I have read previous threads under stock market and banks, and still didn't find quite what I was looking for.

Somewhere in the last few months, I have come across suggestions for where to put your retirement fund IF YOU CAN'T WITHDRAW. i.e. I'm heavy in the stock market right now...can someone direct me to good references that offer what is best to invest in instead?

Thanks!

-- Dina McCullough (dinalm11@aol.com), July 02, 1999

Answers

Ack! You want reliable financial advice on how to cope with one of the most-uncertain markets of the past 50 years?

*sigh* All right. I will take a crack at it. But any decision you make based on this advice is a risk. You don't know me, and almost as importantly I don't know what 401K choices you have at your disposal.

The first order of business is to hedge your risks as much as you can. If you can disperse some of your funds into several instruments, do it. Don't put it all into one instrument unless you're sure that instrument is *uniquely* suited to survive in a y2k environment and you are extremely sure you know what "a y2k environment" looks like.

I would look at diversifying your 401K out of all-stocks and putting a goodly chunk of it into: US government bonds, cash (money-market fund) and gold. If I were in a stock fund, it would probably be one that stresses "value". IOW, it buys out-of-favor stocks at lower PEs than the market is generally commanding. It is *very* unlikely that any stock fund manager has weighted y2k into his/her decisions on what companies to invest in.

I would stay away from: "foreign investment funds" that invest in non-USA stock markets, and REITs (real estate trusts).

I would stress that, for myself, capital preservation is the name of the game rather than earning big returns. I am risk-averse in the best of times and in this environment I am timid to the point of faintness. I just want to put my money somewhere safe enough that it will still be there when I come back to get it.

If you are as timid as I am, and have ample choices for your 401K, you might consider a distribution along these lines: 50% in a US government bond fund, 35% in a money market fund, 15% in a gold fund. This covers you for a pretty wide range of gloomy possibilities.

Good luck!

BTW, although you can't withdraw, you might be able to swing a loan to yourself out of your 401K funds, if you can whomp up a good personal exigency to justify it.

-- Brian McLaughlin (brianm@ims.com), July 02, 1999.

I'm moving my money into US Treasuries. Definitely do a US Treasuries bond fund, although these are partly market driven. I am mostly going direct into the Treasuries bonds in a rollover account.

-- Mara Wayne (MaraWAyne@aol.com), July 02, 1999.

The one big flaw in Brian's suggested Y2K oriented portfolio is that all three are still electronic promises-to-pay, which if Y2K turns out to be a real disaster, completely wipes you out, regardless!

In my case, I was able to completely cash out of my 401k (taking a horrible 23% hit off the top due to fed/state income tax), and it is now in the following "diversified portfolio":

1) cash: $10, $5, $1 bills and also coins (quarters, dimes, nickels, pennies)

2) gold: American Eagle coins, predominately 1/10 ounce

3) silver: pre-1965 quarters (so-called 90% "junk" silver)

I have heard of some people borrowing against their 401k and then using the money to go into cash/gold/silver.

Nobody can "tell" you what is best, because nobody knows! But not having cash in hand, gold in hand, and silver in hand places you at severe risk should Y2K be a big mess and electronic promises-to-pay become vapor.

-- Jack (jsprat@eld.net), July 02, 1999.

Transfer your 401K money to an IRA account. Then withdraw all of your money without withholding taxes. Then put it all into metals. Preferably the non-confiscatable type.

The IRS is toast after 01-01-2000. If not, go to www.paynoincometax.com

Don't pay the SOB's.

-- Villain (villain@thedoghousemail.com), July 03, 1999.

Don't take it out! The hit you take on the way out is nothing compared to the hit you take on the way back in (i.e., there is no way back in.) Follow the conservative suggestions described above (treasuries, money market, etc.). If you wish to take a loan against it and then put that money in a safe place, you can then put it back in by repaying the loan.

-- Dave (aaa@aaa.com), July 03, 1999.

Dina - It is clearly unreasonable for me to give you any advice because I have no better knowledge than you of how knowledge of how things are going to turn out. Here is a site where some of the strategies mentioned above are discussed in more detail.

http://www.y2ktimebomb.com/II/TK/index.htm

But you will note after reading some of this material that these "experts" have really no better knowledge of the future, and in many cases the discussions are merely subjective opinions about how they think that events will unfold.

But a couple of things should be made clear. As Jack says above, you MUST have some amount of cash, gold coin ,silver coin, or totally liquid spendable "money". It is entirely likely that all financial institutions may be closed for some long periods of time, and unless you are totally self sufficient for a long period, you may not be able to buy anything.

For all those recommendations to go into government securities, you should note that you are not buying anything, but instead are lending money to the government. I have no ablolute knowledge of what is going to happen but the U.S. Government is the most heavily indebted institution is the history of mankind, with total debts of about 5.6 trillion dollars, and other unfunded obligations of about 12 thillion dollars. Sooner of later this debt is going to be forfeited. It cannot continue growing forever. I have thought for some time now that y2k could be the trigger for this event, but this is only speculation.

Government securities (promises to pay in ther future) have to date always had the safest rating available, due mostly to the incredible taxing power, and the willingness of the government to tax.

But this is y2k, and who knows how good the tax system will be. If taxes cannot be collected, then the government must go out of business. Having said that, I should also state that I am maintaining a sizable position in short term treasuries, but only as a diversication.

Finally, don't expect to come through the poriod of turmoil untouched. It ain't possible.

s

-- dave (wootendave@hotmail.com), July 03, 1999.

Good question. Now I have one for you: what do you believe will happen for Y2k?

As you can see from the answers above, what people have done with their retirement plans is based on their belief of the severity of the Y2k impact on financial institutions and the government. This varies from small bump (but with problems) to absolute meltdown - and the solutions range from transfering a bit of money around to withdrawing it all into cash of various forms.

If you are going to keep your money in the 401k, look for something that invests in corporate bonds and US Treasury bills (AKA T-bills). These are *generally* pretty safe (you are still gambling somewhat on interest rates, though). You can move your money into a money market account, but check to see what it is based on.

Keep your money diversified and avoid foreign anything.

If you have considered taking all of your money out, think about it long and hard. Be careful, as someone noted above, the penalties for early withdrawal are very high. Plus you'll need to pay income taxes on it (if the gov't is still around to collect it). Ouch.

-- JAW (clueless@pollyanna.com), July 04, 1999.

Wrong Jaw,

no tax hit if you follow Villains's (quite legal) advice...

Transfer your 401K money to an IRA account. Then withdraw all of your money without withholding taxes. Then put it all into metals. Preferably the non-confiscatable type. The IRS is toast after 01-01-2000. If not, go to www.paynoincometax.com

Don't pay the SOB's.

-- Villain (villain@thedoghousemail.com), July 03, 1999.

-- Andy (2000EOD@prodigy.net), July 04, 1999.