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Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55717
Experience:  29 years of experience as a tax, real estate, and business attorney.
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I am 49 years old and have about $500,000 in my 401k. I also

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I am 49 years old and have about $500,000 in my 401k. I also have an indemnity pension that more or less is the equivilent of what social security pays. I also have a paid off 2 family investment property along with an investment townhouse that is a little over half paid off. Single, never married, no kids.

Here is my question. As you know in 2007 the stock market S and P plummeted down by 50%. While I lost half my money I didnt panic. Quite to the contrary I kept putting more and more into the 401k. When the market came back I rode the wave all the way to where I was before and then some.

Here is what I was thinking I should do. Remove my 401k money from stock funds and put them in cash. I do believe we are headed for another crash. After the crash takes place, put all my money back into the 401k s and p fund and ride the wave back. What do you think of my idea? If you dont like it please advise. Right now all of my 401k savings is in the s and p 500 fund.
Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good morning. If you think a crash is coming, I would definitely take the money out of the stock market and put it into a money market account. I will tell you it it difficult to time the market, and you do have time for it to recover again should it go down before you'll need it....just like the last time. The real key is how much you think you need for your retirement...something called "critical mass." Once you reach your critical mass, then you don't want to take further risk because you have the money you need and the reward for doubling that amount is not worth the risk of having the market crash and cutting it in half; but, if you are well-short and you have a good while until your retirement, you will need a higher rate of return than a money market will provide, so you will need it in the market over time. But, again, if you are sure it's going to crash, then I would take it out for a bit and wait for the correction at which time you can then re-invest it.

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Customer: replied 4 years ago.

I was only gong to switch to the money market for a year or 2 while waiting for "the crash" to come. If I kept the money in the s and p 500 and the crash came like last time, my half million would be down to 250k. On the other hand if I remove it from the s and p 500 and do the money market thing, I will keep all of my half a million. When I invest it into the now decimated s and p 500, I will make money when it rises. I dont see what my risk is since I am doing this for the long hall. What do you think?

Thanks so much for replying. I totally understand your thinking and don't disagree; your risk of course is that the market does not actually go down in the two years, but goes up and you would lose out on the opportunity to turn your 500k into 1 million.
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