Remainder of Simple IRA - convert to cash or leave in market?

[technologiq]

I have a very small amount (currently ~$5K) sitting in a SIMPLE IRA that I have had for several years.

With Wall St. facing some impending bad news I'm wondering if I should convert this to cash now since its got a decent worth right now and IMHO I don't see the market getting any better (but I do see it getting worse)

If I convert to cash but leave the money with that financial instution, will I take an IRS penalty on it?

I know if I withdraw the money I will get hit with 10% penalty but I'm wondering if it just makes more sense to turn into cash and let it ride the market out.

Any advice would be greatly appreciated!

[bjl584]

How old are you? When do you plan to retire?

If it is not anytime soon, then you can afford to ride out any market crashes, swings, or corrections.

Trying to time the market is basically a losing battle. Invest for the longterm, not for day to day stock market flucuations.

Remember 2008? You may have taken a hit, but if you rode it out till the present, then you probably would have gotten all of your money back and then some.

If you plan on retiring in the next year or two, then converting a portion of your portfolio to cash or something safe is a good idea, but you didn't provide enough info for me to know your situation.

[Petunia 100]

Guessing when to get in and out of the market is a sure recipe for subpar returns. Instead, put your money into low-cost broad market indexes and allow time to work its magic (growth of your principal).

How is your money invested and how much is your custodian charging you? You have the ability to roll that money anyplace you please, so make certain you have a low-cost custodian and a reasonable asset allocation. If you are uncertain if you have these or not, I suggest rolling your 5k to Vanguard and choosing an appropriate target retirement fund.

[technologiq]

I am 33 and right now am looking to retire at the usual 65 if nothing changes.

Everything with this IRA is in FFFDX. I did take a hit in '08 but I'm not that close to where it was before which is what concerns me if the market dips.

I pay nothing to Fidelity now and they won't charge me if I convert to cash apparently.

My fear is this - I'm putting my wife through nursing school (only 6 mo' left!) and support a family of 5. While I don't need the money now my fear is that I WILL before she is done with school and would hate to see a dramatic drop if the market shifts. I also worry that in the near future (next 10 years) that the market will not even remotely stay where it is today.

Maybe I am just scared and trying to time the market but on the other hand I don't want to regret that I didn't pull my money out of the IRA while I had a chance.

[Petunia 100]

Is this 5k all of your savings? If so, I suggest you try to save what you can in an online bank savings account, just in case you need it.

You could go to cash inside your Simple IRA, and guarantee that you will lose ground to inflation.

You could cash it out, pay income taxes + 10% federal penalty and possible state penalty. (My state assesses a 2.5% penalty.)

But this is long-term money. You aren't going to grow it if you do either of these things.

I didn't know what FFFDX is, so I looked it up on Morningstar. I see that it is Fidelity Freedom 2020. That's a conservative fund for a 33 year old, but if that is your comfort level, there is nothing wrong with that.

Do you have a good handle on your budget? Do you know where all of your money is going? Do you have any expenses which could be cut or reduced in order to build up some cash savings?

Is the job market good for nurses where you live?