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Lost Your Job? Here's What To Do With 401(k)

If you lose your job or you leave your job (not something I'd recommend right now--this is a cling to your employer moment) and you've got some money in a 401(k) plan, should you roll it over into an IRA? The conventional wisdom says yes.

But these are unconventional times. With the market getting killed almost daily, you could probably wait for a better moment to invest in your retirement account. If we really are heading into a depression, remember that the market didn't bottom during the great crash of 1929, although there was an interim bottom with the Dow at 198.6 in November of 1929, it bottomed in 1932 with the Dow at 41.22.

I don't think things are that bad, but I do think there will be better opportunities for investors to buy stocks, especially young investors with a lot of time ahead of us, if we wait a few months, if not a few years. True, you could keep your money in cash inside an IRA or in bonds for that matter, but you won't get much appreciation from that, and when you're investing for retirement in your 20s, capital appreciation is the point.

On the other hand, the reason they tell you to roll that money over into a new 401(k) or an IRA is a pretty good one: if you don't you'll pay a 10% penalty in addition to paying income tax on all the cash in your 401(k) as it becomes cash in your wallet. That's a big hit, and if you don't need the money, then follow the conventional wisdom, roll it over.

But if you've just lost your job in this new world of rising unemployment I think you'd be better served with the money, even if the tax-man takes some of it away. Consider also the fact that it's going to be pretty hard to borrow money from anyone except family and friends unless you've got great credit or a decent net worth, in other words, unless you don't need it.

If you've gotten laid off, fired, axed or terminated (as in your employment), keep the cash and throw the conventional wisdom out the window. The fat years are over, I don't know if we're looking at seven lean ones, but I do know that saving for retirement, basically laying out money to pay for your expenses in the distant future, only makes sense when you've already taken care of your expenses in the present and the more immediate future.

It's time to stop worrying about tomorrow in a metaphorical sense, as in fifty years down the line, and start worrying about tomorrow literally, because no matter what, it's going to be rough.

So in the immortal words of the Steve Miller Band, take the money and run!

Questions? Comments? Send them to millennialmoney@cnbc.com