I became an Excluded Employee (because I went to work with a foreign affiliate of my company) and was given an 30-day mandatory option to rollover my 401k funds. I rolled in over into an IRA (under my control, much happier and doing so much better!).

. . . and a year land four months ater I returned to the states, rehired with the U.S. Affiliate and now the plan administrator says they made a mistake and want all the money back, plus earnings. Do I have to? I don’t want to.

Even though a Direct Rollover was done, I am willing to pay the taxes and penalties if I am allowed to keep the money. fully vested money. 15 years on the job.

My employer stopped contributing to my 401K almost 2 years ago. I have been given the same answer that everyone else has been given….. not allowed by the IRS….period.

They claim they added options to lower the risk.

But I am looking to invest it in CEF’s that pay monthly dividens from within an IRA. So my money is still in a tax defered IRA and making dividens that are in government municiple CEF’s that are tax free.

Now there are other CEF’s that I am invested in that draw a higher than usual dividens but they are not tax free. But they are good high paying investments through Nuveen, Alpine, Dreyfus, and Cornerstone. My 25K from my 401K will draw about 400 a month from CFP.

So is my employer stopping contributions a qualifying event?

The company says that the IRS will not allow this….blah blah blah. It is actually the company or the plan administrator that will not allow this.

For all of you folks convinced this (early withdrawl) is a bad idea, let me show you about time value of money (there is more that you didn’t learn in finance class):
Say I lose 25%, because I am in the 25% tax bracket. Now I have 75% left. Well, I would also pay that money if I had earned it anyway. So, to me, that value is not lost. It was actually never there! It is the cost of earning money in the U.S. Financial advisors love this to use this to their advantage.

Next I would lose 10%. Okay, consider that a penalty the IRS mandates. I’m okay with that too. There is a cost of doing business and Uncle Sam set this up. We all know by now early withdrawls, with no “okayed reason” will face the 10% early withdrawl period. Got it!

Now I am down to 65% left. Some states require money for their coffers beyond this. For this example, we will say that the state requires 5%. So now I am down to 60%. Oh no!! Most of you advisors fear this…….well fear not! Because I would still be at 70% if I actually was being paid that through my current earnings anyway!! Tax law 101: All income is taxable unless otherwise stated by law.

So next the company says, no Mr. ____ you can’t have it, it’s not legal. Bull *&%^! What the company is failing to say is that “this company/this plan adminsitrator does not allow it until retirement, death or any of the previous mentioned reasons. We are smarter than you and this is how we make money. We tie up your money for 20-40 years and as long as you are employeed hear, your stuck buddy!…..we will use the IRS rules as a guise, but we seek to make money by controlling you/your money! See as you plan administrator, we pay….I mean have a great relationship with your company. They agree with us that you can not have your money and we will just say the IRS doesn’t allow this. But the IRS actually does. The only way you can have your money now (pre-retirement) or under any other defined distribution, is for you to quit us. Then and only then can we not hold your money hostage……as defined by our own predtermined rules and greed (that we never disclose in the beginning.)”

“A bird in hand is worth more than two in the bush.”

About time value of money, you finance majors understand this! For simplicity purposes, if someone has determined their 60% is worth more today then the 70% will be down the road, based on their own situation and calculations, yes, it may be wiser to take the money NOW so that they can invest more in the future. For me, I wanted to take my money now. That would allow me to pay off a car note NOW, become debt free over the next 16 months and return to investing more, lets say 15-35% of my income, after I am done. But, my plan administrator says that I can not unless my employment is terminated.

Therefore, I am considering just that. Oh, more info: you business majors will understand this.

Say you are going to invest in a foreign country. Since we have historically lived in a great country, no one has ever considered that you must consider how stable the country must be before making a wise investment decision. Well, with current days and situation, that is exactly what I am questioning at this time. I want my money so I am can pay off ALL of my bills, erase my retirement – or risk loosing this money in a situation where we have radicals changing the rules day by day to fit their political agenda. That is, I work in healthcare. I think this industry & country is facing drastic cuts to it’s working force in the days ahead under the radical progressives in leadership. (Progressives only understand power and control.) They have already laid the groundwork to pretty much mold this industry over the next 5-8 years. Therefore, for me and my house, my situation is stable today, but no one can say that I will be in the same position or better in 5, 10, 15, or 20 years from now. Therefore, that is why I am positioning my household to live off the land, if needed, starting before the healthcare industry is changed forever beginning in 2014.

Why I am willing to give up the 10% extra today? Some of you intellectual advisors are trained to tell people “no, it’s a bad idea.” But, I say to you, you don’t have much street smarts.

That is, when the current President’s people are saying that “Chavez….in Venezula……we saw an incredible revolution…..” you better look out! No matter your political agenda, I would consider that “fine print” if I were considering a contract with these people. Better, you better prepare for the worst and hope for the best. That is what I am doing. If I am wrong, well then the next 20-30 years of me investing is simple CD’s at a rate of 15-35% will be enough to make up the difference for retirement.

Some bozo’s will think I am paranoid, but you must ask your own self “are their any red flags in todays market?” My answer to that is “yes, probably more red flags than not.” Next, you must ask “if I was 34 yo and not retiring until I am 65ish, can I trust that my money will be there……………?” Uh, ……do I need to answer that? wind back the clock, study history. 10 years ago I would have said GE would be around for forever. Look at the market cap today compared to then……….(I hear crickets chirping). No matter your political motivations……….look across each industry and think about companies you have considered stable in your lifetime………..GM, Dell, Microsoft, Steel companies, oil companies, Chrysler, airlines, healthcare, etc. I bet the workers in GM in the 60′s would have been singing about their their future…..sure, they got to retire. What about their workers in the 80′s….the 80′s looked bright……a lot of those workers were probably thinking different in 2007, if they were closing in on retirement.

In strategy class, a few years back (2006), one of my friends turned in a paper on GM and about how it should go forward….a suggestion of it’s strategy. That paper, he failed….why? Well, he advised that the company would enter into bankruptcy, no matter what. The proof was in the numbers. The instructor wrote to him on his paper “GM will never fail….IT IS AMERICA.” Good thing, that student didn’t learn everything that the instructor taught. I hate that GM failed, but that attitude is resonated across this land. Capitalism, to me, is paper……..just like your 403, 401, 457, or 4whatever. Kind of like the statements that were sent out in those Ponzi schemes. One day it will fail….but hopefully the bottom of the pyramid will keep growing.

Can you cite your source in the IRS code for this statement? If true, this would be a great boon in my particular case.

During that time, while the aforementioned 401k change is taking place, I will be ‘unemployed’ due to a temporary lack of work – I will be expected to file unemployment to qualify for assistance from my employer, so, if the state says I am unemployed, I am unemployed in a legal aspect, right?

I can figure the company match fairly easily, and I know what I have put in, so the remainder would be earnings, right? Are “company match” and “earnings” air-tight transferable? Why not the whole thing during the period of time I could argue that I am unemployed – no contributions being made/matched in my 401k?

If you would like help on seeing if your company allows for “in service distributions”, just let me know and I would be glad to discuss it with you. Imagine being in a product where your prinicpal is safe, and you only take part in the market gains, not the market losses.

Whether you should move your money to one of these more stable accounts is a different question. I don’t know you so won’t give you advice.

I’m a fee-based 401(k) consultant that works with a dozens of plans around the U.S. and has a low tolerance for hucksters. My warning — as one with nothing to sell — is this: Beware those who are encouraging in-service rollovers out of 401(k) into IRA’s. Bad guys are preying on frustrated investors right now and they do not care about you. They will probably also tell you that they had all their clients bet on the Giants in the 2008 Super Bowl. Stay in your 401(k) plan and see what advice services are available to help you make no-nonsense investment decisions from this point forward.