Should I quit my 401K?

Question

I've put $1650 in there the last year (I know, not much) and the account is now worth only $1502. It's the time of the year at my job where I need to re-do my benefits. I'm thinking of not adding to the 401K anymore and paying off some small credit card debt instead. I know that people don't invest to make a quick buck, but do it for the long term,however, I'm sick of losing money like this when I'd get a better return not paying interest on the debt I have now. Should I just close the whole thing out, take the money to pay off some debt and maybe start reinvesting at a better time in the market?

Answer 1

If you take out your money from the 401K, you end up paying a lot of interest and penalties.

Why not just leave the 401K at its present state, and stop future contributions?  Use those contributions to reduce debt.

If you are nervous about the 401K, move the money to a stable value fund - all 401K plans include at least one such fund.  The Stable Value fund is like a money market fund, it pays only 2+% interest, but it's close to risk free.

In my case, my 401K is 100% in a stable value fund, because I simply have little confidence in the stock market any more.  Better to leave everything in cash until things start looking better.  Everything is looking really bad at this time.

Answer 2

No, no and more no, you are going to lose close to 40% to takes and penalties, just let it ride out the market because over any 5 year period it will make money.  Its a retirement account and not a savings account.

Answer 3

hello - leave the money there, and if your company matches your contributions I would keep contributing (free money after all).  Look in your choices for the one with the lowest risk and put your money there, it will be in cash so the value wont go down.  also, you can change your investment choices all year, not just once a year.  IN addition, in most companies I know of you can contribute more or less to the 401K anytime during the year, not just once a year.  

take some time and learn about the 401K now, it will benefit you your whole life.  when i started out i just called the 401K management company, said to the person on the other end of the line:

"Please help me understand what the 401K is, and which of the options are less risky vs more risky etc."  They were very nice and explained it all to me.

good luck!