Don't Panic: The Market Will Recover

Posted: Nov 24, 2008 12:01 AM
Don't Panic: The Market Will Recover

DEAR BRUCE: I left my 401(k) with my former employer, as it seemed to be performing well. However, I am 54 years old and, examining it more closely, I saw a couple of $800 losses (quarterly) in a three-year period. I haven't called the company, thinking it might say anything just to keep my money invested. The 401(k) had almost reached $80,000. My wife says to sit tight, the economy is tough, and may get worse before it gets better. But she withdrew her $60,000 for her 401(k) a few years ago, and has no retirement money, plus we got hit hard with the penalties from the IRS. Should I contact my banker and roll the money into a no-penalty CD to gather interest? It's better than a loss. -- R.M., via e-mail

DEAR R.M.: My mailbox is full of letters similar to yours. Your 401(k), self-directed IRA or regular investments have taken a hit. Welcome to the real world. Your wife is correct, however -- the economy is tough. You may have an option at certain times to withdraw this money and if you feel more comfortable taking it out of the market, you may wish to do so. If you put the money into a CD, you will just barely stay even with, or a little ahead of, inflation, but your capital will remain intact. On the other hand, when the market recovers, you'll be the beneficiary and the money locked into a CD will not grow. My inclination would be to stay put. While the market may or may not be close to bottom as these words are written, it is going to recover. At 54, you likely have 10 to 15 years before you will need this money, and most observers think the market will recover long before then.

DEAR BRUCE: I hired a company back in 2004 to take care of my taxes. A former employer recommended them, and I recently discovered that they never filed anything; now I have 30 days to file three years of taxes. What can I do? -- R.W., via e-mail

DEAR R.W.: Find a competent CPA or an enrolled agent who will file amended tax returns. Whether you would have an action against this company is a matter yet to be decided. First, file those amended returns. Did you owe taxes? If so, the taxes (plus interest and penalties) will have to be paid.

DEAR BRUCE: My dad is getting divorced very soon. He and this lady were only married for five years. My dad resides in North Carolina. They have no children together; nor do they own property together. The property they lived on is in her name. He receives a monthly Social Security disability check. Will his ex-wife be entitled to any of that money? -- Concerned Daughter in New York

DEAR CONCERNED DAUGHTER: If this is your dad's only income, I believe his ex-wife will not be able to put an attachment on it. If other assets exist, acquired during the marriage, these would be subject to some type of distribution. She owns the residence and likely acquired it prior to their marriage; he would have no interest in this. At the risk of sounding like a broken record, it is essential that both parties have legal representation during a divorce.