desert dweller
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Post by desert dweller on Dec 11, 2016 20:34:49 GMT -8
I'm thinking of cashing out my retirement fund from Fidelity and putting it in the bank for the next year. I just don't trust the stock market with so much potential for things to go wrong.
Has anyone else given thought to this?
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rebeccad
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Post by rebeccad on Dec 11, 2016 20:38:09 GMT -8
desert dweller My inclination is to keep it where it is and weather the interesting ride we're apt to have. But though we are looking at retiring rather soon, we aren't dependent on the stock funds, so could just let them sit for quite a few years if need be. The problem with your idea is the possible penalties and tax hit you might take. You'd have to do some serious looking at what those consequences might be, though shifting more of your portfolio towards bonds might make sense.
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desert dweller
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Post by desert dweller on Dec 11, 2016 20:41:11 GMT -8
The problem with your idea is the possible penalties and tax hit you might take. I'm old enough to not be penalized. The tax is 20 percent. The fund is not that much. It really wouldn't augment my social security much. But, I've seen friends have their's seriously wiped out. I tend to not trust anything to do with the market anymore.
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rebeccad
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Post by rebeccad on Dec 11, 2016 20:46:43 GMT -8
I'm old enough to not be penalized. The tax is 20 percent. Presumably you have to pay that whenever you withdraw the money? For the record, I don't know squat about this stuff, except what we've learned the hard way from having the spouse handle the funds and me do the taxes ("Honey, WTH were you THINKING when you sold all that? Do you know what the capital gains are on that???")
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desert dweller
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Post by desert dweller on Dec 11, 2016 20:50:50 GMT -8
Presumably you have to pay that whenever you withdraw the money? Yeah, the tax is taken out by Fidelity right off the bat. At 59 or 60 the penalty no longer applies. I know very little about it also. I have some home improvements I need to do before I can sell my house for what I want. I'll probably use part of it for that. If the house sells well and the market looks stable enough, I'll put back in what I take out and then some. The tax is a lot. But, losing the money on the market would be a lot more.
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BigLoad
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Post by BigLoad on Dec 11, 2016 20:58:05 GMT -8
You should have choices within your plan that aren't tied to the stock market. That would allow you to opt out of that risk without paying the tax yet, but you wouldn't have the money free for the house. You also should be able to borrow from the plan, although you'd be on the hook to pay it back at risk of penalties if you don't.
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Deleted
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Post by Deleted on Dec 12, 2016 3:06:34 GMT -8
I also have an IRA with Fidelity...they offer more than just stock and bonds....I have a portion in a cash fund....not making much, less than 1%.
A 20% tax hit is a pretty big hit....
If you don't like the risk associated with stocks, then you could have them transfer it to a cash fund....or, one of the other 1500+ funds they offer....
Frankly, I'd talk to a professional.....before I did anything.
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Post by Lamebeaver on Dec 12, 2016 4:37:31 GMT -8
If you're concerned about the stock market, I would transfer the majority of it into bonds or other secure investment options.
Putting the money in the bank, you may as well stuff it under your mattress. Banks aren't paying squat for interest.
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Post by JRinGeorgia on Dec 12, 2016 5:47:45 GMT -8
Trying to time the market is a losing strategy over the long haul. The real issue is as Ben identified, your time horizon. If the market tanked tomorrow then how much time do you have to allow it to recover? If you need those funds for living expenses in the short term and would have to be cashing out at a market low then they shouldn't be in stocks right now anyway, regardless of any short-term bullish or bearish sentiment. If you have a longer time horizon but are uncomfortable with your asset balance then you can transfer the assets from one protected retirement investment to another without penalty or tax. You can switch it to dividend stocks, bonds, Treasuries, gold, real estate, pretty much whatever you want. Even a money market, which is essentially cash. Fidelity can help you find assets you like and do that penalty- and tax-free.
But actually, the most important word of advice you need here is -- don't get your financial advice from a backpacking forum...
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desert dweller
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Post by desert dweller on Dec 12, 2016 8:12:11 GMT -8
Thanks for the ideas, everyone. This is not a do or die situation. I will cash out some to get the house ready. But actually, the most important word of advice you need here is -- don't get your financial advice from a backpacking forum... The diversity of the people who participate in these forums is astounding. It's a good place to start. Folks here don't have a financial tie to my money and have nothing to gain for the advice.
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whistlepunk
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Post by whistlepunk on Dec 12, 2016 8:49:55 GMT -8
I have an agreement with my accountant. I do not ask her backpacking advice and I do not give accounting advice.
Ask someone who does tax and retirement planning for a living and is licensed/certified.
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desert dweller
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Post by desert dweller on Dec 12, 2016 9:22:07 GMT -8
Ask someone who does tax and retirement planning for a living and is licensed/certified. One time our company, one of the largest pharmaceutical companies in the world, brought in a licensed/certified adviser. I spent an hour with him and told him my goals. I took his advice and switched around a few things on the spot. He got $3500 in commissions for the transfers and my 401k growth dropped significantly. I told him at the onset of the meeting that I was not versed in such matters. I won't trust anyone who is an "expert" in retirement funds and markets. No thanks.
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jazzmom
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Post by jazzmom on Dec 12, 2016 9:50:46 GMT -8
A couple of things I would consider in your shoes.
- There's a 20% penalty for withdrawing early. The amount also gets reported as income, so you will pay income tax on it on top of the penalty. You *may* earn 1% in a savings account in the bank which, again, is subject to income tax. So, let's say you're in the 15% tax bracket. That means your retirement fund in Fidelity could lose 35% in value outright and still do just as well as your put-it-in-the-bank idea.
- There are probably fund options in your account that are not stocks. I'm guessing there are guaranteed rate funds you can move your investment into which will pay a much higher interest than a bank savings account.
- Once you've taken your money out of the retirement account, you can't just put it back after a year. There are limits and constraints to doing that.
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desert dweller
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Post by desert dweller on Dec 12, 2016 9:55:08 GMT -8
I'm not subject to the penalty because of my age. The tax is 20 percent.
I'm no fortune teller, but I don't think the market will be stable for a while after January 20th. I'd rather have a small interest rate and keep the money safe in my bank. I don't trust money markets or any of the "safe harbor" plans.
Thanks for the advice, though.
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jazzmom
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Post by jazzmom on Dec 12, 2016 10:19:18 GMT -8
I misread your "old enough" comment, sorry. Yes, as you get older, the less risk you want to take. I get that. FWIW, though, my investment banker friends are salivating over the Trump victory. They're expecting big things.
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