How to Convert Your 401k Into a Self-Controlled Roth IRA ...

What?s Wrong With a 401k

• You can?t buy individual stocks
• You can?t sell individual stocks
• You can?t short the market
• You can?t control your investment at all

What?s Good About a 401k

• Employer Matching (Free Money)
• Delayed Taxation
• What else? Um, uh . . .

Are We in an Up Market or a Down Market? (Duh)

The market looks like it will be down for 9 to 16 months. If you leave your money invested in 401k mutual funds, you will continue to lose before things turn around. If you move your money to your 401k cash equivalent, you might have stopped the bleeding but you won?t gain a dime until things turn around.

That?s the two huge problems with a 401k. You only make money in good market times. And secondly, you can?t buy individual stocks, only sectors (good stocks mixed with garbage).

Solution:

Borrow as Much as You Can Against Your 401k and Open a Roth IRA and One for Your Spouse Too and a Regular Brokerage Account for Any Left Over

• You get charged interest
• You are paying that interest with after tax money
• You will pay tax on that interest again at the time you withdraw it.

But So What. Here?s the Arithmetic:

You pay 5% interest but it goes back into your own account so that part is your own money. You took money out of your pants pocket and moved it into your 401k, so that?s just your money shifting around. No cost.

You paid that 5% with ?after tax? money. If you?re in the 30% tax bracket, then 30% of 5% is only 1.5%.

When you retire and withdraw your money, you?re going to pay tax again on it. If you?re still in a 30% tax bracket, that?s another 30% of 5%, which is still only 1.5%. The two 1.5 percents add up to an out of pocket cost of only 3%. Pretty cheap loan. Better than losing 50% due to no fault of your own.

Of course you need to check with your 401k Administrator or HR Department for your plan?s specifics. Make sure of the interest rate. Make sure you can pay it back early in a lump sum, if you want to, etc.

Roth IRA as Opposed to a Regular IRA

A Roth IRA allows for you to withdraw your ?deposited? money without interest or penalties. This is because you deposited ?after tax? money into it, so you can get it back with no tax ramifications. Not so with a regular IRA. Nice to know you can use that, if your 401k loan payment makes things too tight.

Conservative Strategy: Buy Low, Sell High

With IRA?s you can buy individual stocks. So build a nice collection of great companies that are having half off sales right now. You know they will be around for a long time. You know who they are and you know who they aren?t. The ones showing up in Washington saying ?I don?t know what I?m doing. Give me money to make up for it.? are not the great companies. The companies you buy from everyday are probably the great companies.

Buy real gold. I don?t mean gold coins and I definitely don?t mean gold stock. Just little pieces of actual gold metal you can save in your safety deposit box. If the economy gets really bad, you clip off a piece and take it to a dealer and say, ?I?d like a month?s worth of groceries, please.? So your 401k turns into a stash of real, tangible gold.

For the More Adventurous:

Short the market. You know the whole market is going down. You know there?s a lot of companies suffering. You know there are a lot of lousy companies out there barely hanging on. The tidal wave is still crashing in. Bet that their stock will go down and make some cash on it. This you can do in an IRA.

You can trade options in an IRA. Learn about options. Work your way up to knowing what you?re doing with a few thousand. Then generate cash that you will use to either short stock or buy stock you want to hold onto. My website has a link to the best options trainer I have ever seen. For about $29 a month, he will take you safely, step by step showing you everything you need to know about safely trading options. His name is Dr. Stephen Cooper. But no matter what, you should be in control of your own investments.

Related posts:

1. Roth IRA Investing ? A Review of Three Types of Instruments For Investing IRA Funds
2. Peaceful Wealth ? 5 Reasons Why You Should Convert to a Roth IRA
3. 401k Hardship Withdrawal ? Smart Way to Withdraw Funds From 401k Savings
4. What Should I Do With My Old 401K?
5. Why Penny Stock Investing is a Risk

Source: http://www.topdocumentinformationlisting.info/homeandfamily/how-to-convert-your-401k-into-a-self-controlled-roth-ira/

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