How To Put Your 401(k) In Cash

When your retirement money is invested in a really bad market, the first thing you want to do is think about reallocating. Reallocating means changing the portions of your money you have invested in each mutual fund. As you have seen, your 401(K) provider probably lists suggested allocations for your portfolio based on your age, and consists of what percentage your money should be in stocks, what percentage in bonds, and sometimes they tell you a percentage of your 401(K) to put in cash.

But these percentages go out the window in a recession or depression, because you want safety no matter when you are retiring. For the past year, stock prices have plunged. The allocations are probably wrong for your particular risk appetite. And if you call your 401(K) provider or employer, as I have, they will probably tell you, “Stay invested!” or “We feel the allocations are appropriate.”
Well, they really just don’t want you to move your money!

No, you have to learn how to reallocate your stocks on your own – based on a new market, and wait until things change or get better. There is no reason to stay in losing funds when you can reallocate to wait until a change for the better.

Now if you’re thinking of putting your 401(K) into cash, you should understand that that doesn’t not mean taking your money out of your retirement account. this could incur penalties that total a large percentage of your money – so don’t add penalties to your losses.

When you invest in your 401(K) instead put it into cash vehicles. Your broker will offer at least one or two of these accounts, since their plan allows for older workers nearing retirement to move into safer investments. These are the investments you want to take advantage of for now.

For example, if your broker offers a sample portfolio balance for someone within 3-4 years of retiring, use that for the their safest vehicles. some of these might be bond funds (usually government bonds), and some will be savings or money market options.

If you don’t want to take their advice, then see what funds or accounts they do offer, and move the portion of your money you want to protect into these vehicles. this is the way to move your 401(K) into cash, not by withdrawing all of your money. Then as the market slowly gets better, start moving small percentages back to stocks, based on the performance of the stock market. This is the beast way to use cash n your 401(K).