Depression Mentality

Today TaxMama hears from Helen in Texas with this concern. “Can I take my 401(k) investment money out of bank investments and put into a credit union without paying taxes? If so how do I go about doing this? Besides, aren’t credit unions safer? “

Dear Helen,

Your first question is easy. If your 401(k) money is still with your employer, you’ll need to check with the fund administrator to see if they will let you move the funds out of the account. However, if your 401(k) funds are in your own IRA account, the transfer should be easy. Just set up the new IRA account at your credit union. Then, instruct your bank to transfer the funds. Your credit union may even have the necessary forms to give to your bank.

Let me tackle your second question. Are credit unions safer than banks? I don’t know. However, before this whole sub-prime mortgage problem started, I had lunch with a friend of mine who is an officer of a credit union. She told me that her credit union didn’t have many shaky loans. They had one loan officer who had started issuing loans of that nature and he’d been fired pretty quickly. Her credit union is sound.

Historically, you don’t see credit unions engaging in the irresponsible, short-sighted activities that we’ve seen in a few financial institutions.

Yet, there are signs that the credit union industry may be in trouble.

Credit Unions in trouble

Edward Harrison of compiled information from articles in the WSJ and Housing Wire in August describing the problems facing the corporate credit unions (the CU equivalent of Fannie Mae and Freddie Mac).

So is it a good idea to move from banks to credit unions? I don’t know.

On the other hand, not many banks have ever failed – despite the heavy news coverage. The FDIC has a list of banks that have failed since 2000. There were only 39 during the last 7.5 years, nationwide. 12 this year

To see the safety rating of your present bank or credit union – use’s Safe & Sound service Perhaps your money is as safe in your bank as it would be in a credit union.
Just read my article about how the FDIC protection works for balances larger than $100,000 per person. You may want to arrange to have your account run through a CDARS system. See if your bank offers it.

Let’s face it, Americans have lost confidence in our regulators and those whose job it is to keep our economy safe. It will be years before Americans feel safe again, if ever. After all, look at the adults who lived through the Great Depression. They are still very wary of trusting any investments – or of making large purchases. Their children and grandchildren think their habits are odd or quaint. Not so sure anymore?

And remember, you can find answers to all kinds of questions about 401(k)’s and other tax issues, free. Where? Where else? At

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