What kind of fund is it in now? What kind of penalties do you have if you withdraw it? My immediate guess is no, don’t pull it out.

I should mention, however, that if you have any credit card or other high-interest debt, you should pay that off rather than invest in anything. No investment is better than paying off 20% credit cards.

You know, I just love how you guys all jump in when I ask for advice. I know this is personal, but I also know there are millions out there asking the same question, some of them Mormons. I wasn’t asking for myself, this topic needs exploring.

Okay. Thanks, you guys, we do have a financial guy who takes care of our stuff and he’s a great guy. But he’s probably losing money as well now and we are being cautious. He’s advising to stay put.

There will be penalties but we’re paying now because of the GM problem and the necessary borrowing from our savings.

We have a friend whose house is paid off, but who never accrued any savings toward retirement. She has little debt and both she and her husband will get social security of course, but they have no personal savings.

The cases run the gamut. I see young kids really struggling today with their debts and their kids. Credit card debt just wasn’t as rampant when I was raising my kids. One crash I anticipate is the credit card companies. Because they’re handing out cards like popcorn with huge limits to young kids who will never be able to pay off those debts. When that comes down, where will we be as a country? China will own us all, lock stock and barrel.

While I was typing, I came to the conclusion that an all or nothing approach probably isn’t the way to go. What I was thinking is take 2/3 out, put a sum in the bank, keep a goodly amount of cash at home, pay off our bills (mostly medical, I’m such a drain that way), and then with the remaining 1/3, put half in mutual funds. Redistribute our wealth, as it were.

I incurred a hefty credit card balance when we were separated, which I transferred to a 0% promotional deal for a year and hope to be able to pay down my debt with my salary. I think this would be better than using cash to pay it off because it improves our credit rating and lets us have our cash available for emergencies, of which I think there will be many in the next little while.

But I’m leaving the last word with God.

We’d have to be really desperate to declare bankruptcy. I’d rather sell my house. No, it’s not that bad. I’m asking for retirees who aren’t necessarily in that dire a strait, I’m just wondering about leaving our money in retirement. We’re afraid we’ll lose it all. We’ve borrowed some the last few months due to slow sales, but we’ve lost times a lot more than that in the stock market fall. That’s what I’m asking about. I think a lot of people are wondering. Young people just starting out in a 401K, for instance, should they reconsider?

I’ve thought we should sell our house and get a smaller house more conveniently located. Our house isn’t large, but we have a full basement and a 1/3 acre lot which requires a lot of upkeep. It’s so pretty we could sell it fairly easily, but we really don’t know what we want to do yet. I guess that’s part of the problem. I think if we did sell the house and get a smaller one, we could be out of debt altogether with lower monthly expenses. But Bill is quite attached to the yard.

But thank you, Seth, I can see what you’re talking about. Medical problems are so huge, that’s one of the reasons I’ll be answering phones for AT&T for the next ten years, the insurance.

Anne – I second what everyone has said, do not panic and think with a straight mind. Remember selling low is not a good idea. I also like Seth’s advice. Good luck to you.

I completely agree with #4. If you have ANY credit card or consumer debt it is worth making a withdrawal from a 401k to pay them off. Your investments may only make a few percent but it can be nearly impossible to pay off consumer debt making minimum payments. Last summer I cashed in one of my 401k’s and paid off two cars and all our credit card debt. It felt SO good to be debt-free (not counting mortgage and student loans) and my credit-score went WAY up over the next three months. When we suddenly encountered big medical debts it was very comforting to know that they were much more willing to work with us than credit-card companies would have been. And if the bottom should fall out from underneath us and we lose our jobs and have to go running to the bishop for help, (we have no family to help us), we know he will be much more supportive when we tell him we have no consumer debt.

Aside from consumer debt, I would consider investing as much as you possibly can in a growth portfolio. “A risky growth portfolio? Heavens, why?” (I can hear lots of people asking).

The market is at historic lows. Even over the few years that you have until retirement the market is likely, almost certain, to recover much of what it has lost. Many analysts see the markets recovering quickly, say in three to five years…which is just about the time you will be hoping, praying, and wishing for retirement. So why invest a bunch now? Here is a lousy, but real, example. I have a friend at work who bought a whole bunch of Ford stock just before Thanksgiving and sold it about a week later. He bought it at about $1.30 and sold it at about $2.30…he invested $5,000 and left with over $8,500 even after all the fees and everything.

Now do I think that is a good investment strategy? Ummm…no. Although if I had a spare $5,000 that I could actually afford to lose then maybe, but that isn’t my life and I doubt it is yours. But my point is that over the next 5 to 10 years I think the market IS going to go up… a lot. A diversified but aggressive portfolio is likely to make a lot of money. Not in the next year, not in the next two years, but in the longer view of five to ten years. Five years ago Ford was at about $16, now it is at about $3. If you had bought it then you would be feeling pretty bad now. But if you buy good stocks now, when they are way down, you are sure going to feel good if they go up 300%-400% over the next many years. If Ford only makes it back to $6 instead of $16 it will still have doubled in value.

The key is to pick good stocks. Which is why Ford may be a spectacularly BAD choice depending on who you ask! But the mutual funds are in the business of trying to figure out what is a good risk versus a bad risk. Your 401k managers are likely to make better choices overall than you or I. They will also make some incredibly bone-headed mistakes (as we have seen). But over the long run they are likely to serve you well.

Ultimately you are right though, the best investment decision you can make is time invested in study and prayer. Continue researching the choices you have; talk to people you trust; follow correct principles taught by prophets, and have righteous desires in your heart. Then, whether your investments earn you a lot of money or you lose everything you will have peace in your heart which no amount of money can buy.

Wow. there is some incredibly dangerous “financial advice” being given in these comments. I’m sorry, but anyone just a few years away from retirement should not be putting significant money in equities, or betting it all on a “growth portfolio” with expectations of great returns in the next few years. It’s heartbreaking to see so many that are so close to retirement have been wiped out this year, because they have neglected conventional wisdom and stayed in equities instead of switching to safer fixed income options as they near retirement.

Those thinking that the recent stock market decline is just a blip in a secular bull market would be well served by studying historical market action following severe market crashes and/or recessions/depressions. It’s not uncommon for markets to give up 80-90% of their value in times like this, and remain flat for years. #12, your friend made a great trade (kudos to him!), but the market values Ford at 1.30 for a reason–there is a huge possibility of a bankruptcy which would wipe out shareholders. And #5, it is quite possible to “time the market.” However, i agree that it is not easy. I also agree that “financial advisors” cannot do this in general as they cannot trade their way out of a paper bag. I guess that is why they are advising others.

As for selling low, low is relative. I agree now is not the ideal time to get out as the market will likely rally to a much better exit point. But I am completely confident we will make a lower low next year.

This is the deal: we’re refinancing at a really low rate (we have stellar credit and equity); we’re leaving some of our money in stocks, transferring some to an FDIC secured IRA; and cashing in the rest the first of the year to: put most in the bank, put some in the mattress and pay our medical bills. It’s really inspired.