Experts Answer Your 401(k) Questions

Oct. 11, 2008 — -- For thousands of Americans, the current economic crisis has taken a toll on carefully laid retirement plans.

Now many are wondering what they should do with their money -- especially their 401(k)s. To answer their questions, "Good Morning America" invited three financial experts to appear on the show today and give their opinions on the best course of action to take.

Ron Leiber is the "Your Money" columnist for the New York Times and the author of three books, including the Times best-seller "Taking Time Off."

Laura Rowley is a columnist for Yahoo! Finance and Dayana Yochim is a personal finance advisor at The Motley Fool.

Ron Leiber: Definitely do not stop contributing.

"As far as the allocation goes, if you move away from stocks right now, you run the risk of essentially selling at the bottom or close to it. You may not have the courage to move back into stocks until the stocks have already run back up again."

Laura Rowley and Dayana Yochim: It depends on debt, job security and retirement timing.

Rowley: "The one thing you have to analyze is 'Do I have an emergency fund -- three to six months' worth of living expenses?' Maybe you can contribute to a 401(k) to get a match that's offered, but pay off high-interest debts also."

Yochim: "For people close to retirement... you may want to take enough money out of the market for the next five to ten years with the low-risk tolerance. But the thing about the 401(k) is that you're putting money away that is pre-taxed. Also, with an employer match, you're getting free money which is hard to come by. If you're nearing retirement, remember, you could have 20 or 30 years left to live, and you want to let compound interest be on your side. You want your money to continue to grow."

Dayana Yochim: Yes, at least until December 2009, when the $250,000 insured limit may revert back to $100,000.