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Everyday Cheapskate: The very nature of investing, no risk means no reward

Dear Mary: This may be the ultimate in stupid questions but it’s been plaguing me for a while. Is there any value in converting my existing 401(k) into cash without removing the funds from my 401(k)? Do they even allow that? I hate losing all that lovely money as things dip and swirl. I would continue to contribute at my existing rate, 12 percent, including the company match of 3 percent for the 401(k). — Symantha

Dear Symantha: Employer-sponsored retirement plans, such as 401(k), typically have a cash option within the list of investments available to plan members. Look for a money market fund. If you move your account assets into that fund (which is perfectly allowable), the money is going to just sit there, not earning. It will be shielded from the wild swings in the market but will begin to lose value because you will not earn enough on your account to even keep up with inflation (currently thought to be about 3.3 percent).

The very nature of investing is that you expose money to reasonable levels of risk with the expectation of achieving a profit or gain. Not all of the choices in your 401(k) plan carry the same level of risk. Just remember that in order to achieve a reward, you must be willing to take a reasonable level of risk. No risk, no reward.

The biggest problem with moving your account into a “cash position” is figuring how you will know when to move it back into investment funds that will give you a chance of achieving a gain. A better idea would be to contact your plan’s administrator and make an appointment to meet with an investment counselor to assess all of the options you have in your 401k plan. This person can help you match your tolerance for risk against the options you have in order to find the most comfortable place for the money you are contributing to your retirement account.

Dear Mary: In a recent column, you said that full retirement age is determined by the year you were born. Where can I find this information? My husband was born in 1954 and I in 1955. Also, can a person continue to work full or part time (mostly for health insurance benefits), and draw Social Security at the same time? Thanks. — Bonnie

Dear Bonnie: Full retirement age for a person born in 1954 is 66. For those born in 1955, the age at which you reach full retirement is 66 and 2 months.

If you wait until you reach full retirement age to begin drawing benefits, you can continue to work without restriction or penalty. If you opt for early retirement at age 62, your monthly benefit is reduced if your earnings exceed certain limits for the months before you reach your full retirement age. If you are under full retirement age for the entire year, you can earn $15,120 gross wages or net self-employment income a year and not lose any benefits in 2013.

If you go over that amount, the SSA will deduct $1 in benefits for every $2 earned above $15,120.

The Social Security Administration’s website, SSA.gov, is quite user-friendly and has the answers to these questions, plus so much more.

Mary invites questions at mary@everyday

cheapskate.com, or c/o Everyday Cheapskate, P.O. Box 2099, Cypress, CA 90630. This column will answer questions of general interest, but letters cannot be answered individually.

Mary Hunt is founder of www.DebtProofLiving.com, a personal finance member website.

To find out more about Mary and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.

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