Weldon Wright (11 Aug 2011)
"RE: Joe M"


            Here is the short answer:

            First you need to get a copy of your company’s 401k Plan Document (not a summary Plan description).  Each 401k is subject to standard IRS rules, but certain variations are allowed, and you need to have your plan document to determine what those are.

1.    Normal distributions from your plan are usually allowed at “normal” retirement age as defined in your document or termination from service.

2.    A few plan documents usually in larger companies will allow you “access” to some monies in your 401k and allow to take it out and put it into a “Rollover IRA” without having to terminate employment.  These exceptions vary by age – most that allow it say you must be age 59-1/2 or more.  Some only allow a portion – usually you own contributions to the plan, but some only allow the employer match to be transferred out.  Bottom line is you must have the plan document to see if you are eligible to do this.

3.    All plan allow “hardship” distributions – you would need to read your document.

4.    Never borrow money from your 401k – when you pay it back, the interest is paid with “after-tax” dollars and when you put them your 401k, they become 100% taxable again, so you end up paying double tax on the interest.


General Investment Advice

1.    Your need to be truly diversified.  Most people think if they have Large, Mid, and Small Cap Stocks, Growth and Value, some International, and some bonds, they are diversified.  They are NOT, they have spread the risk, but they are all CORRELATED to the stock market.  They all move up and down with the market.

2.    Things change with your age, but generally you should not have more than 30-40% in one asset class. Stocks and Mutual funds are considered on asset class – even bonds have some a high correlation to the market in recent years.  Other assets one should consider – real estate, fixed indexed annuities, equipment leasing, commodities/natural resources and others depending on the size of your investable assets.  Some people buy public traded Real Estate Investment Trust – but the risk is it still acts like a stock and does not offer true diversification.  You should investigate non-traded REITs.  Everyone should have 4-8 different asset classes depending on the size of their portfolio.

3.    Be wary of brokers who tout a ‘buy and hold” strategy.  I call it “buy and hope”.  Just look at the last 11 years.  We are still not back to the highs of 2000.  If you had money in the market in the year 2000 and just held on, you would still not have recovered to where you started.


Hope that helps.