Dear ETR: “Should I cash in my 401(k)?”

“I want to thank you, Michael, for your frank and direct approach to the advice you offer. You are one of the few individuals that I have come to trust when it comes to acquiring the knowledge needed to realize my goal of becoming financially self-sufficient within seven years.

“I have two websites under construction. I am developing a product for one of them, and I am enrolled in the copywriting program from American Writers & Artists Inc. I also want to fund an investment account with an advisory service.

“I currently have $115K in my 401(k) account through my employer, and am very concerned with the future of these savings as it relates to our economy. I am aware that there will be taxes and penalties due if I liquidate this account. At 50 years old, I am in no position to make mistakes with these funds should I use them for funding the additional programs from ETR and Agora that I have in mind.

“My question is: How should someone in my position proceed?

“I am divorced with a young child, 28 years with my employer, and I come from extremely humble beginnings. To say I am very ambitious is an understatement.

“I appreciate any advice you might offer.”

– Caleb Montes

Dear Caleb,

Don’t cash in your 401(k).

If you are worried about the dollar’s devaluation, you can make some appropriate adjustments in your investment portfolio. I can’t give you advice on what to do with that. I am not an investment advisor. I can tell you that I am affected by the dollar’s decline every time I visit one of my overseas clients. It hurts, but it hasn’t caused me to change my portfolio too much.

My personal crystal ball is predicting that the dollar will probably continue to fall. And the stock market will probably come way down in the next year or two. But I’m not worried. I’m mostly in bonds and cash. I don’t need big yields, because about 10 years ago I began to work with several partners to develop little side businesses. It took a while, but there are now about six that give me more monthly income than I could possibly spend. So if the dollar continues to fall and the market crashes, I don’t care.

I’m not bragging. I only followed the advice of people who know investments better than I do. All of these people are on the Agora investment advisory team. (The best in the world.) If you spend time reading a few their free e-zines (there are dozens of them), you will have a good idea of what you should do with your money. You might consider starting with ETR’s own sister publication, Investor’s Daily Edge.

The most important thing, though, is to develop second and third streams of income. You are already doing that with your websites and copywriting. Congratulations.

But if you are spending money on your websites and haven’t yet developed an e-marketing program for a customer base, you may need a little help.

For the ultimate program for Internet success, invest in ETR’s Internet Money Club when it opens up for the “class” of 2009. You can get on the hotlist right now. MaryEllen Tribby tells me this program is the best thing ETR has ever produced on the subject – by far.

But don’t dip into your 401(k) to invest in it. Instead, go out and get an extra job on the weekends. Earn the money to invest in the program. That way you won’t be depleting your nest egg.

Meanwhile, get a copy of my book, Ready, Fire, Aim: Zero to $100 Million in No Time Flat, and read it three times. That will help you ratchet up your side businesses and start bringing in cash.

Start right away. And at the end of 2008, let me know about the progress you’ve made. I am looking forward to hearing a good report.

And don’t cash in that 401(k)!

editor’s note.

[Ed. Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]