Support NeoGAF

[The_Inquisitor]

Hey GAF help. I have about 5.1k dollars in my 401k and I am 21. I really fucking hate seeing my personal return at fucking -5.5% for year. Should I just keep sitting and holding, or consider going into cash at times?

I am 50% Vanguard small cap and 50% Hartford cap.

 

[Zoe]

Hey GAF help. I have about 5.1k dollars in my 401k and I am 21. I really fucking hate seeing my personal return at fucking -5.5% for year. Should I just keep sitting and holding, or consider going into cash at times?

I am 50% Vanguard small cap and 50% Hartford cap.

Sounds like you need to reallocate your funds. I know very little about the stock market, but returns have been positive for me ever since it was opened in 9/08.

 

[The_Inquisitor]

Sounds like you need to reallocate your funds. I know very little about the stock market, but returns have been positive for me ever since it was opened in 9/08.

Thinking so too. Losing 140 for the year is crap. I have made almost 0 return since I started putting money in a few years back. In fact, I am pretty sure I have done nothing but lose cash....

 

[MarkMclovin]

So a 401k (why is it called that?) is like a pension, only you can dip in now and then, like a bank?

I had a pension in my previous job for like 9 years. God knows how much is in there or how I even get to it!

 

[Zoe]

So a 401k (why is it called that?) is like a pension, only you can dip in now and then, like a bank?

I'm not too familiar with pensions, but from reading the Wikipedia article, it sounds like pensions don't get invested in anything...

 

[mr stroke]

If it's acceptable for the government to mismanage the money I'm giving them for my retirement. Why is it not okay for me to do the same?

:lol

 

[JGS]

Hey GAF help. I have about 5.1k dollars in my 401k and I am 21. I really fucking hate seeing my personal return at fucking -5.5% for year. Should I just keep sitting and holding, or consider going into cash at times?

I am 50% Vanguard small cap and 50% Hartford cap.

Don't go near cash at your age. Large cap always works for me (Where are they going to go en masse?).

Nothing wrong with small cap either. My advice would be to stop looking at it.

 

[Cyan]

So a 401k (why is it called that?) is like a pension, only you can dip in now and then, like a bank?

I had a pension in my previous job for like 9 years. God knows how much is in there or how I even get to it!

It's basically the inverse of a pension. A pension is a defined benefit plan--you accrue benefits at a specified rate, and you know exactly how much you'll get from your company per year at retirement (well, sometimes changes depending on cost of living adjustments and so on, but it's basically set). Contact your previous company to find out about what's happened with your pension--presumably whatever benefits you accrued in your 9 years will be available to you at whatever their retirement age is. You won't be able to access the funds, though, now or in the future; that's not how pensions work. But the company is obligated to pay you what they've said they will, whatever else might happen.

A 401k (it's named after the section of the tax code that allows for it) is a defined contribution plan. Your company will contribute a specified amount to an account that you have some limited control over (generally they match your contributions up to whatever their limit is). Funds are supposed to stay in the account, or you'll be hit with penalties and taxes, but they're your funds. Once you hit 59 1/2, you can take the money out and do whatever you want with it. But it's not a pension--if you've kept investing in risky assets and lost a big chunk of it right before retirement, that's your lookout. The company has no obligation beyond whatever they contributed.

 

[Javaman]

Hey GAF help. I have about 5.1k dollars in my 401k and I am 21. I really fucking hate seeing my personal return at fucking -5.5% for year. Should I just keep sitting and holding, or consider going into cash at times?

I am 50% Vanguard small cap and 50% Hartford cap.

Might as well ask for stock tips. Just keep in mind that if you had it in high risk during the slump, switching it to stable before a big recovery will cause you to lose even more money. Personally I've been putting money into mine for about 14 years and have only moved the money around into different funds a couple of times. I've been leaning heavily towards high risk since I'm still decades away from retirement. It might be a good idea to go with age based recommendations for risk instead of reacting to recent market changes. Keep in mind, this is for the looooong term and not short term trading.

Best of luck with whatever you choose to do.

 

[TylerD]

Never. Although, the company I started with in 2008 (3rd largest in the industry) would match 6% of my contribution so I contributed 6% of my salary. In 2009 we were bought by the biggest company in the industry and they only match 3% but I am still contributing 6% and they froze the first 401k.

In a couple of months I should have the option of taking a check for the entire value of my old 401k to do anything I want (pay off some of my student loan, do some personal investing, rolling it into an IRA, etc.) I will probably roll half of it into an IRA, take a quarter to pay off loans, and roll the rest into the new 401k.

/responsible self

It would make a great down payment on a 370Z though!

 

[Cosmic Bus]

Cashed mine out entirely (was only about $2,500) last summer in order to have money to live on while unemployed and trying to make it to Seattle. Without that money, I wouldn't be where I am now, so it was a completely sensible choice. Kind of like AVClub, retirement age isn't necessarily something I see myself reaching anyway, so *shrug* and whatever.

 

[DarkAngelYuna]

If it's acceptable for the government to mismanage the money I'm giving them for my retirement. Why is it not okay for me to do the same?

Are you really that fucking stupid?

 

[Cyan]

Never. Although, the company I started with in 2008 (3rd largest in the industry) would match 6% of my contribution so I contributed 6% of my salary. In 2009 we were bought by the biggest company in the industry and they only match 3% but I am still contributing 6% and they froze the first 401k.

In a couple of months I should have the option of taking a check for the entire value of my old 401k to do anything I want (pay off some of my student loan, do some personal investing, rolling it into an IRA, etc.) I will probably roll half of it into an IRA, take a quarter to pay off loans, and roll the rest into the new 401k.

/responsible self

It would make a great down payment on a used 370Z though!

Better to roll it all into an IRA. You have much greater control over your investments in an IRA than in a 401k, and there is no benefit to choosing the 401k. There is literally no reason to roll over into your new 401k (well, unless your company is offering some kind of incentive).

As for paying off loans... you still have to pay taxes and penalties on any money you take out of the 401k, so you'll be losing a lot. Paying off low-cost student loans with 401k money is probably not a good idea. You'll lose far more in taxes and penalties than you'll gain in interest savings.

Hey GAF help. I have about 5.1k dollars in my 401k and I am 21. I really fucking hate seeing my personal return at fucking -5.5% for year. Should I just keep sitting and holding, or consider going into cash at times?

I am 50% Vanguard small cap and 50% Hartford cap.

Don't know what Hartford cap is, but you're probably overinvested in small cap. Small cap tends to be more volatile than large cap, which is likely why you've been losing money. Reexamine your investment options and allocation. But don't try to time the market and move into cash; that's never a good idea.

Once you pick an asset allocation, ignore what happens in the market and just leave it be. You'll want to move into safer investments over time (the fairly conservative rule of thumb is Age in years = % to allocate to bonds), but for the most part you shouldn't pay much attention to what's going on, or you'll be tempted to move things around and time the market.

 

[JGS]

Cashed mine out entirely (was only about $2,500) last summer in order to have money to live on while unemployed and trying to make it to Seattle. Without that money, I wouldn't be where I am now, so it was a completely sensible choice. Kind of like AVClub, retirement age isn't necessarily something I see myself reaching anyway, so *shrug* and whatever.

Are you thinking you will die sooner than expected for a particular reason - genes, suicide, life on the wild side, etc...?

 

[CrankyJay]

Hey GAF help. I have about 5.1k dollars in my 401k and I am 21. I really fucking hate seeing my personal return at fucking -5.5% for year. Should I just keep sitting and holding, or consider going into cash at times?

I am 50% Vanguard small cap and 50% Hartford cap.

You're young, so you should invest aggressively. You're also too young to be concerned about negative returns. The lower the price of your investments the more shares you will be buying.

 

[The_Inquisitor]

Wow thanks for PM's and advice guys. I think I should move some to a larger cap. Any recommendations?

And yeah, I am trying to be aggressive. That's why I am in the small caps. I was down like 45 percent 2 years ago when everything hit the shitter, but I kept buying in. Things then went back up 40 percent or so. :lol :lol

I put 15% of my summer internship paychecks straight into my 401k along with a 4% company match.

 

[Cyan]

Wow thanks for PM's and advice guys. I think I should move some to a larger cap. Any recommendations?

Yeah, index funds.

Seriously though, few mutual funds beat index funds after fees, and the ones that do tend to change from year to year (i.e. it's random). If any index funds are available through your 401k, then use 'em.

I put 15% of my summer internship paychecks straight into my 401k along with a 4% company match.

Good man. Honestly, probably the most important thing at this point is just getting yourself into the habit of saving. And at 21, your money's got loads of time to compound!

 

[The_Inquisitor]

Yeah, index funds.

Seriously though, few mutual funds beat index funds after fees, and the ones that do tend to change from year to year (i.e. it's random). If any index funds are available through your 401k, then use 'em.


Good man. Honestly, probably the most important thing at this point is just getting yourself into the habit of saving. And at 21, your money's got loads of time to compound!

What are some examples of index funds? I am seeing a lot of small, medium, and large caps on the fidelity site that is used to manage my info.

 

[demon]

I'm thinking of cashing out my 401k. Save the speeches about how bad it is for my future. I don't give a fuck. I'm in an all-around bad situation right now.

I'm low on money and have virtually none to pay my car insurance which is coming due soon, and it turns out I'm going to have to find a new apartment which will require a deposit and may very well be more expensive (I lucked out on my current one). Not to mention other things, including debt that's really holding me back.....I just need all the cash I can get, and if I can't at any point start saving a lot more than I have been, my future's fucked anyway.

So basically my question is this: how much would I ultimately get if I cash out my 401k? This is my joke of a 401k balance, from the last 18 months. I don't make enough to be able to put a decent amount into it, and for several months my employer stopped matching. I'll just post screen captures from the website...

-------------

That "amount avilable for hardship withdrawal" figure....would that be before or after it's taxed? It doesn't really explain anything about hardship withdrawal on the website. Maybe it's obvious from looking at that or maybe it's barely enough information, I don't even know enough about 401k's to be able to tell.

 

[Halvie]

Anyone know the penalties of taking money out of a Roth? Also if I put 5k in this year can I take some out this year too?

 

[teh_pwn]

Because it's naive?

No way social security will survive until we retire. At least not in any form where you could live off it comfortably.

Yeah, I'd only expect Social Security to pay for food and little more, and only around the average life expectancy - 3years (so 74 if it doesn't change). That's how it was back when SS was created, and we have way more old people now. The birthrate is already slightly below maintenance...SS at 65 just isn't feasible.

You'll have government assistance to barely survive, but if you want a good retirement it's best to contribute about 5k USD/year into some index funds starting in your early 20s. Stocks average 9% annualized interest, so if you start at 23 and retire at 63, you get 1.09^40=31.5x. So 5k at age 23 becomes 150k. Now there's inflation at about -3%/year, but if you diversify index funds and rebalance annually you can boost nominal performance to 12%, and get 9% real interest per year.

If you stick with it, there's a good chance you can retire on > 1 million USD in today's value at age 63. Put it into a moderate mutual fund when you return, and you can live off the interest @ about 80k-160k in today's value annually.

 

[teh_pwn]

Wow thanks for PM's and advice guys. I think I should move some to a larger cap. Any recommendations?

And yeah, I am trying to be aggressive. That's why I am in the small caps. I was down like 45 percent 2 years ago when everything hit the shitter, but I kept buying in. Things then went back up 40 percent or so. :lol :lol

I put 15% of my summer internship paychecks straight into my 401k along with a 4% company match.

Aggressive != large cap. Small cap tends to be more aggressive. Much more volatile, but long term tends to get about 10-11%. Just be warned that historically it can have periods of 10+ years of shit performance.

Personally I'm diversified with domestic & international index funds, but I tilt towards small cap and value. Always good to also diversify on industries. Don't get a bunch of euro financials and american financials for instance. Not really that different.

 

[Wads]

Hey GAF help. I have about 5.1k dollars in my 401k and I am 21. I really fucking hate seeing my personal return at fucking -5.5% for year. Should I just keep sitting and holding, or consider going into cash at times?

I am 50% Vanguard small cap and 50% Hartford cap.

I have Vanguard too... in the same boat. I moved all of my funds to a bond fund before the stock market crashed and didn't lose my ass like everyone. The bond has done fairly well in comparison.

 

[Zoe]

That "amount avilable for hardship withdrawal" figure....would that be before or after it's taxed? It doesn't really explain anything about hardship withdrawal on the website. Maybe it's obvious from looking at that or maybe it's barely enough information, I don't even know enough about 401k's to be able to tell.

If you're taking out a (hardship) loan, there are no taxes. You will be paying it back with your paycheck though.

 

[teh_pwn]

I'm thinking of cashing out my 401k. Save the speeches about how bad it is for my future. I don't give a fuck. I'm in an all-around bad situation right now.

I'd recommend either cashing out and using it to make your life better, or to change your plan to be more aggressive than any of the preset levels. Conservative models should be used by people in their 70s that want the money now and cannot tolerate losing 50% of their purchasing power for a few years.

You're young, aren't you demon? You should be 100% stocks. The difference in long term performance in stocks and bonds is exponentially in stocks favor. Some types of bonds are beaten by gold.

 

[demon]

If you're taking out a (hardship) loan, there are no taxes. You will be paying it back with your paycheck though.

I'm not talking about a hardship loan (I was under the impression I wouldn't be able to with how little I have in my 401k anyway...no?), plus I don't like the idea of having anything else chipping away at my paycheck at the moment. I'm treading water already. Maybe I'll look into that though...

Basically I just want to know if you can tell by what I posted how much I would get after taxes from cashing out.

 

[teh_pwn]

I have Vanguard too... in the same boat. I moved all of my funds to a bond fund before the stock market crashed and didn't lose my ass like everyone. The bond has done fairly well in comparison.

That's called market timing. It seems you got lucky, or you're talented at grasping the market.

Have you transferred back to stocks? They've already half way recovered, seems ideal to buy when they're low.

Personally I tripled my 401k contributions in october of 2008. Because I had only been working for about a year, I quickly broke even. Now I'm about 18% average annualized interest.

As Warren Buffet says "be fearful when others are greedy, be greedy when others are fearful." I still think the guy cheats somehow, but the basic premise is correct. People are so overly emotional about money being temporarily devalued that they aren't going to cash out for decades anyway...I don't understand why.

 

[Javaman]

I'm thinking of cashing out my 401k. Save the speeches about how bad it is for my future. I don't give a fuck. I'm in an all-around bad situation right now.

I'm low on money and have virtually none to pay my car insurance which is coming due soon, and it turns out I'm going to have to find a new apartment which will require a deposit and may very well be more expensive (I lucked out on my current one). Not to mention other things, including debt that's really holding me back.....I just need all the cash I can get, and if I can't at any point start saving a lot more than I have been, my future's fucked anyway.

So basically my question is this: how much would I ultimately get if I cash out my 401k? This is my joke of a 401k balance, from the last 18 months. I don't make enough to be able to put a decent amount into it, and for several months my employer stopped matching. I'll just post screen captures from the website...


That "amount avilable for hardship withdrawal" figure....would that be before or after it's taxed? It doesn't really explain anything about hardship withdrawal on the website. Maybe it's obvious from looking at that or maybe it's barely enough information, I don't even know enough about 401k's to be able to tell.

It's going to depend entirely upon your income for the year as to how much you are ultimately taxed. You're definitely going to be out 10% and the additional will probably be set to a fixed amount to take care of estimated taxes (20% or 30%) since the government and 401k administrator makes the assumption that you won't pay the taxes on it later. At the end of the year you'll get some of it back depending on how much you've already paid in taxes and your income. Check for withdraw FAQs on your plan's site since many places are slightly different.

 

[Zoe]

I'm not talking about a hardship loan (I was under the impression I wouldn't be able to with how little I have in my 401k anyway...no?)

No. That's what that number is showing. You're allowed to take out 800+ as a loan. Also look at your vested balance. There's less than a $200 difference there, most of which (if not all) will be eaten up by taxes.

You really can't afford less than $8 being taken out of each paycheck for the loan?

 

[Javaman]

If you're taking out a (hardship) loan, there are no taxes. You will be paying it back with your paycheck though.

Are there really hardship loans? I thought there were just loans and hardship withdraws (which have very strict justifications in order to get one)

 

[Zoe]

Are there really hardship loans? I thought there were just loans and hardship withdraws (which have very strict justifications in order to get one)

Sorry, yeah, I was misreading his screenshot. I didn't see that it was for withdrawal.

 

[NotWii]

Retirement funds are fucking bullshit.
I could be doing much more constructive things with my locked up money.

But I'm not allowed to touch it for another 40 fucking years, in which time anything can happen.

 

[Joe Shlabotnik]

Retirement funds are fucking bullshit.
I could be doing much more constructive things with my locked up money.

But I'm not allowed to touch it for another 40 fucking years, in which time anything can happen.

Er, in terms of generating more money, you literally can't do anything more constructive over a 40-year period than invest it and watch the magic of compound interest. OK, besides the one-in-a-billion chance of using it as seed capital for a wildly successful business.

 

[demon]

a bit of a bump, but it's looking like I really could use that 401k cash right now.

The company I work at (a bank) does not allow 401k loans. A month ago I asked HR about hardship withdrawal and they said I needed to prove I have one of a few specific hardships, and you're only allowed to withdraw however much you absolutely need. It looked like a real hassle and I just didn't bother at the time. But is there any other way of getting your money back at all without it having to be being okayed by your employer? Aren't there people out there who've cashed in their 401k to buy fucking luxury cars and shit? Any way to convert your 401k to a different type of account that would allow for more easy withdrawal?

 

[Cyan]

Hate to say it, but I'm guessing you're out of luck. If your company doesn't allow 401k loans, they probably also don't allow non-hardship withdrawal. If they do, you can get your money out but you'll be paying full taxes plus a 10% penalty. If they don't, there's really nothing you can do.

When you leave your job, you can cash in your 401k or convert it to an IRA. This is likely what you're thinking of with people using 401k funds for luxury cars or whatever.

 

[biggersmaller]

I'm thinking of cashing out my 401k. Save the speeches about how bad it is for my future. I don't give a fuck. I'm in an all-around bad situation right now.

I'm low on money and have virtually none to pay my car insurance which is coming due soon, and it turns out I'm going to have to find a new apartment which will require a deposit and may very well be more expensive (I lucked out on my current one). Not to mention other things, including debt that's really holding me back.....I just need all the cash I can get, and if I can't at any point start saving a lot more than I have been, my future's fucked anyway.

So basically my question is this: how much would I ultimately get if I cash out my 401k? This is my joke of a 401k balance, from the last 18 months. I don't make enough to be able to put a decent amount into it, and for several months my employer stopped matching. I'll just post screen captures from the website...

-------------

That "amount avilable for hardship withdrawal" figure....would that be before or after it's taxed? It doesn't really explain anything about hardship withdrawal on the website. Maybe it's obvious from looking at that or maybe it's barely enough information, I don't even know enough about 401k's to be able to tell.

You can withhold as much as you wish for taxes.

However, the trustees of your 401K will NOT automatically withhold the correct amount of tax for you. Liability won't allow a trustee to say, "You will have to withhold $345". They'll in all probability have an automatic 10% withholding policy (that you still have the right to waive).

You must figure it out yourself, preferably with a CPA. This is because in-order to withhold the correct amount of money you would have to know your entire tax liability as it is taxed at whatever bracket you are in (as ordinary income), then add ten percent. A very general calculation would be applying your paycheck's net vs gross percentage.

Remember, at the end of the year they will only report to the IRS how much you took out VS how much you had withheld. That's it.

In January 2011 you will get your bill from the IRS, but chances are you won't like it. You already know that this is generally seen as a retarded move, but the economy is a bitch and desperate times call for desperate measures. I hear that.

 

[yuna55]

Make sure you guys are taking into consideration state taxes too. 10% flat penalty + your marginal tax rate + state tax rate.

And yes, just because the company says, "Oh you have to pay 20% in taxes!" does not mean that at the end of the year you won't owe more or get some back, just like wages and withholding. They have no idea what else is going on with your personal tax situation and they really don't care.

 

[Wads]

That's called market timing. It seems you got lucky, or you're talented at grasping the market.

Have you transferred back to stocks? They've already half way recovered, seems ideal to buy when they're low.

I didn't and haven't and I probably should have a long time ago, but the stock just kept spiraling downward. The reason I transferred out was because for the entire time I had worked there, the Vanguard stock had continuously gone down. So, I said f this and traded it all for bonds thinking it was better to gain a little than continuously lose 3-5 %. I had no idea the bottom would drop out and was lucky in that regard. I'm not too worried about it, but I should buy back into it at some point since I am still young and such.

 

[Korey]

Retirement funds are fucking bullshit.
I could be doing much more constructive things with my locked up money.

But I'm not allowed to touch it for another 40 fucking years, in which time anything can happen.

Yea I know, it's such bullshit that the government is allowing us to put money aside tax free while it grows and makes us into millionaires by the time we hit level 67.

Also I hate the fact that we're forced at gunpoint to put any money into it.

 

[C.Dark.DN]

My dad did 401k loans. Don't know the details.

 

[teh_pwn]

Retirement funds are fucking bullshit.
I could be doing much more constructive things with my locked up money.

But I'm not allowed to touch it for another 40 fucking years, in which time anything can happen.

Most people cannot grow wealth faster than the market. First you have to have enough money to start a business, and then it has to be more successful than the average business. For most people with smaller amounts of cash, it's easier to just buy stocks and get about 9% interest per year. With diversification, low cost index funds, and re-balancing, you can get about 12% per year. That grows money fairly quickly - doubles it every 6 years.

And maybe I'm a bit optimistic, but I think by the time most people in their 20s hit 60, there is going to be robust life extension tech that virtually halts the rate of aging. Then within another 40 years progressively better age reversal treatments. We may be a bit too early to make it to indefinite youth until accidental death, but there's a decent chance many of us will live beyond 150 years in decent health.

 

[WickedAngel]

Because it's naive?

No way social security will survive until we retire. At least not in any form where you could live off it comfortably.

You couldn't comfortably live on social security now.

 

[teh_pwn]

I didn't and haven't and I probably should have a long time ago, but the stock just kept spiraling downward. The reason I transferred out was because for the entire time I had worked there, the Vanguard stock had continuously gone down. So, I said f this and traded it all for bonds thinking it was better to gain a little than continuously lose 3-5 %. I had no idea the bottom would drop out and was lucky in that regard. I'm not too worried about it, but I should buy back into it at some point since I am still young and such.

I wouldn't say it's spiraling downward. It was doing that in early 2009. Since then the market half way recovered. In the last 6 months, it has been going up and down 20%.

 

[Wads]

Oh yeah, I meant that's what it was doing. I should have gotten back in, but honestly I figured steady gains were better than if something bad happened again. I should have gotten back in, but I've been a tad bit conservative.

 

[Ether_Snake]

Hey GAF help. I have about 5.1k dollars in my 401k and I am 21. I really fucking hate seeing my personal return at fucking -5.5% for year. Should I just keep sitting and holding, or consider going into cash at times?

I am 50% Vanguard small cap and 50% Hartford cap.

I have like 1%, maybe 5% I forget, in small cap or something like that if I recall. I never made under 10% on my 401k except in 2007. Been contributing since 2006. I could put more in small caps probably, but I'm saying it's riskier. I don't even know what I invested in really, I remember more or less thinking about it when I chose what I was investing in back then, and never changed anything since. Been doing fine for me. When it comes to investing in stocks on my own tho I'm a bit more careful, but so far only video game stocks bring me money on that end, outside of dividends from other companies.

 

[biggersmaller]

My dad did 401k loans. Don't know the details.

I've taken a 401K loan. Paid it back within a month. It's very important everyone knows that if you leave the company, you will have to pay it in full. Otherwise it's a great way to get low interest cash real quick.