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401k not looking good. Will I lose any money if I pull funds out? Any tax breaks?

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This thread isn’t telling the full story. If you take your money out of your 401k account and transfer it to a bank account, you will be subject to 10% penalty as well as an additional 20%. If you leave the money in your 401k but move it from equities or mutual funds or whatever it is in now, into a money market account (which most 401k plans have), then you would sit out any potential gains or losses in the stock market. I’m not advising you to do anything, but I believe people should know that there is an option between withdrawing from a 401k and leaving it in the stock market.

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I have another chunk that I trade futures with, which has been a great way to pass the time while “working” from home. I agree with you - wouldn’t be surprised if we started dropping again, nor would I be surprised with another 10-15% higher. Ultimately we’re going to be driven by whether or not the “reopening” states have outbreaks, and how fast we “return to normal.” I hate those terms and think they’re bullshit, but I think that will guide the market.

People need to understand that investing involves risk and that a 401(k) is not an investment. It’s an investment vehicle. Just like a bus isn’t a person, it’s a person vehicle. Your 401(k) has investment choices for you to make. Some are riskier than others. Some are costlier than others. You need to understand what your tolerance for risk is, and have a plan for your investments that matches your tolerance for risk. Your risk profile depends on your ability, need and desire to take risk. If you have a secure income that exceeds your expenses, you have a greater ability to take risk. Same is true if you are young and have lots of time to make up for short term losses. Your need to take risk increases the less you have and also the closer you are to retirement. And then there is your desire to take risk which is important because the less desire you have to take risk the more conservatively you should invest so you don’t make poor decisions. Nobody here can answer your question without knowing more about your risk profile. However, it is evident that you are working without an investment plan that you are comfortable sticking with. It suggests your investments don’t fit your profile. Still, you should know that panic selling is rarely helpful. And, in the long term, you make more money being in the market than out of the market. If you still have a job and can continue contributing, you will bring the average cost of your investments down while increasing your shareholdings, which will magnify returns when things turn back up. Your 401(k) should be for money you plan to tap after you retire. If you are far from retirement, don’t worry overly much about the value at this point in time. Just keep plugging away. However, you still should have an idea about what level of equities can fixed income is right for you.

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How old are you? Unless you’re close to retirement, don’t worry about the dips to your 401k. You’ll make it up in the long run

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Buy high, sell low!

likefunny

you only realize the loss when you pull money out. If your retirement is far enough away, just leave it be

likesmart

Dave Ramsey agrees!

Hold up. Your 401k itself can’t look good or bad. It’s a tax-advantaged wrapper for a basket of investments. Can’t imagine a good reason to give up those tax advantages. And you’d incur penalties for doing so. Do you mean the investments inside the 401k aren’t looking good. No kidding? The market is down 20-30%. All the more reason to buy not sell.

likesmart

Well said my gal

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Pulling money out of your 401k about the worst thing you can do - actually should buy more with depressed prices if you can budget it.

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If you want to do something, double your investment. Otherwise? LEAVE IT BE!

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Personally I think 401k isn't a great way to save for retirement. If you know how to invest and plan on doing it yourself (and are disciplined enough to keep it up and manage it) I would invest your money elsewhere. You get taxed a ton on a 401k and take all the risk. But if you don't know how to invest /don't plan on learning and are just panicking then leave it. Things will pick back up again. I wouldn't sell now either way, I'd wait until the market is better.

funnylike

No one advised dumping “all your money” into a 401k. I mean you do know there are contribution limits anyway right? Maybe your investment decisions in your 401k were subpar who knows.

Don’t take it out. Imagine if you’d panicked and sold a few weeks ago! You must have made back a lot already from the lowest point.

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What's your diversification? I'm only down 6% with this crazy market. That's not that bad imo.

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Emerging market, international, s&p 500, mid cap, real estate

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Ever heard of the get rich scheme buy high, sell low? Seems like you have.

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You'll pay a $#!1load in penalties proportional of what's left. I think it's like 10% or something

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10 percent penalty and you need to pay taxes too.

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No, they have lifted the 10% penalty for early withdrawal due to COVID.

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Leave it — and keep putting more into it. At this point everything is “on sale.”

Should I convert my 401k to a Roth 401k - I feel I would rather take the tax hit now when I’m younger then later on when I’m older and probably in a higher tax bracket. Anybody thinking of doing this also? Thoughts?

The bracket jump isn’t an automatic deal killer. It still depends on your marginal tax rate vs belief about retirement tax rate. If, for instance, your conversion spanned 22% and 24% brackets, that probably doesn’t change the decision math. I am being nitpicky. Personally, I think a Roth conversion at 24% is a no brainer. I am indifferent at 32%-35%; rational people could disagree about future tax rates.

How old are you? Your risk adversity is higher when young and healthy. Change up your investment if you need to but don't pull it all out. Remember economies have their ups and downs.

Don’t do it!!

General 401k question: could it be wise to withdraw early for a first time home purchase? I’m still relatively young and at the beginning of my career. I would likely find a place I could rent out when I move to a different house. Since you can only do this one time, I feel like it would be a missed opportunity to not do it.

I think home ownership is overrated from an investment standpoint, so I would leave the money in the market. Regardless I don’t think it’s a good idea to use your retirement money to do. You can also take out a loan out of your 401k for a down payment.

Disclaimer: Not a financial expert but... There are extreme situations where it can make sense to take it out despite any penalties. If you're in a crushing amount of debt that is at high interest and you're absolutely certain there is no other way to pay it off (be it working hard or otherwise), then it may make sense to forego the tax benefits and appreciation your 401k will increase your net worth by if you can rid yourself of that debt. Again, just an extreme situation, and I would say applies to maybe very, very little people. Especially if you think you can someday pay off that debt in some other way (usually probably you can).

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