Is there a place I can put it into a retirement fund and if heaven forbid a problem happens I can take from it without penalty (unlike a 401k)? Where'd you put your money into, just looking for opinions. Thanks!

However, I would recommend you look into the rules and benefits of a Roth IRA.

With a Roth, you put money in post-tax, however, it grows and you never pay taxes on the growth. Some benefits of a Roth vs a 401K or traditional IRA are that you can take out the principal at any time without penalty for any reason. Not that I would recommend this, but it is an option.

Another benefit of the Roth is the withdrawl rules. I don't know them completely, but it is my understanding that there is no minimum withdrawl age and there is no annual minimum withdrawl amount like there is with a traditional IRA.

Additionally, there are also some considerations as I believe at least your spouse can inherit your Roth with minimal tax penlties. I am not sure about willing it to other family members or individuals not related, but possibly. I am sure someone with more knowledge on it will chime in!

So, don't be too hasty in turning away from 401K contributions. If you are concerned that you may need to access money from your 401K before you retire, there are rules that allow you to do that, usually if there is a hardship or to buy a house for first time buyers. The rules are complicated and I do not remember them all. Go to irs.gov and find out.

You pay it back with post-tax dollars so you are taxed on it twice and if you ever leave your company, or worse, get laid off, the balance is due in 60 days or so.

I do agree that a 401K is a great investment vehicle for retirement funds. The limit is $16,500 this year if you are under 50 and there is $5K additional you can add as 'catchup funds' if you are over 50.

Some employers now have Roth 401Ks and you get the benefits of contributing to a Roth, but you can contribute as much as $16,500. It's a very nice thing!

Here is a strategy I have read that makes sense to me:

1) Contribute to your company's 401K until you get the full match (free money!).
2) Contribute to a Roth IRA up to the max.
3) If you can still contribute more, go back to the company 401K for the rest of the funds even if they are not matched as you still get a tax benefit.

Sounds like a good strategy to me!

The below link is an example of a site that ranks the performance of some 401k plans based on peer 401k performance. If your company ranks high, I'd continue to invest even without the match; however, if your company ranks low, I think I'd turn to a financial advisor for advice on good retirement investments. There are other sites that do the same thing, but this is the one I have used.

Good luck.

I actually have my funds in traditional CDs, which often have much higher rates than no penalty CDs but the maturities are staggered such that I have one maturing every other month and if I had an emergency, I would only be a short time frame away from a fee-free withdrawal.

With a Roth, you put money in post-tax, however, it grows and you never pay taxes on the growth. Some benefits of a Roth vs a 401K or traditional IRA are that you can take out the principal at any time without penalty for any reason. Not that I would recommend this, but it is an option.

Another benefit of the Roth is the withdrawl rules. I don't know them completely, but it is my understanding that there is no minimum withdrawl age and there is no annual minimum withdrawl amount like there is with a traditional IRA.

Additionally, there are also some considerations as I believe at least your spouse can inherit your Roth with minimal tax penlties. I am not sure about willing it to other family members or individuals not related, but possibly. I am sure someone with more knowledge on it will chime in!"

I recall reading something about changes with Roth IRA's. Here is the
latest news.

"Starting in 2010, the existing $100,000 income test for converting a traditional IRA to a Roth IRA will no longer apply. Conversions that occur in 2010 will be able to have half of the taxable converted amount taxed in 2011 and the other half taxed in 2012. (On May 17, 2006, President Bush signed the Tax Increase Prevention and Reconciliation Act of 2005 into law. This tax bill included a provision dealing with conversions of traditional IRAs to Roth IRAs.) Since Roth conversions increase tax revenues, it seems unlikely that the previous income ceiling will be reinstated anytime soon.

On August 17, 2006, President Bush signed into law the Pension Protection Act of 2006. This law made permanent increased contribution limits to IRAs (including Roth IRAs) that would otherwise have expired after 2010. It also made permanent the Roth 401(k), which would otherwise not have been available after 2010. For additional information, see the Roth 401(k) Web Site. "

A link that might be useful:

www.rothira.com

A particular person in my life says not to do it because you never know when they will take the Roth away or change the rules. But I think it is too late in the game for the government to do something like that.

There's one in every crowd, right? :)

Thanks for the info!

If you're not going to access the Roth account for at least 20 yrs, then fund the Roth first because the max is much lower than the 401k contributions limit. Then fund the 401k.

If you're within 10 yrs or less to access your retirement money, then fund the 401k to the max, regardless of whether or not your employer contributes. Your bonus is still the pre-income tax dollars, which when you combine Fed and state taxes can be quite considerable. After you've funded the 401k max, then fund a Roth with any extra dollars. 401k limits are $16,500 for ages 49 and younger; $22,000 for ages 50+.

The income limit for Roth conversions is lifted for 2010 only. I think the income conversion limits return in 2011. Roth/Regular IRA contributions are limited to $5K ages 49 & younger; $6K ages 50+, indexed for inflation increases ONLY (in increments of $500) past 2010, unless Congress changes this.

Why It's Time to Retire the 401(k)
By Stephen Gandel
Oct. 07, 2009

Retiree Robert Shively spends his days on the golf course. For many, that would be a dream come true, but not quite in the way Shively does it. The 68-year-old is the cart mechanic at the Niagara Falls Country Club.

Two and a half decades ago, his then employer, Occidental Petroleum Corp., cut its traditional defined pension plan in favor of a 401(k)-type system. So instead of getting a guaranteed pension check of $1,308 a month for his 36 years as a full-time, salaried employee, the former chemical-factory worker receives $225 a month from his 13 years as an hourly employee, plus $180.16 a month from a profit-sharing plan Oxy had for salaried employees until 1994. He also has $70,000 left of the money he saved from his tax-deferred 401(k). On the days he works, Shively rises at 5 a.m. to get to the golf course. He mostly enjoys the job. But on tournament mornings, he has to be at the course at 4 a.m. A few years ago the country club switched from gas to electric carts, some of which have four 84-lb. batteries each. Every year, Shively and another worker have to lift out all the batteries and store them for winter. "Your body aches all over," he says. (Read about unemployment in America.)

This isn't how retirement was supposed to be.

If you have even peeked at your account statements in the past year, it's painfully obvious that something is wrong with the way we save. The tax-deferred 401(k) plan, and others like it, such as the 403(b) and the IRA, have become our nation's go-to retirement piggy bank. Invented nearly 30 years ago as an executive perk �" one more way to dodge Uncle Sam �" the 401(k) was never meant to replace the employer-guaranteed pension fund, supplemented by Social Security, as the cornerstone of our nation's retirement system. But propelled by a combination of companies looking to cut costs and consumers who wanted control of their retirement destiny, that's exactly what happened.

The ugly truth, though, is that the 401(k) is a lousy idea, a financial flop, a rotten repository for our retirement reserves. In the past two years, that has become all too clear. From the end of 2007 to the end of March 2009, the average 401(k) balance fell 31%, according to Fidelity. The accounts have rebounded, along with the rest of the market, but that's little help for those who retired �" or were forced to �" during the recession. In a system in which one year's gains build on the next, the disaster of 2008 will dent retirement savings long after the recession ends. (See 10 perfect jobs for the recession �" and after.)

In what must seem like a cruel joke to many, the accounts proved the most dangerous for those closest to retirement. During the market downturn, the 401(k)s of 55-to-65-year-olds lost a quarter more than those of their 35-to-45-year-old colleagues. That's because in your early years, your 401(k)'s growth is driven mostly by contributions. You control your own destiny. But the longer you hold a 401(k), the more market-exposed it becomes. It's a twist that breaks the most basic rule of financial planning....."

A link that might be useful:

www.time.com/time/business/article/0,8599,1929119,00.html

Dream - I have to admit I had the same general thoughts as bill on the article. And even if you only had $70K, the article even states that most people have recovered quite a bit of the losses by now - so whether that is on $10 or $1M, you've recovered some....

Gandel's article has some relevance in that unless we do a better job teaching financial education, we risk current and future generations of retirees who don't understand how dollar-cost-averaging and compounding are key to their financial security. My DH's pension fund is full of working employees who keep exactly the opposite mix of what is recommended, because they're too frightened of the market to learn how to invest properly. According to the pension fund's own stats, working employees have a portfolio of 80% bonds, 20% stocks, the reverse of what they should have!

The market goes up, then the market goes down. You always know that is going to happen, you just don't know exactly when it's going to do so!

The summer rally has been amazing. As our portfolio is all in mutual funds, not individual stocks, the gain has been only 36% - but the speed of the rise really surprised me. We took some profits, but still have some skin in the game, mostly now in international to take advantage of the favorable currency exchange.

That is a common misconception, but it is simply not true. You are paying back the loan with the exact same pretax money that you borrowed. Here is a simple way to look at it:

Let's say you borrow $10,400 from your 401(k) and put it in a drawer in a desk at home. The money has not been taxed. Then you start paying back the $10,400, at let's say $200/week using the stash in your drawer at home. After one year, you've paid back the entire $10,400. No after tax money has been used. You've simply returned/replaced the money borrowed from your 401(k).

People get hung up on the fact that instead of putting the $10,400 in a desk drawer, they spent it on whatever they borrowed it for, and then paid it back out of their after-tax salary from their paycheck. But as I've already shown, they are just not thinking the process through. The money going back in is the exact same money that came out. It doesn't matter if you had the loan money in a desk drawer or spent it and then repayed it. It is still pretax money.

However, you do pay an interest rate on the loan. My friend says her current rate is 4.5% annually.

Jkom - If you pay interest, don't you pay it to yourself? I thought that was to kind of 'make up' for the lost opportunities I mention above. Or does the company keep that? I don't know anything about it having not ever done it.

I'm not Jkom, but I can answer that for you. Yes, you do pay it to yourself. And it is for the reason that you noted: to make your retirement account whole.