I am starting a new section of Money Crashers that will be labeled under the “FAQ” category. These are questiions that I either receive from my contact form, questions I hear people ask on radio/TV, or questions that I hear people asking in everyday conversation.
Should I Cash Out/Stop Contriibuting to my 401(k) During Weak Economic Times?
My answer to this is that you should definitely not stop contributing OR cash out your 401(k) and/or retirement account. Your retirement is long-term investment, and trying to time the market with your retirement is not a good idea. When you see your retirement account balance falling, think about all of the shares you are buying at an extreme discount. And don’t even think about cashing out your retirement account. You’ll get penalized 10% and the IRS will tax the lump sum based on your current tax rate. So, kiss goodbye 25 to 35% of your money if you cash it out. Think long-term. This stock market plunge most recently happened in 2001 and 1987, so it’s not the end of the world.
The answer to these questions is merely my opinion, and make sure you consult a professional, friends, and family before making a huge financial decision.