YOUR RETIREMENT
PLAN, SAVE & MAKE YOUR MONEY LAST
PRINT
EMAIL
DEL.ICIO.US
DIGG THIS
For many American workers, just thinking about the damage done to their retirement accounts since the beginning of 2008 can be painful. It has gotten worse lately as turmoil in the U.S. financial sector has sent worldwide markets into a tailspin, dragging hundreds of billions of dollars invested in retirement plans along for the ride.
So what can you do to stem the flow of any more money out of your 401(k), 403(b) or 457 plan?
RELATED LINKS | |||
 |
Time to Buy Stocks -- Not Sell | ||
|
|
6 Things to Do While the World Ends | ||
|
|
The Bright Side of the Financial Fallout | ||
|
|
What Should Investors Do Now? | ||
Let's start with what you shouldn't do: DON'T stop contributing to your retirement plan or cash it out entirely.
Sure, 777-point Dow plunges in a single day and relentless talk of a recession are scary. But, remember, you're in this for the long run -- even people in their fifties, sixties and seventies shouldn't worry too much. You won't need all your savings immediately, and because retirement can be a 30-year prospect these days, your investments have time to rebound.
"Just because things are happening (with the stock market) doesn't mean you have to take action," says Clare Bergquist, director of 401(k) strategies at Charles Schwab. "The action you need to take is: Take a deep breath and assess your plan."
Here's what you should do:
Study your history. "Remember, markets go up and markets go down, but history has proven that over the long term, they go up," Bergquist says. Over the past 20 years, the Dow has had some tumbles worse than the 19% it's fallen this year: a 23% drop in October 1987 when the stock market crashed; a whopping 47% plunge during the 2000-02 bear market; and a 684-point plummet the day the stock market reopened after the September 11 terrorist attacks.
After each of those drops, though, stocks rebounded, and markets reached new highs. Taking the really long view, large-company stocks have returned an annualized 10.4% since 1926, according to Ibbotson Associates, an investment-research firm.
Plus, for long-term investors, a market downturn can be a good thing. "At the point where it's most scary, it seems the most bleak and you're the most depressed, that's the point when there's the least risk and the biggest gains are to be had," says Brent Brodeski, managing director of Savant Capital Management, a fee-only financial planning firm in Rockford, Ill. You can buy more stocks -- or mutual funds -- at cheaper prices, then reap the rewards as the market recovers.
Study your investment plan. Your retirement account is for buying and holding investments, not for day-trading stocks. But now might be a good time to review your plan based on your personal situation and risk tolerance, Bergquist says.
POSTED BY: Cameron Huddleston (August 15, 2008 02:24 PM)
To Linda: Hi again, this is the author of the story. You have to start taking withdrawals on 401(k) accounts once you turn 70/12 or you'll pay a penalty. If you're 701/2 and still working, you don't have to take minimum distributions until you actually retire. The exception doesn't apply to 5% owners in a company. Use our search option to find my story entitiled How to Tap Your Retirement Accounts. (Type in that title, and you will get a link to the story.) Hope this helps.
POSTED BY: Lea (October 02, 2008 11:51 AM)
I heard that if you cash in some of your 401K to pay for college you don't have to pay the 10% for cashing early is this true?
POSTED BY: Rick (October 06, 2008 03:32 PM)
I'm 54, voluntarily unemployed, and have been taking a monthly 72(t) distribution from my IRA for the last few years. I know I need to take "substantially equal" distributions each year, but I'd like to stop taking the monthly distributions for the remaining months of '08, then take the three months' distributions towards the end of December, with the hope that the markets will have recovered somewhat by then. Likewise, if things are still shaky in early '09, I'd like to not take the monthly distributions until things (I hope) recover somewhat, realizing I'll still have to take an annual distribution sometime during the year. Thoughts?
Reprint Article
|
|
|
|
|
