Newsvine Q&A: John Schoen on your retirement plan

Has anyone addressed the problem imposed on older retirees by the Required Minimum Distribution tax law?  We are being forced to dispose of assets at firesale prices in order to avoid a 50%(!!!) tax on under-withdrawal.  I guess the government needs that 50% to give to AIG and others so their executives can continue enjoying luxury outings aroud the world.

Attached to the article about people dipping into their retirement funds to make ends meet was the byline, "Tapping funds is costly," which might lead some to think that it shouldn't be done. My question (comment) is that it would seem to me that paying the penalties and tapping into money that is already ours is less costly than putting the mortgage payment, grocery bills and other day-to-day expenses on credit cards and racking up that kind of debt, which ends up being way more costly in the long term. Am I wrong?

Should I wait to rebalance my 401(k), and weight it away from stocks? Should I wait for things to get back to where they were, while still putting contributions into the current plan? Or should I put everything into bonds right away? My portfolio IRA and 401(K) has lost 40% of its value. Thanks.

My 401k was rolled into American Funds stocks and I hqve lost $14,000 so far.  Should I move them into a guaranteed 5% annuity until the market begins to go back up or wait it out?  I am 60 and "may" retire when I turn 66.  This is all the lump sum I have retirement.

I had to take time off work and ended up having to make a choice to cash out my 401k entirely as I watched 35% of it disappear due to the market downturn.  What are the chances of the govt supporting a change in the 401k rules to suspend the 10% early withdrawal penalty for people like myself who have been slammed by the economic downturn and stock crash and were forced to cash out lest we lose it all? (btw, I would have lost another 15% if I had not cashed out, so I'm ahead of the game in a twisted sort of way).bb.

I don't mean any disrespect to people who this has happened to, but who in their right mind would retire and leave their nest egg in high risk investments?  I am five years away from retirement, and I have a very large portion of my 401K invested in a fixed income fund that pays a guaranteed 4.5%.  Why?  Because I don't want to postpone my retirement, and the "opportunity lost" (as my former financial advisor calls it) doesn't bother me as much as the thought of having to work another 5-10 years to get my balance back up to the number I need to retire. 

It's too late now for anybody to take my advice, of course, but anybody who's 55 years old and has just lost 35% of his/her nest egg has just got to look in the mirror if they're looking for somebody to blame.  The Financial Crisis didn't do this to you. You did it to yourself.

I'm  27 years old, employed and curious what the best moves are to start saving for retirment.  Currently I take a cut from each paycheck and put aside in a high yield savings account like Emmigrant Direct.  At some point I would like to start investing, but with todays market I'm apprehensive to do this (at least for now).  Suggestions?

I am like everybody else, hurting for money. I have a 401K but not too much in there to try and get out. But I do have a retirement account from my job of 20 years. 8 years ago and was able to take some out then but now I can not get anymore until I am 55. I am 53 now. I need some of that money NOW, to live on. I know it is for my future but I need to think about now. I had heard President elect Obabma mention something about letting people get their money out early and not have to pay a penaty. He is talking just the 401k or a retirement fund.

HELP

thanks for your advise

poemp you have many years to go before retirement.  If I were you I would speak to a CFP and start buying some of these beaten down stocks.  In 20-30 years, they will be worth much more then they are today.  But stick with large caps that can weather these difficult economic times.  This is truly a great time for the younger investor...

Congress created this mess thru deregulation!!  Their pimps told them to deregulated the industry and they did ignoring the concenquences to the people! Therefore congress and the white house should take a 75% pay cut, their retirement should be put into Social security, and they should lose all benefits!!!  Politicians have become nothing more than a bunch of dirty rotten low class prostitutes who serve their pimp lobbyist!! The ones who made out like a bandit is the federal reserve who rip off the American people with the help of the whores of congress and the white house!! Washington D.C no longer represents the people of America they represent their pimps and Israel and just use us and our children to benefit them!!!  The democrats when first elected decided not to prevent bush the B*stard from going into Iran because of it possible impact on Israel, who the f*ck elected them to represent Israel instead of America!!! Israel is NOT our best friend as they have spied on us, stolen our secrets, and attacked us!  They are the only country to us and get away with it in the 60's!  It is the only act of war on the U.S. that congress has never investigated!!!! WHY!!!!!! It is now wrapped up in national security and no one is allowed to discuss it, WHY!!!

Give me a break rider. you're right that thie mess was facilitated by deregulation, but the main problem is our addiction to spending at and beyond our means. Deregulation, sub-prime loans, etc. all extended economic growth that was unsustainable becuase it depended on people continuing to buy things they couldn't afford. The house of cards was going to fall sooner or later. had it happened soooner it woudn't have been a tough. And we haven't experienced the worst of it yet.

We have been very fortunate because we moved almost all of our investments into treasury bonds about 1 year ago and have lost less than 3% of our nest egg since Jan. 08.  I was wondering what percentage we can withdraw annually without using the principle?  My husband says about 3% but I have always heard around 7%?  Given the current economic climate who is closer to the mark?  We are in our mid 50's and intend to keep it in bonds.

I would appreciate your thoughts. Thanks

Since my 401K account (through my employer) has lost over 40% of its value, I looked into withdrawing the money to get out of debt, invest in a Roth IRA on my own, and start funding a college fund for my son.

After reviewing the 10% penalty along with tax withholdings, I was told because I was still an active employee, I could not withdraw my account. Is that really the case? Are there any changes in the tax laws coming that would allow us to tap our 401K balances in order to weather this economic storm?

The key is to take control of your own funds. When the economy is obviously going to tank the equity stocks are going down. It does not go in straight lines. It was impossible not to expect the decine so I sold all my equity in company stocks and bought a short fund SKF at 91.00. It is $209.00 today. I am up 110%. The market is going down further and SKF will go higher. Either way I have taken out a lot of profit that I earned on margin and no longer have any margin used.

Take control of your own 401K or IRA. I pay $7.00 per trade of any size. You do not need a broker who will charge $$$ for the same trade.

I have money in a retirement account through a previous employer. They asked me to take it out several times, but I never got around to it until the stock market collapse. Now I lost about 60% of it, so I don't want to roll it over now. I'm still under 40, does it make sense to just wait for the market to come back? I'm considering to wait for the market to come back to 2007 levels and then to put my money into a safer investment, so I don't have to worry about it anymore. Is that a good idea? Are there any "safe" investments, that still qualify for the tax deduction?

Ok, here's my question.

What about thoss of us who have no retirement fund or savings? Those of us who have worked 30 years paycheck to paycheck and who have never worked at a company that offered any kind of retirement plan, and could never afford an IRA or anything like it.

This is the vast majority of people I know.  Why is there no reporting about us?

What I want to know is why no one is being held accountable for the current financial situation.  Also, that $700 billion is the biggest boon-doggle in the world.  Since when do we reward the very people whose stupidity got us into this mess in the first place. So the hardworkers are going to get screwed.  That is basically it. The CEO's and other overpaid jackasses are going to even receive bonuses while the rest of us watch our 401K's shrink day by day and you can't take the money out or you are punished financially (or have to pay taxes). So far people continue to lose their jobs, their homes, their savings and their retirement while hearings are being held to decide who needs help.  THE CITIZENS need help! All that is happening now is a continuation of the "trickle down" theory which has not and will not work. I predict that we are going to have a depression that will make the last one look like a cakewalk. Isn't there any way to wake up our officials? Geeeez.

How about the "retired" retirees ?? I'm 76 years old, have worked 49 years and put aside

401-K type retirement savings regularly for many years.....only to now realize that Barney

Frank's and Chris Dodd's appeared to have deliberately encouraged FANNIE and FREDDIE

(their party's mortgage re-packagers and insurers) to put dangerous sub-prime mortgages

on the US taxpayers' balance sheet (see WS Journal report on Congressional Hearings with

Barney Frank saying even way back SEP 25, 2003 (yes, 5 years ago !):

"I want to roll the dice a little bit more in this situation towards subsidized housing..."

And, in fact, the DEMs on the committee complaint that FREDDIE and FANNIE were not taking

on enough  "no-money-down" mortgages from people who "didn't have a pot-to-pee-in".

RESULT: $ 225 000.00 of my stock portion of the 401-K have vanished (DOW dropped from

14 000 to 8 000 within 1 year). Being handicapped by hips damaged by osteoarthritis......

I may not live long enough to wait for the DOW to recover.

But my wife at age 71 has to work standing on her feet for 10 hours/day to make ends meet

Barney Frank & Co. (taxwriting Congr. Committee) could come-up with a $ 700 Million

bail-out package in ten (yes, 10 day)....but they WOULD NOT STOP THE SUB-PRIME TSUNAMI

(SUB-PRIME MELT-DOWN) in the almost 2 years they have had the power of the law.

Mr. A. Falcon Jr, the director of OFHEO (US Govt housing oversight/regulator) who pleaded

with the Committee 5 years ago:

"I have been asking for additional authorities and resources !"

which fell on the Committees "deaf ears".

Details: GoTo:             

Look for: Barney Frank - Fannie - Fannie Mayhem -

Wouldn't it have made sense to borrow half of my 401K when the market was still above 12,000? 

I think all of the citizens of this country need to raise their voices and not ask but DEMAND that the CEO's, mortgage brokers, bankers and others who are responsible for the current financial cesspool have to pay the price. This is like Enron on a larger scale (no one was really held responsible in that one either). There needs to be some serious prison time served by some of these. Instead it is just business as usual while they wait for their Christmas bonus (of millions).  This is BS. Come on, people. Make your voices heard. This is not right and we just won't stand for it!!!!

What no-one mentions are the folks (like me), over 71 1/2 - and FORCED to take money out of IRA's at an absurd time!

I am a 50 year-old African-American woman who was diagnosed with Stage IV Breast cancer in 2006.  I have lost closed to 40,000 in my Retirement Fund (AIG).  I know I may not have long to live but I still get up and go to work everyday, primarily so that I will have health insurance.  My co-payments are literally bankrupting me, but I do what I have to do.  I had planned on taking an early retirement so that I could live out the remainder of my years with at least some dignity.  Our economy is such that the little money I have left in my retirement account, plus some other retirement matching funds from my current employer and a little from Social Security, make it impossible for me to financially live for another year with working.  I am still undergoing Chemotherapy treatments on a weekly basis.  I have to pay for parking at the hospital at a rate of $16.00.  I have to pay for parking near my employment at a rate of $12.00.  I have to purchase meds and special foods for my disease.  I am not complaining because I know there are people who are worse off than I.  But, what can I do to financially live a life of dignity and relaxation.  I'd like a bail-out as well.

I'll make it short.

The problem started under Jimmy Carter's 1977 to 1981 presidency with the COMMUNITY RE-INVESTMENT LAW that would force bankers to make mortgage loans to undeserving buyers, i.e. they had no or too low FICO rating.

The Democratic party started COMMUNITY ORGANIZERS in the slums of big cities that were financed by MILLION-DOLLAR "donations" from the National Mortgage Bank (started by the democrat ==== Franklin Delano Roosevelt ======= more than 40 years ago, aka FANNIE MAE, now in Washington DC, staffed by "out-of-office" Democratic Leaders in high (CEO) positions, like FRANKLIN RAINES, one-time CEO of Fannie Mae who was found, along with others to have COOKED-THE-BOOKS (Enron-style), for which he was fined Millions of $$$$ but did not have to pay a nickel because Fannie had bought "insurance" (from AIG ??? ha-ha-ha) that paid the fine to the SEC. Another $ 400 Million fine was paid by Fannie, also to the SEC. The good Democrat soldier FRANKLIN RAINES (an A-A) was duly rewarded with a 2-digit-Million $$$ GOLDEN HANDSHAKE by his Fannie-Mae employer while dismissed.

The donations the Community received from "well-wishers" (many came from Fannie and the sister Freddie-Mac) enabled them to hire "community organizers" in groups like ACORN (where our new fearless leader OBAMA cut his political teeth in South Chicago and started his political career, building a power base to get elected to the Illinois State House and later to the US Congress). Typically, they would get people in, like South Chicago, and find a small house for them, get them a sub-prime-mortgage and then take them to the Chicago VOTER REGISTRATION OFFICE, where they were recorded as NEWLY MINTED DEMONCRATS. Over the years, Millions of new DEMOCRATS, especially the last 4 years, were added to the DEMOCRATS voter rolls in big cities nationwide.

Is it any wonder that our new fearless leader OBAMA was elected with, I believe I heard, 96 or 97 per cent of the BLACK vote =

nationwide it was 63 Million for OBAMA votes vs. 56 Million against OBAMA, i.e. a 7 Million votes difference...most of those coming from newly-minted, overwhelmingly black DEMOCRAT voters.

That's one of the explanations why the DEMOCRATS in Congress fiercely defended the costly and risky "buying & insuring" bad mortgages before re-selling them to Wall Street who, in turn, re-sold them to investors world-wide.

When the "house-of-cards" came crashing down and LEHMAN Brothers of Wall Street went under.....all hell broke loose and most everybody asked:      WHODUNNIT ??? 

The fault clearly lies with the DEMOCRATIC LEADERSHIP in the US Congress who were in charge of making new laws and regulation to put a stop to the irresponsible "insurances by Fannie Mae and Freddie Mac" on behalf of the US taxpayer, but who refused to do so.

Like the famous Washington Redskins' coach VINCE LOMBARDIE announced to the world.....

WINNING IS NOT EVERYTHING......IT'S THE   O N L Y   THING.

The Democratic Party of the USA got that one planned for years, and it paid off on Nov 4,  08

The price paid by the US economy (and the American people) and that of the industrialized world is so huge it cannot be clearly measured: TRILLION upon TRILLION of Dollars & Euros.

The POLs don't care! Get over it!

Or have you seen Barney Frank and/or Chris Dodd step-up to the mikes and cameras yet ??

I think you people crying about your retirement shrinking should quit your crying, you allow the crooks calling themselfs our leaders to create their own retirement program that gives them there pay, which is up around 180,000 a year, even if they are only in for 3 or 4 years and they make you contribute to a social security program that they could never by law make mandatory which is shrinking every year because they keep borrowing from it, they let bank CEO's squander away billions and get million dollar bouness and say they can bail these CEO's out with your money, where did the constitution say they could do that.

Quit your crying and get off your tail end and do something, enough is enough, both Democrats and Republicans will continue to do what they are doing untill you do something, Like getting rid of the Federal Reserve and getting back to sound money, money backed by something, if the money was backed bu Gold and Silver again, they could only spend what they had backing it, no more, Wake up people.

Hi,

When will the Fed pony up a bail out package for all us baby boomers that have seen their 401k evaporate into green air??