What is a 401K? Once you have money in one, can you loose any of that money do to a failing the economy?
Posted by Dolores
cluelessblue asked:
My mom said her 401K was getting smaller and smaller and she is not sure why. So she was told to cash it in. Is that the right thing to do?
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My mom said her 401K was getting smaller and smaller and she is not sure why. So she was told to cash it in. Is that the right thing to do?
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November 13th, 2009 at 4:13 pm
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A 401(k) is a retirement plan. Usually most of the assets are stocks. The reason the value of her 401(k) is going down is because the stock market is falling now. Shares of stock are worth less, however, that means that the same amount of money will buy more shares. Usually 401(k) stock is not in the riskiest companies, unless the individual investor chooses it. The value of the account fluctuates, but goes up over time. If your mom is not retirement age, she will pay a lot in penalties to cash it in. Her best bet is to leave it alone, except she may want to change the way future contributions are invested. There should be someone at her company who could direct her, or she could call the company that handles the 401(k). I wouldn’t just cash it in without professional advice, because that can create a lot of tax problems. Good luck!