OYS: Pulling out of your 401(k) might not cost what you think

By: Jeff Anderson Email
By: Jeff Anderson Email

News 12 at 6, November 18, 2008

AUGUSTA--With all the uncertainty in the financial world, you may be wondering what to do with your investments. Specifically your 401(k). If you're getting nervous, there are some options that won't wreck your retirement plans.

A lot of folks are sleeping on pins and needles these days because their 401(k)'s are holding their own like a cardboard box in the middle of the ocean. But if you bail out from it, won't you pay out a bunch in penalties and taxes? Not necessarily.

David Smith made a move recently with most of his retirement savings that a lot of people wish they did too.

"I decided to move it. Moved 95 percent out." he said.

David had his money in what's called a 403(b) Account which is pretty similar to a 401(k). and because he moved it into a more protected investment, he's sitting pretty right now.

"If I'd have left it in there, I'd have lost 50 thousand dollars. Because I moved it, I haven't lost a dime." he said.

David was lucky he pulled out before things crashed, but if you're feeling uneasy, you can pull out too if you think it'll help you sleep better.

And as far as all those taxes and fees you think you'll have to pay to do that? Financial advisors say read the fine print in your policy, but you probably won't have to pay them if you do a rollover.

"A lot of the 401(k) Companies are releasing funds, are allowing people to take money out because it releases them of liability." said David Cheira of Strategic Retirement Solutions.

Liability that comes when investors sue a company that won't release their money.

So what can you do?

Again, check the fine print to read the rules on your 401(k). If you can roll it over, you can put your money into something safer like bonds, certain types of annuities, cd's or maybe even money market accounts.

It's a decision David Smith made that's helping him sleep a lot better.

"I don't have to worry because i know it's safe." he said.

Again, check with a financial planner to make sure this is the right option for you. The upside is this can keep you from losing more money. The downside is, if you sell now, you're guaranteeing you've lost money.


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