I got a lot of questions about the financial crisis over the weekend and the main theme seemed to be that people are scared, mainly about their 401(k) accounts. That’s understandable: 401(k)s are usually the first and sometimes the only introduction people get to the stock market. If that’s your only investment, you’re probably scared. So I’ll answer some of those questions below:

“Descants” asked: Wednesday I receive my 403b statement and it shows where I loss money. I have not received my 401k statement as of yet, but I have already set myself up for a loss on that also. Yes, I am worried, but not enough to make any withdrawals. My question is when will this financial disaster subside?

No one knows how long the crisis will last. Things will turn around when credit loosens up and investors and consumers start to feel confident again. As far as whether you’ll be able to make your withdrawals, that depends on your age. If you’re in your 20s, 30s or even 40s, don’t worry because you’ve got at least a decade to recoup your losses. Remember that withdrawing from a 401(k) or 403(b) early will lead to a big tax hit and a penalty for early withdrawal. That’s not a good look. The best thing to do is consider your age, then consult a professional to look at your asset allocation to make sure that if you’re nearing retirement, you have your money in safer investments like bonds or money market accounts where the risk of principle loss is lower than in stocks or mutual funds.

“SLMB” asked: I am having a huge fit right now. My 401k account have too much money, about $15K. I am going to spend the weekend seeing if I can transfer the remaining money from stocks & bonds into a money market to stop the lost…. My questions, if 401k accounts are losing the money, will the money “return” when the market returns?

Yes. That’s how the market works: the value of your investments can change from day to day, but over time the trend is generally upward. Say you own 100 shares of company and today it closes at $50. That investment is worth $5000. If it drops to $40 tomorrow, it’s worth $4,000. But two days from now, if it climbs to $60 a share, it’s worth $6,000.  So the bottom line is yes, the money comes back when the market does, but only if you don’t pull out before that can happen. Another rule to remember about the stock market is that those who get hurt the worst are those who pull out of long-term investments at the bottom. Think of it like jumping off a fast moving roller coaster right before it climbs its steepest hill: not only will you get hurt, but you’ll miss the best part of the ride.

Again, SLMB, I don’t know your age, but if you’re in your 20s or 30s, time is on your side. Moving money around might seem like a good idea for now, but there’s a good chance it could cost you a lot of money over the long term.

I’ll answer more questions tomorrow. Keep ‘em coming. Remember to leave your email when you post a question so I can let you know when I’ll answer it, and if you like, you can email me directly.

Are you scared yet?

The Dow Jones index lost another almost 700 points yesterday. People I know all over the place are asking me whether they should pull out of their 401(k) accounts. Unemployment continues to go up and nothing the government does — including the tens of billions of dollars they keep giving to companies every day — is making anything better.

The advice I’ve given my friends is pretty much the same that you’ll hear anywhere else: don’t panic. Sit tight, re-evaluate where your money is going and start saving as much as you can. Cut back on those plans to spend for Christmas and put away as much cash as you need.

In the meantime, I’m going to dedicate next week to answering questions about the economy. Anything you don’t understand about the causes of the meltdown, whether or not we’re in a recession, if your bank will fail or if your 401(k) retirement account is in danger. That means don’t be shy: send me your questions, either via the comments page here, via email or on my Facebook group (just search for Keith Reed’s Money Corner).

Have a good weekend, and try to relax.

It’s really getting serious: last weekend a woman in Ohio tried to commit suicide after her house was foreclosed on. This week a man killed himself and his entire family after being out of work so long he just couldn’t take it.

Anybody ready to admit to a recession yet?

These two tragedies were isolated incidents, but they do show the level of financial and emotional strain people get under when money gets tight. Desperation is clearly a powerful thing. Just keep one thing in mind: no matter what happens, money, a house, a job — they’re all things that can be replaced. Life is more precious.

Did you watch last night’s presidential debate?

If you missed it, most of the questions from the audience and moderator dealt with the economy. Later for the war and foreign policy, people want to know which candidate gives them the best chance of collecting a paycheck next week. And from what the polls showed after the debate, more people have confidence that Barack Obama is that guy than John McCain.

If you watched the debate, who do you think won and which candidate’s economic policies would benefit you more over the next four years?

I learned a really important financial lesson this weekend that might save me a lot of money in the future: ALWAYS call your insurance company to verify what you owe before you pay a medical bill.

A few months ago I had to go to the hospital, and not long after that, I got a bill for $500.66. I usually pay bills right on time but honestly I forgot about this one. Of course, the threatening notes start coming: pay us or else. So I called to see if I could pay by phone rather than writing a check, and the woman in billing tells me that I don’t owe anything because my insurer finally sent them in a payment!

Incredible. If I wait months to send in a payment, I get threatening letters. My insurance company can wait months and nobody says anything. On top of that, If I’d just written a check, would they have sent me my $500 back? I doubt it.

You always hear tales about people diving out windows the last the stock market crashed. Mostly it’s a myth, but this financial crisis has brought an incident a lot more real and very tragic. A 90 year old woman in Cincinnati shot herself over the weekend after her bank tried to have her removed from the home they had foreclosed on.

Fortunately, she lived, but unfortunately, it’s very possible we might see more acts of desperation in the months to come if the economy stays as bad as it’s been.

I spent my week interviewing elderly people about how they’re dealing with the financial crisis. I heard some of the saddest stories, like the man whose health insurance payments have gone from $96 a month to more than $300 a month in just a few years, and the diabetic woman who lives on $600 a month and has to eat canned food instead of fresh fruits and vegetables which would help keep her healthy.

I also heard how angry they are at the government and younger folks for living beyond our means. Most of them lived on only a small percentage of what they made when they were working so they could save for when they’d need the money. It made me think and set a new goal: by next year I want to cover all my expenses on half my after-tax income, and save most, if not all of the rest.

Do you think you could live on only half what you make? If not, what other steps could you take to increase your savings?

A question I got from a reader:

“Is it better to start using a smaller credit union? I’m currently with Bank of America. I’ve stayed away from them because I like the security of big names. Clearly the big names aren’t so secure anymore.”  -NJ

Well, NJ, I don’t see any reason at this point for you to switch banks based on anything that’s happened in the past week. There have been bank failures, but that has nothing to do with the size of the bank, it has to do with the investment and lending choices certain banks made. Specifically, some banks chose to bet their money on risky mortgages to uncredit-worthy people or businesses and they lost big. When they couldn’t recoup they money they bet, they tried selling the assets (their loans) to raise cash but couldn’t find any buyers. That’s when either they sell themselves (Wachovia) or the government takes over (WaMu).

Bank of America is in a totally different position because as an institution, it never played heavily in risky markets like subprime mortgages. It should be fine, and in fact, it bought Merrill Lynch, another major investment bank that was in trouble because of bad investments.

My last thought is that even in the event of bank failures, as long as the money you have with a bank is less than $100,000 and is kept in a depository account (checking or savings), you have nothing to worry about because that money is insured by the Federal Deposit Insurance Corp., or FDIC. So unless you have some other reason to switch banks, you’re probably fine where you are.

Is anyone else out there nervous about how safe their money is in the bank?

Would you pay for a concert by two people you wouldn’t normally care to see if it meant helping a cause you supported?

Billy Joel and Bruce Springsteen are doing a fundraiser concert in New York for Barack Obama’s campaign this month. My guess is there aren’t too many people on BET.com lining up to buy tickets for that one. But if you support Obama, would you kick out the cost of a ticket?

Other celebrities like Oprah and John Legend who support Obama, but I don’t know if John Legend is touring right now and if Oprah’s doing fundraisers I know I couldn’t afford the plate.

And does it matter to you whether celebrities support a candidate or not? Who could get you to donate to a candidate if you weren’t already planning on doing so?

Trying to understand how big this financial crisis really is?

Think about this: yesterday, investors lost $1.2 trillion on Wall Street. $1.2 TRILLION! If you think that doesn’t affect you, find the courage to look at your 401(k) statement today. It’s down, right? Some of your money was in that $1.2 trillion.

By comparison, the bailout Congress shot down would have cost taxpayers $700 billion, so in theory, Washington could have saved us all $500 billion.  But don’t start cheerleading for a bailout just yet: one investment adviser told me that even if Wall Street gets every dime  in taxpayer money that it wants, we could still end up in a very deep recession.

The country has lost more than half a million jobs this year already and another 100,000 are expected to be announced later this week.

If you were the president, how would you fix the economy? And if you had the $700 billion that Wall Street is asking for, what would you do with it?