]

Zee

Are you a financial planner and a tax preparer? If not both (and compensated for each), I'd avoid answering questions on how to position investments...It's interesting how often client's ask their tax adviser where they should invest their money for the best return. I've been asked the question thousands of times. We all have. But, is it wise to answer?

Zee,

You're absolutely right! The message I left on the machine when I called a few minutes ago was that I was not the right person to be asking these questions of. My exact words to her.

Over several years, I've seen people in our position offer advice they were not qualified to answer and the adverse consequences to the client were huge. So, a very good lesson there for those of us that are not licensed to do so.

Honestly, thank you for reminding us!

D

[joanmcq]

Since the value is down, could be a good time to rollover to Roths.

But I caution also against financial planning. I had thought you were asking for personal reasons.

[DaveO]

A agree with Zee

About not offering advice. But one of the really fun things about this work is seeing what is in people's portfolios. What has worked over the years and what hasn't and having a discussion with the client. No matter if it's the retired 85 year old economist with $500k in government bond funds, the 90 year old widow with a million $ in annuities or the guy with a capital loss carry forward he will never live to use up.

I always preface my comments with the fact I'm not licensed and therefore not qualified to give advice about specific investments beyond the tax issues. I also mention that since I'm not licensed I have nothing to sell them.

As far as my own account goes, no changes for what I have but am going to be putting future additions into more conservative investments. Getting to the age I need more emphasis on income.

[DTS]

Client

I finally talked to this client about her call. She called only to see what the tax consequences of retiring and pulling her retirement combined with her husband's income, who will still be working.

Intially, she called saying she wanted to see what to do with the accts., which is why I posted and also told her what I told her about being the wrong person to be asking this question of.

D

[veritas]

I would think

The client is going to retire in 1-5 years, but the sooner, the better I was told. Likely, next year.

I don't know how things are doing in this acct, as I got a VM last night and wanted to ask you all before I answered the call. I will talk to her later today and get that info.

Thanks for the input!

D

that if one was near to retiring they would have made adjustments to the 401K in anticipation. This individual may have to work a few more years if she was counting on the 401K.

[DTS]

Veritas

I've done this couple's taxes for some years. She earns a lot and has contributed the max each year into her 401. I don't know what the value of that acct is. Her husband's making a very nice living, as well, so she won't need to depend on the retirement alone, as he's about 10 years younger and will continue to work many more years. She's been with this company for almost 30 years.

[veritas]

Husband 10 years younger

with a good income certainly changes things.

[JoshinNC]

Do I sense some eny in that comment?

Are you a financial planner and a tax preparer? If not both (and compensated for each), I'd avoid answering questions on how to position investments.

There are too many liability issues and no payback. Haven't you noticed who is driving the Mercedes? It's most often the financial planner selling annuities after a dinner seminar to a 95 year old.

It's interesting how often client's ask their tax adviser where they should invest their money for the best return. I've been asked the question thousands of times. We all have. But, is it wise to answer?

Yes, there are unscrupulour "advisors" out there who prey on the elderly but I have placed several clients in variable annuity contracts because that honestly was the best option for them at the time, considering their risk tolerance, investment goals and time horizons. Painting an entire industry with a broad brush is usually not a good idea (look at the posts on HRB) and may offend those of us who work hard for our clients to develop holistic investment plans that are in the clients best interest, whether that plan includes mutual funds, individual stocks/bonds or (gasp) annuities.

I would be more than happy to work with you offline to help you better understand the value of annuity contracts for certain investors and also would recommend that you read a book written by John Huggard, an estate attorney, that is designed to help financial planners and tax pros understand the potential benefits of variable annuities for certain clients. It can be purchased from Amazon, just plug his name in the search box.

[JoshinNC]

If they are not already working with

I've done this couple's taxes for some years. She earns a lot and has contributed the max each year into her 401. I don't know what the value of that acct is. Her husband's making a very nice living, as well, so she won't need to depend on the retirement alone, as he's about 10 years younger and will continue to work many more years. She's been with this company for almost 30 years.

a financial planner they should be. Some like to use fee only planners, some like to use fee based planners, some don't know the difference and some don't care. What state are you in and I would be more than happy to recommend someone if I have contacts there.