401K Question: Move funds to Money Markets?

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I have about $12,000 in my 401K, mostly in the Magellen fund. I am seriously considering transferring all of it to a Money Market fund, which I understand to be Federal Government bonds, and as such very low yielding but the most secure. I don't care about growth, I care about protecting my principle.

I am interested in any comments on this subject.

-- Buffalo Bob (buff@hal.com), August 10, 1999


Buffalo - I'm also in a Fidelity program at work. At the beginning of the year, I switched from an aggressive fund to a money market fund and stopped making contributions, in the hope of protecting my principle. The yield is currently 5%, which could turn out to be a pretty good yield if the market tanks. If not, I am at least sleeping more soundly. There was no way I was going to leave my job so I could withdraw my entire 401k (and then do what with it??). My goal is to be entirely out of debt at rollover, so I did not want to borrow against my 401k either (and then do with with it??).

-- Brooks (brooksbie@hotmail.com), August 10, 1999.

I have all of mine in money market. I have about 100K. It took me too long to get this amount and I'm not too keen on gambling. See my thread on the world bank. They're having some problems. Just another reason not to believe the "no problem" crowd.

-- Larry (cobol.programmer@usa.net), August 10, 1999.

I took mine out. All of it. There's no way I would keep my money in there, penalties be damned. If you don't take it out, it'll be gone in a few months.

-- (jonah@in.whale), August 10, 1999.

I moved my meager retirement funds (meager only due to small amount of time of putting $$$ into it....my company started a matching payment program) out of stocks and into a bond fund....Question for someone. Was this a smart move? Please don't laugh.. It only involves 2,000.00, but a penny saved could be a penny earned, if we're still around a year from now. PS: sorry I asked a question within an anwer.

-- thomas saul (thomas.saul@yale.edu), August 10, 1999.

Do you want return on your money or do you want return of your money?

Get cash! legal tender. green paper. , then convert most of it to gold and silver

-- Jube (Jubilation T. Cornpone@logic.com), August 10, 1999.

To Jube: Hi,

I wish I could. The only control over my retirement fund is where I want the $$$ to be invested. I knew the stock option was a bad place to be. Bonds seemed more secure, assuming the gov't doesn't go belly up next year (not that I wouldn't mind that). Based on your statement, I have put in a request to see if there is a fund primarily with a gold backing. Since there is no way to get out of this...I wish my resources were such that I could buy gold now in some sufficient quantities to help make a difference for next year. Any comments would be appreciated.

-- thomas saul (thomas.saul@yale.edu), August 10, 1999.

Take the money out NOW, even if there's a penalty. There are always ways to get it out, including getting it out as a "loan." Whatever it takes, just make sure you have it in your hands.

-- (jonah@in.whale), August 10, 1999.

Thomas Saul, Call 1 800 228-8825 and request info on IRA gold. The Company is American Church Trust Company in Houston TX. They handle the transactions and the actual gold is held in the Republic Bank in NYC. Jube

-- Jube (Jubilation T. Cornpone@logic.com), August 10, 1999.

If I took the money out now, I would be paying a $30,000 penalty. I'll be damned if I give the government that kind of money. I'd rather lose $30,000 than give them a nickel. Everything is a gamble, just like gold and silver. People put thousands into gold several months back and they lost their ass! If the whole financial market goes down the tubes, then everyone goes down with it. And as far as gold goes, I don't want your gold in exchange for my sack of rice and beans. Food, ammo and durable goods will be the gold of the future ITSHTF.

-- bardou (bardou@baloney.com), August 10, 1999.

Another option is to transfer your account to a fund that deals with gold mine stocks. The Gold Eagle site surely will have a list of those funds.

bardou, money is only lost on gold metal when one sells the gold for cash, assuming that the POG is below what one paid for the metal.

Metal is for long term conservation - think storage of assets. Only rarely can one speculate short term using the metal and come out ahead.

-- Mitchell Barnes (spanda@inreach.com), August 10, 1999.

Taking Money out of 401k

I was told I can't (or everybody would be doing this). I would have to quit my job, take the money and pay a penalty. I inquired on this last year. I wanted some extra cash for y2k. My CFO told me I couldn't even borrow unless I had a financial handicap like a mortgage foreclosure or something like that. I was told that I have to prove this handicap. I can't just take money out whenever I want. I don't know if this is BS or not, but this is what I've run into. The bottom line is that they won't let me take money out. This is too bad. I'm afraid I still could lose everything even if it is in a money market fund.

-- Larry (cobol.programmer@usa.net), August 10, 1999.

Sounds like BS. You should challenge it. Threaten to take them to court. It's YOUR money, not theirs.

-- (jonah@in.whale), August 10, 1999.

Mitchell: My husband's company doesn't offer us any options of putting money into a gold fund. I would rather gamble and leave the money in a stable fund, than take it out and pay the $30,000 penalty.

Larry: My sister is in the same boat as you are in. She cannot take her money out either unless it's a hardship. Her husband works for the IRS and they have moved all their money into a money market fund.

If I knew for a fact that the price of gold would double in price between now and 1/1/00, I would jump on it...but that's the catch isn't it?

-- bardou (bardou@baloney.com), August 10, 1999.

Bardou: Thanks for verifying my claim. Isn't this a law set up by the government and not by the company you work for?

Regardless, I can't take it out and I could be out 100K in 2000. Sure took me a long time to build up to this and I could lose it all.

My only other option was to quit my job and pay about 50K in taxes and penalites. Then what? I sit with 50K in cash, and I would still have to look for another job.

-- Larry (cobol.programmer@usa.net), August 10, 1999.

bardou,as u said u c'ant eat gold.Safest thing to do is get a loan with you're 401k take cash out,ITSHTF you can use the cash for food guns.necessities.Gold IMHO will be worthless if the system collapses,wallstreet is burning as we speak,india just shot down a pakistanian jet,and then Y2K.Gold will only help if the system survives.I do not believe it will.Therefore,spend that soon to be worthless green IOU,not all of it get yourself a good home in the country,and lots of food,H2O,Guns.

-- Alan greendollarworthless (bye bye@bubble.gone), August 10, 1999.

Many GI tax advisors (if there are indeed many) will be or have already been advising their clients of the 60-day rollover provision for IRAs. This means many IRAs will be drained in early November so the owners may ride out the final two months and redeposit in an IRA in January by the 60th day to avoid tax and penalty.

Distributions from employer plans like 401K will probably have a 20% withholding taken if they go into the individual's hands; that would be a credit against your 1999 taxes, and refunded if the 60-day redeposit is met AND the IRS is giving out refunds next year. (It also presents the difficulty of finding that 20% amount to re-deposit to make up the full amount in January.)

Research these moves THOROUGHLY in IRS publications and guides like Lasser, etc. before you rely on ANYONE's scuttlebut advice from the Internet! Playing the y2k odds is one thing; making a stupid 1-day error is unnecessarily expensive.

-- Mr Gresham (wh@t.century.is.it?), August 10, 1999.

I'd say a *short term* money fund would be a good move. Most people confuse these with other bond funds, ususally intermediate treasuries. I'd say make sure whatever fund you go into has a majority of it's assets in truly short term (90 day) money. That way when the interest rates go up you won't be burned.

That is my plan, as I am now out of the equities market and moving assets to money markets in a IRA. Not that I am a doomer, as my earlier posts would prove. It's just that equities (for now) look like a bad investment. Middle of '00 may be a good time to move back into stocks (assuming the anticipated major correction occurs between now and then.) FWIW I've had my retirement money in stocks for over 10 years and am only now moving them.


-- straw (strawberry9@worldnet.att.net), August 11, 1999.

Just today I was trying to decide how to re-balance my 401k portfolio with Vanguard (should have done it weeks ago). Like most everyone else I'm trying to avoid as much risk as possible. I keep hearing that the Money Market funds are the way to go. Vanguard offers a group of Money Market Funds. They Are: Vanguard Prime " Federal " Treasury Money Market Funds. Contained in the profile summaries of all three funds in the latest Participant Prospectus from Vanguard is the statement:

"An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to loose money by investing in the fund".

Any more suggestions?

-- John F. (tinfoil hats @nd colanders.com), August 11, 1999.

Larry, bardou,

you have been given misleading information.

this is an option - leave your job, find another one. do a direct rollover of your 401k to an "independent" ira. you will pay no penalties. normally if you cash out you pay a 10% penalty plus a 20% witholding fee to the IRS. this way you avoid both.

you now have your full amount of dollars in a new ira. sometime before dec. '99 you cash out, in writing, stating to the ira that you want them NOT to withold the usual 20%. this is perfectly legal. the 10% penalty will not be deducted either - this, and the 20% witholding, plus whatever else the irs asseses, will be due in full next april, 2000.

ask yourself - will there be an irs next april?

ask yourself - would i be happier using the money now, either having it in cash or gold or supplies, rather than have it as a bunch of ones and zeroes in some 'puter?

only you can answer this question.

so bardou, larry et al, i may have saved you a little money or a little time, i learned all this the hard way from another forum participant.

good luck - excuse the spelling...

-- Andy (2000EOD@prodigy.net), August 14, 1999.

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