Advise on my 401K please

**alarosalpn** · 07-15-2008, 12:09 AM

ok, so I work or worked for the company that had made the front page news and was all over the news on TV-Haven Health Center.
Well, the good news is that our building was leased and the owners decided that we weren't going anywhere. The name was changed and we are now an independent company all of our own.
Here's the problem. Our 401K plans are frozen until Haven Health center is resolved and everything is closed- no more Haven Health.
We can't get to it even if we needed it in an emergency.
When this lifts, what should I do? Should I pull it out because of the economy or leave it be? We're not even sure if we are going to have 401K with the "new" company. They are still taking $$ out of our pay every week for it. Should I stop that for now?
I don't knwo what to do? Any advice would be appreciated.
Thanks

**brainyblonde** · 07-15-2008, 06:16 AM

If they terminate the plan, you can roll your money into an IRA account without incurring any penalties or tax implications. This is what I have done.

If you take a lump sum distribution (without rolling it over) and you are under age 59-1/2, you pay a 10% premature distribution penalty plus will owe taxes on the lump sum distribution amount. Generally, the employer withholds 20% for Federal taxes from the distribution amount so you will get a lot less money. Not a good idea.

As long as the plan is still active, there isn't much you can do. The IRS governs 401k plans, and the employer has to follow the rules or risk disqualification of the plan and major tax issues. Ask HR if you can stop contributions. Generally, that is an option.

**Greebo** · 07-15-2008, 06:24 AM

First of all, if you pull the money OUT of the 401k, you will be hit by major taxes and penalties, so do not do that!

Secondly, yes, stop contributions, NOW!! Unfortunately, it sounds like there is a risk your money may be going into a black hole. I could be wrong, I don't know the details of your company - but either way, if the accounts are frozen, DON'T ADD TO THEM! 401ks CAN vanish (illegally but it happens) - think Enron and Worldcom.

Thirdly, I'd suggest you go to Dave Ramsey's site and find an Endorsed Local Provider on Investing and meet with them to discuss your situation.

I *suspect* the best thing for you to do, once the money is freed up, is get out of your company 401k and roll the money into a private investment plan with a solid, reputable company.

In the meantime, since you're going to stop contributions to the 401k, you can open up a Roth IRA, invest it in good, long term growth stock mutual funds, and put up to $5,000 a year into the Roth. The money in the roth goes in post-tax, so its growth is tax free.

Again, HIRE AN EXPERT! That referral link should take you to someone who can educate you and has the "heart of a teacher", not the heart of a salesman.

**alarosalpn** · 07-15-2008, 10:56 AM

I will call the HR woman. She is leaving the company too. ALOT of people are leaving now that we are independent.
If you haven't heard of my company you can search it at Hartfordcourant.com
The owner of the company-Ray Termini- embezzled medicare/medicaid money to buy personal things and to start a recording company that signed on Travis Tritt. To my understanding Travis Tritt has a law suit against the guy too!
Attorney Blumenthal got involved and the State of CT was going to take receivorship if the 25 homes didn't sell. we had 2 prospective buyers which both pulled out. Finally the mortgage holder agreed to keep it with our administrator running the show. Haven Health is sold but until everything is finalized in bankruptcy court our 401K's are frozen. We have asked what will happen to them and they say that the money is ours because it is the law- we just have to wait because it's part of Haven...

**alarosalpn** · 07-15-2008, 04:17 PM

My 401K is through John Hancock. Do you think I could keep it thru them or should I move it all together to someplace local?

**Greebo** · 07-15-2008, 04:27 PM

Oh I think John Hancock is a pretty reputable and reliable company. I doubt there's any risk in that case of you losing the money.

**brainyblonde** · 07-15-2008, 08:32 PM

Originally Posted by alarosalpn

My 401K is through John Hancock. Do you think I could keep it thru them or should I move it all together to someplace local?

John Hancock is a solid, reputable company. They are a subsidiary of Manulife Financial which is the 4th largest insurance company in the world. I wouldn't be concerned about the safety of the money in that respect.

**brainyblonde** · 07-15-2008, 08:40 PM

Originally Posted by alarosalpn

I will call the HR woman. She is leaving the company too. ALOT of people are leaving now that we are independent.
If you haven't heard of my company you can search it at Hartfordcourant.com
The owner of the company-Ray Termini- embezzled medicare/medicaid money to buy personal things and to start a recording company that signed on Travis Tritt. To my understanding Travis Tritt has a law suit against the guy too!
Attorney Blumenthal got involved and the State of CT was going to take receivorship if the 25 homes didn't sell. we had 2 prospective buyers which both pulled out. Finally the mortgage holder agreed to keep it with our administrator running the show. Haven Health is sold but until everything is finalized in bankruptcy court our 401K's are frozen. We have asked what will happen to them and they say that the money is ours because it is the law- we just have to wait because it's part of Haven...

What a mess! I wonder how long it will take them to sort it all out?

**brainyblonde** · 07-15-2008, 08:52 PM

Originally Posted by Greebo

First of all, if you pull the money OUT of the 401k, you will be hit by major taxes and penalties, so do not do that!

I *suspect* the best thing for you to do, once the money is freed up, is get out of your company 401k and roll the money into a private investment plan with a solid, reputable company.

The only ways you can get money out of a 401k plan under age 59-1/2 while still employed are:

Hardship withdrawal (defined by IRS regulations)
401k Loan (if the plan has a a loan provision)

http://www.irs.gov/retirement/sponso...151926,00.html

**alarosalpn** · 07-15-2008, 09:54 PM

Is being 2 months behind on your mortgage considered a hardship? If so, then I'm in! But I really would like to leave it there. I've been through this before and I know I can get through it again.
The reason for being behind is that during this whole mess, they cut all overtime. They made it a point to use perdiem,part time, free float supervisors or salary staff before giving anyone overtime. This hurt us bad, obviously. The only difference this time with being behind in the mortgage is that it's the only thing I am behind in, so it shouldn't be that bad. I have a weekly payment system that I worked on the last time I was in this predicament and so far it has been successful with the exception of the mortgage. But, I'm strong and will pull through.

I'm not that worried about it. My vacation is coming up in 2 weeks and I plan to have a tag sale for 3 days. That money will help. I'm gonna sell alot of our stuff just to get up some money. I may not even have to get a repayment plan.

I should have $1800 buy the end of the month so I only need $1100 more to pay off the 2 months. I'd be happy if I could pay off most of it, if not all of it so the repayment plan won't be as high or as long and things will get back to normal. Also, I have it set up at work where they will call me to come in while on vacation so I will get paid vacation time and hours worked. Extra money! so between the tag sale and working while on vacation I should be able to do it.
I've listed things on Craigslist and CTgarage.com but no takers.
I did sell a bunch of books though! I have to go to the post office tomorrow to see how much shipping is gonna be(her expense @ her request)so we can finalize the transaction.
That's an extra $70!!

**Greebo** · 07-15-2008, 10:26 PM

Originally Posted by brainyblonde

The only ways you can get money out of a 401k plan under age 59-1/2 while still employed are:

Hardship withdrawal (defined by IRS regulations)
401k Loan (if the plan has a a loan provision)

http://www.irs.gov/retirement/sponso...151926,00.html

Well at the time I was thinking she meant that the 401k company would be liquidated, which would mean she'd have funds that would need to be rolled over or penalized, but hardship disbursements can still be taxed heavily.

**Greebo** · 07-15-2008, 10:27 PM

And yes:

Payments necessary to prevent the eviction of the employee from the employee’s principal residence or foreclosure on the mortgage on that residence;

You CAN do a 401k withdrawal to avoid foreclosure. But if you can avoid it, you should.

**Greebo** · 07-15-2008, 10:29 PM

Grr - someone broke the permissions again...wanted to edit the last post. Can't.

What I *would* do right now is stop making any 401k contributions so you have more money available to get current.

Not much point investing at 12% if you're risking getting foreclosed on and losing a house.

**Gabe** · 07-15-2008, 10:57 PM

Originally Posted by Greebo

Grr - someone broke the permissions again...wanted to edit the last post. Can't.

What I *would* do right now is stop making any 401k contributions so you have more money available to get current.

Not much point investing at 12% if you're risking getting foreclosed on and losing a house.

You can thank Sara for that!
Grrr!

**alarosalpn** · 07-16-2008, 12:08 AM

Greebo- thanks for your knowledge. I knew you would reply!
Thanks to everyone else also! I appreciate your advice!
As for the 401K, I have been with this company for over 6 years now. I just signed up late last year. I contribute only 2% because of our financial situation but felt that any contribution is better than none. I didn't want to be left with nothing when it comes time for me to retire-which at this point isn't for way after I'm supposed to-but HEY! That's what getting current and following Dave Ramsey is about, right?
I don't want to close it since I think I only have about $1000 in it right now anyway so after the penalties and taxes it wouldn't be worth it. However, I will stop contributions at this time. The way the HR person explained it is that, with contributing it actually lowers my tax bracket since it is pretax dollars...
Just one more question... With the market and economy the way it is... IS it safe to have a 401K? ISn't there a huge risk of loosing everything? I'm only 31 so I know that I have many years for it to regrow and I do have the risky one (there were 5 choices from lowrisk to high risk. I took the one that is right below the highest risk) Should I not even think about that and just go with the flow? I'm really not knowledgable in this area which is why I chose to go with one of the plans that John Hancock had and not pick and choose my own options.
Sorry for being so stupid with this. And thank you for all your help.