Worried about your 401(k) or IRA? Las Vegas Informs Us Again

As often as I have compared having one’s retirement in the stock market to playing in Las Vegas, there are some positive practices that we can use.

Behind all successful players is the concept of money management.  That is, planning and controlling how much of your money as at risk.  Along with that comes knowing when to—as Kenny Rogers says—”hold ‘em” or “fold ‘em”. To push this analogy to the brink, let me add the phrase to, “take your chips off of the table.”  When you are up, don’t let the house get their money back.  The longer you sit at the slot machine or the crap table, the more guaranteed you are of doing so.

Now back to reality.  If your money has been part of the seemingly incomprehensible market in recent years, and actually has seen growth, you may want to exercise the above advice. You may want to keep your gains from disappearing because of—for instance—a war.  But how?

Depending on the terms of your employer’s 401(k) agreement, and usually in all cases in which you have an IRA (Individual Retirement Account), you can transfer some or all of that account to another account.  You can do this usually without incurring any tax penalty, so long as you follow the rules.

The question is: To where?  Going from one mutual fund to another will still expose you to the full power of the market to take back your gains. An alternative is the Annuity.  There are far too many details to get into here, but this is the key difference:  Annuities offer contractual guarantees against loss.  There are still situations in which you can, but you have to try really hard to do that.  The tradeoff for this security is the potential upside.  Gains in Annuities are either fixed to a humble rate or based on a percentage of the gain in a conventional market index, like the S&P.  Again, too many options to discuss.

Certainly, a quick internet search of the subject will yield perhaps thousands of hate-filled articles.  So why bother?  Annuities have only been around since ancient Rome, so they must not work, right?   Perhaps the people making money from Wall Street may not want you to know you have another option.

To offer one more tired adage about putting all of one’s eggs in one basket, if everything you are depending on depends on Wall Street,  are you protecting yourself?