Quick question. I enrolled in a 401k last year when I got a new job. My employer matches 50¢ for every dollar I contribute up to 5 percent of my annual salary.. For the past year and a half, I've contributed 15 percent of my income into this 401k. OK, now since the inception of my account, my total return has been -2 percent (YTD is around 20 percent).. I know 401k's have been suffering due to the "recession" or "economy", but here's my dilemma:
I also have a Scottrade acct that I toy with as a hobby. I've been tracking the returns of my Scottrade acct vs my 401k, and my Scottrade acct has seen a 131 percent return YTD and about a 156 percent return (on a total of 20 trades) since the time where I enrolled in the 401k. I have an extremely conservative approach when I trade, hedging losses by placing stop orders if my shares drop more than 5 percent and targeting gains of only 7-8 percent (I had a couple of huge gains last winter thanks to Ford) but for the most part, I average 8 percent returns on each trade .. I've had (IMO) great success growing my hobby acct by using this strategy.
I have already reduced my elections in my 401k, but I am wondering should I cash out my 401k and switch the money to my Scottrade acct so I can have more leverage?
I also have some real estate investments and some real conservative savings accts and IRA. The 401k + Scottrade accts equate to less than 15 percent of my assets.. so I am somewhat diversified already.. I'm just not convinced the 401k is a good idea.. I think I'd rather have control over that money.
Any thoughts?
If you still have the job, this is a non-issue. You can't cash the 401K out unless you quit or are fired/laid off.
If you have lost the job, you can cash out the 401K, but it will be expensive. Not only will you owe the taxes, you will owe an additional 10% penalty if you are under 59.5 years of age.
If you truly believe the 401K has lousy choices and isn't worth the 50% match, stop contributing to it.
If you are no longer employed with the company, you can always opt for a direct transfer. I would call your local Scottrade office to find out how they handle 401(k) direct transfers.