Home Personal Finance I’m 49 with $133K in my 401(k), but recently lost $25K. Should a pro help?

I’m 49 with $133K in my 401(k), but recently lost $25K. Should a pro help?

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question: I am a 49 year old female with $132,870 in 401(k)s from my previous company around the end of 2022. I was laid off during the COVID-19 pandemic and now have a different job, but I don’t have my new girlfriend’s 401(k). I have her current 401(k) she hasn’t donated in over two years and I’m losing money because so much of it is tied to the stock market. I lost my shirt and pants. I lost over $25,000 and need to stop the bleeding. I am considering moving to a Roth IRA. What do you suggest?

Having trouble with your financial advisor or looking for a new advisor? Email picks@marketwatch.com.

answer: 2022, as you wrote to us, has been a tough year for stocks. So first see if your losses were within normal limits for the year, and then consider how to get professional help with your investments and whether it’s appropriate. In cases like yours, it’s worth the expense. Finally, we weigh the pros and cons of the Roth IRA. (Looking for a new financial advisor? This tool matches you with advisors that meet your needs.)

Landmark Wealth Management’s chartered financial planner Joe Favolito said the 2022 economic downturn “is simply the result of the current bear market and is a temporary but worrying situation.” If he started at around $157,870 and lost $25,000, now he’s down to $132,870. This is a decrease of about 16%. This is consistent with what happened to many investment portfolios in 2022.

“With a balanced stock and long-term bond investment, you can expect these fluctuations. Assuming , it’s within expectations,” said Bradley Nelson, certified financial planner at Point Loma Advisors. (Looking for a new financial advisor? This tool matches you with advisors that meet your needs.)

Favorito added: “There is no reliable way to consistently predict which years will be positive or negative, so you have to keep investing and get through the negative periods.” Did you invest in time for your retirement date?

Is it worth hiring a financial planner?

However, I want to make sure the risk level in my portfolio is appropriate for my age and circumstances. If you don’t feel comfortable making your own decisions, your financial girlfriend’s planner can help. That being said, this can come at a cost.

Talk to a planner who can work with you on an hourly or project basis to get a holistic view of your situation. “The small upfront cost you pay to hire a financial planner can cost you a fortune if you accidentally switch to Ross or make a major investment/portfolio change and miss the eventual upside when the market recovers. It’s far less than the tax impact that could occur.” Jessie. (Looking for a new financial advisor? This tool matches you with advisors that meet your needs.)

Advisor costs per hour and per plan vary by location and expertise, but hourly advisors cost approximately $150 to $450 per hour, flat rate planners cost between $2,500 to $10,000. Expect to be between. There is also the more affordable option of DIY a household. You can do this with the help of a robo-advisor or by learning the basics of personal finance and solving your own problems.

Having trouble with your financial advisor or looking for a new advisor? Email picks@marketwatch.com.

To sharpen your financial literacy and learn about different ways to invest, take Udemy’s free Personal Finance 101: Everything You Need to Know course, Purdue University’s Safe Retirement Planning, and Indiana University’s Risk, Retirement, and Investment Planning. Courses are available online.

Need to convert your 401(k) to a Roth IRA? Need a professional to help you with it?

A bear market is usually a favorable time to convert to a Roth IRA, but there are many things to consider, such as whether you have the funds to pay the taxes that the conversion will incur and how this will affect your taxes. “If you’re in a new job, that doesn’t apply,” says Alonso Rodriguez Segara, a certified financial planner.

“Every dollar converted is taxable income. It may not always be beneficial to convert if you are generating too much income in a year. Depending on how much taxable income you can get without raising too much, it may be more profitable to convert part of your IRA each year,” Favorito said.

Your income this year will help determine whether transferring your assets to a Roth IRA is a good decision from a tax perspective. “Furthermore, moving assets to a Roth IRA does not reduce investment possibilities. Nonetheless, this is a great opportunity to assess whether your investment portfolio is aligned with your risk tolerance, goals and time horizon. ,” says Daniel Miura, Certified Financial Planner at Spark Financials. (Looking for a new financial advisor? This tool matches you with advisors that meet your needs.)

So if you think “Huh?” Experts say you may want to consult a tax advisor before making the conversion. Because transformations are irreversible and the new tax law no longer permits the re-characterization of transformations, i.e. simply reverting.

In general, think of a 401(k), IRA, or Roth IRA as just a wrapper that holds your investment, says Taylor Jesse, certified financial planner at Impact Financial. “It holds your stocks, bonds, mutual funds, and if you own the same or similar funds in a 401(k), if you own them in a Roth IRA instead, the results are pretty much the same. If your goal is to avoid or minimize stock market losses, moving money around will not help, rather changing the type of funds in the account will make a difference.” says Jesse.

Other Considerations: Staying Investing During Tough Times

At 49, he has a long way to go before retirement. Worthpoint Wealth Management Certified Financial Planner Anthony Ferreira Considers Resuming Contributions to Some Retirement Accounts and Rolling 401(k)s into Traditional IRAs to Current IRAs says it should. Donations to the Roth IRA, assuming you are below the income standards. (Looking for a new financial advisor? This tool matches you with advisors that meet your needs.)

The question has been edited for brevity and clarity.

Having trouble with your financial advisor or looking for a new advisor? Email picks@marketwatch.com.

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