Father considering cashing out 401K early -- market fear

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Kernschatten
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Father considering cashing out 401K early -- market fear

Post by Kernschatten »

I just received a message from my father speaking of withdrawing his 401k for fear of a market crash:
Father wrote:From what I am hearing, the stock market is currently high as it is being falsely pushed up by the printing of money. At this rate, it cannot sustain itself and is due for a correction of a drop of 90% or so. I am actually thinking of taking the early withdrawal hit because if it does drop I will probably never get to see it increase back up to what it is now. Also why domestic and not foreign.
:oops:
I can't blame him as this type of fear is too common in media. I think some of it is from these sort of sources:
http://theeconomiccollapseblog.com/arch ... is-soaring
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I fired off a response in the meantime in hopes that he doesn't do something rash.

He doesn't seem too into intense reading or research. One of the more concise thing I think I can share with him is: http://www.bogleheads.org/wiki/Boglehea ... philosophy
Is there anywhere else I could point him to help him save what retirement funds he has? (At this time, I don't know what available funds he has and how much)



For reference, this is what I fired back:
I wrote:Markets don't really get falsly pushed-up, per se, by printing money. Printing money is a source of inflation and the value (and earnings) can seem a bit higher than they actually are because of inflation. As such, inflation is a form of risk and must be deducted from your returns to get "real returns". Let's say my stock returns over 10 years is 11% and inflation was 2% -- my real return was 9%.
I think a speculator talking about a market correction/drop of 90% is a extremely silly. I know the report you are talking about -- it is commonly cold "aftershock survival summit". If the market were to drop THAT much we are in for worse times than the Great Depression and things will globally collapse as markets are so connected. My point: little to nothing could be done with retirement money to mitigate this.
90% aside, a drop could happen and really isn't forecast-able. You are correct that if a larger drop happens, you may not (or may... who knows) be able to recover from drop before you need it. This however, can be mitigated through diversification of all assets and increasing bond holdings while lowering stock holdings.

"Also why domestic and not foreign."
I am not sure what this is referring to specifically.

My final portfolio looks something like:
56% Domestic Stock
24% International Stock
20% Bond
That is diversified over 3000 US companies, 6000 foreign companies, and 5000 bonds.

Whatever you do, don't sell what you have and take that hit... please talk things over with me first before you make that kind of decision.

Update: I just spent an hour on the phone discussing this among other things. He talked of a lot of rumors from talking heads that concern them, for instance, CNBC - Germany Wants Its Gold Back—Should You Worry?.
I also learned that a sizeable percentage of his 401k is in a single stock with a company he used to work for. When I told him that I saw that as risk to have reasonable concern over, he replied stating that it was big/global/lack of concern. I brought up Enron (big/global) and he started to grasp why diversification helps mitigate risk.
Some of the 401k is in some sort of other mutual fund - he has no idea what holdings -- stock/balanced/etc. Some of it was transferred into gold some years back, but still within the 401k/retirement structure.
Without prompting from me, he stated that he would like to send me his 401k information for me to have a look. I shared with him the concerns that many have expressed here with regards to advising family/friends. I told him that I'd be happy to give it a look, but that he'd have to come to decisions of his own accord. Additionally, I requested that he send me what funds he has available to invest in.
Last edited by Kernschatten on Tue Mar 12, 2013 4:10 pm, edited 1 time in total.
letsgobobby
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Re: Father considering cashing out 401K early -- market fear

Post by letsgobobby »

He could at least move half to a bond fund or stable value or money market *within* his 401k so he doesn't compound one horrible mistake - market timing - with another - early 401k withdrawal penalties.
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Re: Father considering cashing out 401K early -- market fear

Post by clacy »

Turn him on to Harry Browne and the Permanent Portfolio. It may or may not be the highest performing portfolio in the coming years, but it's well balanced,low volatility, hedged for high inflation (yet still give you a positive real return if the economy does well), and will be 10x better than him pulling all his money and doing god knows what.

Also Harry Browne was a big advocate of understanding that no one can predict the future and that the future is guaranteed to turn out differently than we envision.

It's perfect for those with a little paranoia, which is about 80% of investors from what I can tell.
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tc101
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Re: Father considering cashing out 401K early -- market fear

Post by tc101 »

The market may drop, but no way will it drop 90% unless we are hit by an asteroid or terrorists set off an atomic bomb in New York or something like that. Tell him to transfer "some" of the money to a bond fund in his 401K. Do not withdraw.
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dbltrbl
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Re: Father considering cashing out 401K early -- market fear

Post by dbltrbl »

Have him move the money to a MM account in 401k. Family members are hardest to convince so do not try. Just tell him to keep in 401k. Good luck. :?
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Re: Father considering cashing out 401K early -- market fear

Post by nisiprius »

Proceed with caution. How old is your father? If he were to go straight to cash, 100%, how bad would it be?

It would be one thing if he wanted to invest 100% of his funds with a lodge brother who can get him into a risk-free investment opportunity that is certain to earn 15% per year. That would be an "intervention" situation.

If you convince him to do something different from what he thinks he should do, then if your suggestions are even slightly suboptimal he will blame you. Suppose the stock market crashed tomorrow and he'd held off selling because you convinced him to wait?

What is his stock allocation, actually? Maybe what he is saying, even if he doesn't know it, is that it is too high for his risk tolerance. Making a huge sudden change downward doesn't seem like a good idea, but maybe reducing stock allocation is--and it's hard to argue that this is an obviously bad time to do it.

He said "why domestic and not foreign," and you might work with that. I am personally an international skeptic--only 21% of my stocks are international--NOT a recommendation for anyone else, just saying where I am. But if he is spooked by fears that the U. S. stock market, specifically, is going down the tubes, then it seems to me that it would be perfectly OK for him to shift a healthy portion of his stocks to some suitably broad international stock mutual fund. Don't tell him to do that, but if he is clear on wanting to do that, let him know that it's easy to do, that you don't oppose it, and if he isn't sure how to go about doing it then help him find the most suitable low-cost broad international fund available to him.
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Re: Father considering cashing out 401K early -- market fear

Post by WHL »

If there's absolutely no way to change his mind, have him exchange his funds for a money market. This way, when the market tanks as he thinks is going to happen, he has the cash ready to purchase funds at a discount. Tell him to put a time line on it...if the "crash" doesn't happen for 6 or 12 months, he needs to reinvest the money.

Taking the cash out of the retirement account all together would be the wrong move!
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Re: Father considering cashing out 401K early -- market fear

Post by pkcrafter »

I agree with others on keeping the money in the 401k. It's not just a 10% penalty, it's all the taxes plus a 10% penalty. He could switch to a bond fund, stable value or money market within the 401k. It sounds like he's nearing retirement and is worrying about a loss that might delay that. It would be helpful to know what his asset allocation is right now and how long he has until retirement.

Paul
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Re: Father considering cashing out 401K early -- market fear

Post by lawman3966 »

At the risk of repetition, I endorse the above statements regarding moving the money into bond funds, assuming his fears are valid.

But, I think the basics bear addressing here. There are two separate issues here: (1) stock market investing based on economic factors; and (2) falsely believing that 401K money and stock investments are synonymous.

Discussion of (1) above is not resolvable here, and I'm not going to address it much except to say that if you have a reasonable stock/bond allocation based on age, experience suggests that most investors won't profit by conducting their own personal analysis of monetary policy.

But, (2) above is a pet peeve of mind havind heard co-workers make the same assumption over the years. The equation of 401K money with stock money has risen to the point of being an urban legend among uninformed investors. I have the impression that most people, outside of Bogleheads and financial advisors, actually believe this nonsense. Your Dad can move money from stock funds to bond funds inside his 401K just as easily as he could in a taxable account. More easily in fact, since there are not cap gains taxes to pay with such a move when conducted within a retirement account, whereas a large move from stocks to bonds could be painful tax-wise within a taxable account.

Moving money from a 401K account to a taxable for this purpose is even worse than the stock-to-bond transfer within a taxable account. It's the worst of all worlds. First, he will pay taxes and penalties on the 401K withdrawal. Second, he will lose the legal protection afforded by ERISA to 401K plans for the transferred money. Third, he will forego tax deferral on all gains incurred after the withdrawal.

It's a massively self-destructive move, and is completely unnecessary for implementing the investing logic he is thinking of applying.
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Re: Father considering cashing out 401K early -- market fear

Post by STC »

Here is what I would write:

"The phrase "double-dip recession" was mentioned 10.8 million times in 2010 and 2011, according to Google. It never came. There were virtually no mentions of "financial collapse" in 2006 and 2007. It did come. The risks from 'printing money' are already priced into the market by professionals who understand this much better then you do. That said, the unknowable is by definition never priced in. Therefore, your actions should take all of this into account. My recommendations:

1: Dont react to speculation of the known (i.e. it would be a really bad idea to sell everything now because you fear printing money)
2: Structure your portfolio to absorb the unknowable (i.e. do retirement planning. Understand what you need. And match your portfolio risk to that need)

Everything else is someone trying to sell you something for their own gain, not yours."
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Re: Father considering cashing out 401K early -- market fear

Post by retiredjg »

pkcrafter wrote:I agree with others on keeping the money in the 401k. It's not just a 10% penalty, it's all the taxes plus a 10% penalty. He could switch to a bond fund, stable value or money market within the 401k.
Agreed. It could be a mistake to sell everything, but early withdrawal from the 401k would be a second mistake (and a worse mistake) on top of that.

Apparently your father is invested beyond his comfort zone. Pulling back some might be a good idea.
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Re: Father considering cashing out 401K early -- market fear

Post by Kernschatten »

My father is in his mid-50s.
pkcrafter wrote:I agree with others on keeping the money in the 401k. It's not just a 10% penalty, it's all the taxes plus a 10% penalty. He could switch to a bond fund, stable value or money market within the 401k. It sounds like he's nearing retirement and is worrying about a loss that might delay that. It would be helpful to know what his asset allocation is right now and how long he has until retirement.

Paul
I, too, agree... and yes, it would be helpful to know asset allocation. I'm not sure he'll provide me this and I'm not sure of the if/how I would get him to provide such unless it came up... we are on opposite sides of the globe, so between that and work hours, our conversations tend to be more text than vocal.

Thank you all for the input.


nisiprius wrote:Proceed with caution. How old is your father? If he were to go straight to cash, 100%, how bad would it be?

It would be one thing if he wanted to invest 100% of his funds with a lodge brother who can get him into a risk-free investment opportunity that is certain to earn 15% per year. That would be an "intervention" situation.

If you convince him to do something different from what he thinks he should do, then if your suggestions are even slightly suboptimal he will blame you. Suppose the stock market crashed tomorrow and he'd held off selling because you convinced him to wait?
Noted on all accounts.

Regarding the "intervention" situation, it's almost there with talk of gold and other things along this discussion-line. But yes, I won't be telling him what to do for the aforementioned reasons in your post. It is largely just the withdrawing from the 401k (and where it would go from there) that is the problem for him.

nisiprius wrote:What is his stock allocation, actually? Maybe what he is saying, even if he doesn't know it, is that it is too high for his risk tolerance. Making a huge sudden change downward doesn't seem like a good idea, but maybe reducing stock allocation is--and it's hard to argue that this is an obviously bad time to do it.

He said "why domestic and not foreign," and you might work with that. I am personally an international skeptic--only 21% of my stocks are international--NOT a recommendation for anyone else, just saying where I am. But if he is spooked by fears that the U. S. stock market, specifically, is going down the tubes, then it seems to me that it would be perfectly OK for him to shift a healthy portion of his stocks to some suitably broad international stock mutual fund. Don't tell him to do that, but if he is clear on wanting to do that, let him know that it's easy to do, that you don't oppose it, and if he isn't sure how to go about doing it then help him find the most suitable low-cost broad international fund available to him.
Yes, I can work with this.

Now, regarding your words in bold. I don't know his stock/bond allocation or if he is diversified internationally at this time. He could have 100% or 80% stocks for all I know. Your bolded words, particularly the later part, make it sound like you are stating that decreasing stock and increasing bond/cash would be a bad idea because it's a bad time to do it. Am I understanding you correctly?
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Re: Father considering cashing out 401K early -- market fear

Post by The Wizard »

His comment about Printing Money indicates a disconnect. That's usually one thing behind high INFLATION.
And that's NOT what we have this decade.
I sense a combination of misinformation and distrust. No way to fix this using a long stick, sorry...
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Re: Father considering cashing out 401K early -- market fear

Post by trudy »

You might ask your Dad what he plans to put his money into if he withdraws it and takes the tax hit. Unless it's his mattress, he could instead, if he's determined to do this, do a trustee-to-trustee transfer into credit union or bank IRA CDs or whatever safer thing he's aiming for. Five year CDs are earning 1.8% something in my area and the low interest rate means that if he changes him mind and money is taken out before maturity it's not a giant hit. I don't know anything about gold, but if it's a reasonable thing, heck he could probably buy that in an IRA.

You could also look at his investments and tax returns and do some number crunching and show him how much money he'd lose just in taxes alone for this year taking the money out of IRA status.

My mother was very independent, but she didn't object to us kids looking at her financial stuff and expressing opinions. In your dad's case, I would start monitoring things. The fifties is early for that, but it sounds appropriate in this case.

(rant on) I'll just express my frustration with people believing every rumor that comes around in email. Not just financial rumors, but crazy political rumors. What has happened to our school system today? Does no one read newspapers on the web or otherwise? How about checking information through reliable sources? (rant off) Sorry for the rant.
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Re: Father considering cashing out 401K early -- market fear

Post by jaj2276 »

Kernschatten wrote:
nisiprius wrote:What is his stock allocation, actually? Maybe what he is saying, even if he doesn't know it, is that it is too high for his risk tolerance. Making a huge sudden change downward doesn't seem like a good idea, but maybe reducing stock allocation is--and it's hard to argue that this is an obviously bad time to do it.

He said "why domestic and not foreign," and you might work with that. I am personally an international skeptic--only 21% of my stocks are international--NOT a recommendation for anyone else, just saying where I am. But if he is spooked by fears that the U. S. stock market, specifically, is going down the tubes, then it seems to me that it would be perfectly OK for him to shift a healthy portion of his stocks to some suitably broad international stock mutual fund. Don't tell him to do that, but if he is clear on wanting to do that, let him know that it's easy to do, that you don't oppose it, and if he isn't sure how to go about doing it then help him find the most suitable low-cost broad international fund available to him.
Yes, I can work with this.

Now, regarding your words in bold. I don't know his stock/bond allocation or if he is diversified internationally at this time. He could have 100% or 80% stocks for all I know. Your bolded words, particularly the later part, make it sound like you are stating that decreasing stock and increasing bond/cash would be a bad idea because it's a bad time to do it. Am I understanding you correctly?
No, he's saying exactly the opposite of your understanding. He's (nisiprius) saying that it's hard to argue against your dad reducing stocks and buying into bonds or it's hard to argue that it's a bad idea to do so. Bogleheads are obviously against market timing - which is what your dad is wanting to do - but in this case it's hard to argue, after this huge run up in equity valuations and with uncertainty all around us, to say that someone should stay with their present asset allocation if they're obviously not comfortable with it.

I think the conventional wisdom is for your dad to keep all funds within the 401k but to reallocate his equity investments into more conservative (bond, stable value, money market) investments.
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Re: Father considering cashing out 401K early -- market fear

Post by Watty »

One other thing that might be helpful is to use tax software to do a dummy tax return that shows just how much in taxes and penalties he will pay if he does an early withdrawal from the 401K.

For what it worth, if he is still working for the company then it might not be very easy to actually withdraw the money.
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Re: Father considering cashing out 401K early -- market fear

Post by Kernschatten »

The Wizard wrote:His comment about Printing Money indicates a disconnect. That's usually one thing behind high INFLATION.
And that's NOT what we have this decade.
I sense a combination of misinformation and distrust. No way to fix this using a long stick, sorry...
Concur.

It is mostly ignorance and a little distrust.
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Re: Father considering cashing out 401K early -- market fear

Post by Kernschatten »

jaj2276 wrote:
Kernschatten wrote:
nisiprius wrote:What is his stock allocation, actually? Maybe what he is saying, even if he doesn't know it, is that it is too high for his risk tolerance. Making a huge sudden change downward doesn't seem like a good idea, but maybe reducing stock allocation is--and it's hard to argue that this is an obviously bad time to do it.
Now, regarding your words in bold. I don't know his stock/bond allocation or if he is diversified internationally at this time. He could have 100% or 80% stocks for all I know. Your bolded words, particularly the later part, make it sound like you are stating that decreasing stock and increasing bond/cash would be a bad idea because it's a bad time to do it. Am I understanding you correctly?
No, he's saying exactly the opposite of your understanding. He's (nisiprius) saying that it's hard to argue against your dad reducing stocks and buying into bonds or it's hard to argue that it's a bad idea to do so. Bogleheads are obviously against market timing - which is what your dad is wanting to do - but in this case it's hard to argue, after this huge run up in equity valuations and with uncertainty all around us, to say that someone should stay with their present asset allocation if they're obviously not comfortable with it.
If that is what nisiprius is saying (and I misunderstood), then that makes sense.

Timing is poor investing behavior, but having poor asset allocation for someone's acceptable risk is worse.
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Re: Father considering cashing out 401K early -- market fear

Post by FireProof »

Peope on this forum have FATHERS who are younger than 59?
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Re: Father considering cashing out 401K early -- market fear

Post by The Wizard »

Kernschatten wrote:
The Wizard wrote:His comment about Printing Money indicates a disconnect. That's usually one thing behind high INFLATION.
And that's NOT what we have this decade.
I sense a combination of misinformation and distrust. No way to fix this using a long stick, sorry...
Concur.

It is mostly ignorance and a little distrust.
If you could get HIM to sign up on Bogleheads, we'd have a fighting chance of helping...
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Re: Father considering cashing out 401K early -- market fear

Post by The Wizard »

FireProof wrote:Peope on this forum have FATHERS who are younger than 59?
I'm sure a lot of the newish college grad bogleheads do, sure...
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Re: Father considering cashing out 401K early -- market fear

Post by Khanmots »

FireProof wrote:Peope on this forum have FATHERS who are younger than 59?
Some of us are early 30s or even younger...
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Re: Father considering cashing out 401K early -- market fear

Post by Kernschatten »

FireProof wrote:Peope on this forum have FATHERS who are younger than 59?
Yes, hello! Late 20s, no debt, taxable income never exceeds 30K, low six-figure net worth, and future multi-millionaire if everything goes smoothly. :wink:
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Re: Father considering cashing out 401K early -- market fear

Post by Kernschatten »

STC wrote:Here is what I would write:
[snip]
Great talking points, thank you.
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Re: Father considering cashing out 401K early -- market fear

Post by Boglenaut »

letsgobobby wrote:He could at least move half to a bond fund or stable value or money market *within* his 401k so he doesn't compound one horrible mistake - market timing - with another - early 401k withdrawal penalties.
That was my first thought as well. His father seems to equate 401k with stocks only.
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Re: Father considering cashing out 401K early -- market fear

Post by freebeer »

clacy wrote:Turn him on to Harry Browne and the Permanent Portfolio. It may or may not be the highest performing portfolio in the coming years, but it's well balanced,low volatility, hedged for high inflation (yet still give you a positive real return if the economy does well), and will be 10x better than him pulling all his money and doing god knows what.

Also Harry Browne was a big advocate of understanding that no one can predict the future and that the future is guaranteed to turn out differently than we envision.

It's perfect for those with a little paranoia, which is about 80% of investors from what I can tell.
I don't know - with all due respect to HB, the PP has huge potential volatility from holding 25% in one rather narrow asset class (gold) and recency bias is implicated in recommending it given the longish bull market in gold. Also 25% equities is pretty low. If no one can predict the future then there's arguably nothing better than "owning the market" (broadly speaking) which would imply more equities and a lot less gold.
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Re: Father considering cashing out 401K early -- market fear

Post by Scooter57 »

Parents will often take advice from a bum on the street--or a TV huckster--before they will take it from someone whose diaper they changed at a time that seems much closer to them than to you. And if they are swayed by your advice and it doesn't work out so well, you will hear about it all your life.
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Re: Father considering cashing out 401K early -- market fear

Post by Kernschatten »

trudy wrote:(rant on) I'll just express my frustration with people believing every rumor that comes around in email. Not just financial rumors, but crazy political rumors. What has happened to our school system today? Does no one read newspapers on the web or otherwise? How about checking information through reliable sources? (rant off) Sorry for the rant.
Tell me about it!
Fact checking isn't done because there isn't enough time after one is through listening to talking-heads.
Scooter57 wrote:Parents will often take advice from a bum on the street--or a TV huckster--before they will take it from someone whose diaper they changed at a time that seems much closer to them than to you. And if they are swayed by your advice and it doesn't work out so well, you will hear about it all your life.
There are a lot of things I could hear about for a very long time. This is one thing that doesn't concern me. For a variety of reasons, to include losing assets in divorce, he knows that he will not have enough to retire. Little to nothing can change this. I can do nothing, or I can give him the tools to make a smarter decision.
Boglenaut wrote:His father seems to equate 401k with stocks only.
I think this may be accurate.
The Wizard wrote:If you could get HIM to sign up on Bogleheads, we'd have a fighting chance of helping...
That might make this all very simple, but doing so could be a bit too technical. I think I have the next best thing with him sending me his 401k information without prompting from me.

Update: I just spent an hour on the phone discussing this among other things. He talked of a lot of rumors from talking heads that concern them, for instance, CNBC - Germany Wants Its Gold Back—Should You Worry?.
I also learned that a sizeable percentage of his 401k is in a single stock with a company he used to work for. When I told him that I saw that as risk to have reasonable concern over, he replied stating that it was big/global/lack of concern. I brought up Enron (big/global) and he started to grasp why diversification helps mitigate risk.
Some of the 401k is in some sort of other mutual fund - he has no idea what holdings -- stock/balanced/etc. Some of it was transferred into gold some years back, but still within the 401k/retirement structure.
Without prompting from me, he stated that he would like to send me his 401k information for me to have a look. I shared with him the concerns that many have expressed here with regards to advising family/friends. I told him that I'd be happy to give it a look, but that he'd have to come to decisions of his own accord. Additionally, I requested that he send me what funds he has available to invest in.
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Re: Father considering cashing out 401K early -- market fear

Post by steve r »

I think I have a simple solution

Show him vanguard Wellsley ... show him returns in 2008 (lost less than 10 percent) ... it never lost more than this ...

If ten percent is too much, dilute w/ MM or whatever
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Re: Father considering cashing out 401K early -- market fear

Post by HardKnocker »

Have him withdraw his 401k money and send it to me. I'll invest it for him.

:D
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Re: Father considering cashing out 401K early -- market fear

Post by livesoft »

Kernschatten wrote:Without prompting from me, he stated that he would like to send me his 401k information for me to have a look. I shared with him the concerns that many have expressed here with regards to advising family/friends. I told him that I'd be happy to give it a look, but that he'd have to come to decisions of his own accord. Additionally, I requested that he send me what funds he has available to invest in.
You can tell him you posted his 401(k) info to a group of internationally renowned financial advisors and here is what they said .... That way, any advice doesn't come from you. Instead it comes from them.
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suming
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Re: Father considering cashing out 401K early -- market fear

Post by suming »

I showed my husband the DVD 'The Smartest Guys in the Room' which was suggested by our fellow bogleheads. That worked for him - he used to own a large amount of one single stock. After watching that film, he sold half of that stock. You can borrow it from your local public library.
bayview
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Re: Father considering cashing out 401K early -- market fear

Post by bayview »

Remind him that it's not a loss (or profit) unless and until he sells. If he's in his mid-fifties, he's got a while to go.

Depending on the size of his 401k, maybe put 1-2, even 3 years' worth of retirement expenses into a MMF, and then go 50/50 or 40/60 or 30/70 in the rest. (Point out that he'll have to save more and maybe work longer to make up for it, but if he sleeps better, that's worth it.) If the market is down when he retires, he can live of the cash while waiting things out. Tell him that the risk of running out of retirement money is way higher than the risk of a 90% crash.

And tell him to stop watching CNBC, which makes a fortune out of creating hysteria. :oops:
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri
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nisiprius
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Re: Father considering cashing out 401K early -- market fear

Post by nisiprius »

Kernschatten wrote:
nisiprius wrote:Proceed with caution. How old is your father? If he were to go straight to cash, 100%, how bad would it be?Now, regarding your words in bold. I don't know his stock/bond allocation or if he is diversified internationally at this time. He could have 100% or 80% stocks for all I know. Your bolded words, particularly the later part, make it sound like you are stating that decreasing stock and increasing bond/cash would be a bad idea because it's a bad time to do it. Am I understanding you correctly?
No.

I am saying that if he has a lot of his 401(k) in stocks, and if he is nervous about stocks, then he may well have too much in stocks for his risk tolerance.

If he has too much in stocks, then some reduction might well be appropriate.

In my opinion a big-bang, sudden, large reduction--like going from all stocks to all cash--is never a good idea. But a substantial reduction might be.

I should not have said anything about timing at all, but having said it... let me just step even deeper into it... all I meant was that "stocks are up," whatever that means. If he wants to sell some of his stocks now, he's not taking an actual dollar loss, at worst he is foregoing a future profit. In contrast to my colleague at work--guy in his late forties--who was, I'm pretty sure, 100% stocks in in his 401(k) and sold all of it, went straight to money market, around October of 2008.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Jebediah
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Re: Father considering cashing out 401K early -- market fear

Post by Jebediah »

You gotta just let him move it to a MM within the 401k and learn for himself what it's like to buy into fear marketing. It's pretty harmless, all that happens is he gets out after a nice run up. Maybe he even gets lucky and pulls out right before a big crash. Trying to teach him 'the boglehead way' in order to keep him in stocks is IMO a mistake. Then maybe turn him on to Hussman or something instead of Newsmax so at least he can get his fear fix from a literate source.
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