Wait or go for broke? I want to convert my 401k to an IRA with a SDB account in it...here's the stupid part-

Question

I held my company's stock in my 401k for 25 years (Amex). Despite advising everyone else to diversify, I put it off and put it off, thinking that a nice blue chip like Amex would only do well in the long run. Now I'm 50 and unemployed, the market sucks and I have lost about 40% of the value of my 401k over the last 2 market dumps. I am nervous because boomers will be pulling $ out of the market and because of the dollar dive and the intrinsic feeling that the good ol' US of A is on it's decline in many ways. I was trying to hold out for a rebound, knowing about the big settlements Amex recently won from MC and VISA, and the fact that they did not invest in any of the stinky sub-prime loans, but I fear they are just lumped together with everyone else in the "finance" category. Now I just don't know about much, except that I don't want to lose any more, but am loathe to transfer into something else and kiss $70K good-bye (even though the return will most likely be better).

Help!

Answer 1

OK, you are right you should have diversified, but no use crying over spilt milk.

You say you are 50, that means you have about 12 more years till you retire, however you are out of a job. One is seperate from the other. You will get a job, so don't worry just keep searching. The market is down, a great time to diversify. Rollover into a IRA account, then find a good financial advisor and make a plan. Be aggresive for 4-5 years and then start to allocate more funds to bonds to perserve the money you would have made back over those 4-5 years. Make a plan, you don't build a house without blueprints, you shouldn't try to build a retirement fund with planning either.

Any questions, email me and good luck, you still have enough time to have a nice amount in 12 years with 70k as your base.

Stu

Answer 2

Okay, so you are not diversified (You are 100% in ticker AXP, correct?).  Don't beat yourself up about that:  what's done is done.  Let's move forward.

First, you can rollover your AXP stock to the rollover IRA if you do not want to sell your American Express stock at this time.  All you need is a Rollover IRA Brokerage account -- which can be set up easily at Vanguard or Fidelity....of Schwab or a dozen other firms.  

Second, decide if you want to diversify now or not.  If not, do the rollover as above.  

Third, don't kid yourself -- you never "had" that $70k.  That is an illusion based upon an arbitrary stock quote selected on a random day you just like to remember.  It isn't real and you are making the classic investment mistake of "anchoring" your decisions today to a random number from the past.  Your decision today should be made based soley on the facts of today and your plans for tomorrow.

If you were my client and you asked me what to do, I would tell you to sell it all and roll it over into a Vanguard IRA invested in the Target Portfolio for the year closest to the year you will turn 68.  

You've got 20 years until retirement.  Concentrate on getting another job and let your retirement money, time, and a diversified portfolio work for another decade before you panic.