What should I do with my funds if I am unsatisfied with a 401(k)?

I began putting money into a 401(k) this year. I only have about $1,000 dollars in the account. I have been doing more and more research and have decided that a 401(k) is neither a safe nor smart investment vehicle. About how much should I expect to lose if I cancel and withdraw my funds? Would an advisor suggest I do something else, such as transfer the funds somewhere to avoid a severe penalty?

Personal Finance, 401(k)
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December 2016

First, let's be clear that a 401(k) is not an investment, it is simply a type of account. Whether or not it is "safe" or "smart" has more to do with the choices you make in the plan, and less to do with the fact that it is a 401(k). This "research" you have been doing doesn't sound very credible.

If you are still working for the same employer, ask if there are any advisors who service the plan and provide employee education. Talk with someone who understands the specifics of the plan, and then you can make a better decision about whether or not to keep investing.

If you are no longer with your employer, you can withdraw the money. However, you will pay income taxes and a 10% penalty if you are younger than 59 1/2.

You can transfer the money to an IRA account, however, it may be hard to do that without paying a sales charge on the new investment.

Hope that helps.

All the best,


Wyatt A. Moerdyk, AIF®

January 2017
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