Hello.

I am totally sick of my 401K fund losing 40% a year. Even now I have almost $75,000 in my 401K account left. In the last few years, I have been doing some studying of investing in stocks and I have been doing better investing in the market (percentage wise) on my own partly because I am allowed to short the market and the fund managers don't get paid on performance, but only on how much money is actually in the acccount. This compensation method is not good for my wellbeing, but very good for fund managers, and I am now convinced that this is just another giant ponzi scheme cooked up by the fat cats with fancy suits and $500 haircuts. So my question is, can I extract all of my money left out of my 401K if I then put it in an account that lets me buy and sell stocks and manage it myself with out penalty?

If your 401K is controlled by your employer, most likely the employer won't let you do anything until you leave employment. Once you leave, you can rollover your 401K into an Individual Retirement Account without penalty or taxes. If you roll it over into a ROTH IRA, you will have to pay taxes on the money you rollover. There are many reputable companies that will let you rollover your accounts. Fidelity Investments, Charles Schwab, Ameritrade, A.G. Edwards and Scott Trade are just a few. If you have suffered like almost everyone in the markets, not to worry. Unless you need to money within the next three to five years, putting it in investments that will do well when the global economy recovers will get most, if not all, of your losses back. Growing countries need lots of infrastructure commodities like steel, copper, aluminum, iron ore, etc. as does the United States when it starts rebuilding bridges, roads and highways, etc.

Of course when the funds were making 15 plus percent a few years ago, not one thought they were any type of schemes. And the markets are starting to show improvements.

A lot will depend on how you requested your funds be invested.

You may not like part of what I'm going to say, but if you can make it to the end, there's some stuff you may want to hear.

You sound a bit like a rich-people hater. Well... rich people put money into the economy so you shouldn't hate them. They employ people and/or put their money into investments which allow other companies to run and employ people, and they spend money. Basically, unless they are literally hiding it under their mattress or something, their money is going back into the economy, which helps everyone. Yes, everyone. The economy is a giant symbiant being that you can't rip apart and separate out.

Not to mention that not all rich people are getting $500 haircuts and taking advantage of other people. (And someone else is making a living off that $500 haircut, no?) You only hear about the bad ones. (Just like you only hear about the bad corporate conglomerates.)

Stop blaming everything on them.

Granted, some fund managers and brokers are making money off the size of their investments, or by selling the "investment of the week" or whatever. The better brokerages have lower expenses and fees. A 401k probably has more opportunity to have some hidden fees, but it doesn't mean that it does.

Question: do you think your 401k is the only thing that's down by 40%?? I have two IRA's, of MY choosing, that I have total control over and have it invested where I want it (which is all mutual funds of various sorts), and my portfolia is down just like yours is. Some of them as much as 60%. We're ALL tired of looking at the "losses" on our money.

Important lesson: you have no loss unless you sell it.

OK, lectures aside... Plans are different. You may have more or less control over what happens to your 401k. It's your company you should be checking with on that. We don't know your plan.

I'm not aware that an employer can make you contribute to your 401k. They can put limits on it - the tax laws put limits on it. But as far as I know, you don't have to contribute to it. It may be to your employer's advantage to have you contribute, but I don't think you're required to. Now, what laws may exist about you rolling over what's already been contributed, I don't know. You're allowed to do it if you leave, but I don't know about if you stay.

You'd have to check into whether you can stop contributing to it. I tried to find this info, but couldn't find that specific info, or at least not in the amount of time I had available to do a little googling. Considering that you don't have to contribute to begin with, and that you have options about how much, etc. I don't personally see a good reason why you shouldn't be able to stop.

If you are allowed to roll it over or ever leave the company and want to do so, there's plenty of brokers who can help you do this.

But... if you've made it this far... you also need to consider the big advantages of having that 401k. I think you're too busy blaming everything on the fat cats and thinking you're the only one losing money to think about the advantages.

One, is your employer contributing to it? If so, that's free money. Even if the expenses are higher than, say, going to Fidelity and getting yourself an IRA and sticking it into a low-expense index fund, you're more than making up for this with the employer contribution of free money.

Second, depending on how much you're contributing, you may still be able to get an IRA in addition to the 401k. As with everything, there's limits on these things. I don't know the details cause I don't know 401k's well enough - I only know the IRA limit is $5000 ($6000 if 50+). The 401k limit is higher.

If you want to invest right, get your emotions out of it. Look at the advantages a 401k offers, and take advantage of what you can. Anything contributed recently is being invested at some really good prices! I wish I had some extra available money to invest right now.

A few thoughts that, hopefully, will help you sort this out. I pretty much agree with everything that others have posted, so please consider this as additive rather than counter-points.

1. I doubt that you are losing 40%/year. Like most of us, you've seen a big drop in your 401k asset value over the last couple of years. But, as Morgaine says its not a loss until you sell and - like most people - you are looking at a drop from a maximum value that was probably much greater than your contributions + your company contributions + a "reasonable" interest rate over the time involved. We all wish we could have read the peak and cashed out then, but I, for one of several hundred million people, was sitting there fat dumb and happy and fully believing it would continue going higher. -- Serious point: If it is important to you to look at your paper losses, look at actual contributions vs current value. I don't think it will look so bad -- particularly with the market apparently starting to recover.

2. Your comment that you have been studying the market for a couple of years and can do better scares me for your welfare - particularly when you talk about shorting the market. I'd feel better for you if you told me you had studied Texas hold-em poker for a couple of years and were sure that you have figured out how to win consistently.

3. Question: Is your 401K with one of the big guys, or a little local finance office. The small ones have a tendency to put people into load funds (where they get a commission). The bigger ones at least make no-load funds available. Of all the 401K options that I know of, I prefer Vanguard. But, that's your emplyers choice not yours.

Have to spread the rep, but..

Comment #2 - good point and I totally agree. I missed that shorting the market thing. Spooky.