Q. I am 25 and have been working my first corporate job since I was 22. During that time I have invested $15,000 in my 401(k) plan. I stopped contributing to it last November. I will be leaving the company at the end of this month and need advice on what to do with my 401(k) balance. Currently, I have a little under $9,000 in student loans that I would like to pay off. I was thinking of liquidating my 401(k) to do that. What would you suggest? Should I keep the money where it is? Should I pull it out and roll into a Roth IRA? Or should I use it to pay off my student loans? —B.S., by email

A. There are two reasons you should avoid cashing out your 401(k). The first is that you will pay a penalty of 10 percent since you are not 59 ½ years old. You’ll also have to pay income taxes, assuming you are leaving your current job for another job and will have taxable income for the year. The second is that it's good to have money in qualified plans and it would take a while to rebuild.

I know investment returns look pretty "iffy" right now, but they almost always do. If you consider our history in the last 100 years, there have been lots of reasons to fear for the future and believe that investing would not pay off. But it has. In general the best time to invest in equities or real estate has always been the same: “Long Ago.” The money in your account has the potential to double 5 times by your 70th birthday, which will probably be the age of (early) retirement by around 2050.

The 5 doublings figure is based on a compound annual return of 8 percent. That's less than the long-term return of equities and close to the long-term return of a traditional balanced portfolio. So your $15,000 could become $480,000, before adjustment for future inflation.

With that in mind, my suggestion is that you roll your 401(k) to an IRA with low cost mutual fund options. You could also move to a discount broker to give you access to even lower cost exchange traded index funds. After that, focus on paying off your student loans out of what you earn in the next few years, perhaps by reducing the new money you put in a new employer provided 401(k).

Q. In 2006, I was talked into a variable annuity by a Merrill Lynch advisor. I've since moved my other assets to a Wells Trade account that I manage myself, with emphasis on low-cost Couch Potato investing.

The Couch Potato portfolio is a thing of beauty, and I'll tell you, it demonstrates how simple investing can be— but I still have a problem. I've read many articles about variable annuities, but no one ever gives tips for getting out of one.

Right now, my variable annuity has a value of $315,435, and my cash surrender value is $306,435. My original contribution was $300,000. How hard is it to get out of a variable annuity? Would now be a good time to get out? Can I even get out? I'd really rather have the money in my Couch Potato account. I'm 51 and won't need this money for another 15 years. Where can I look for answers? —R.S., by email

A. Assuming this is not qualified plan money, you can do what's called a 1035 exchange, moving the money from one variable annuity to another without creating a "taxable event." Exchanging to the Vanguard variable annuity would reduce expenses significantly and allow you to become a tax-deferred Couch Potato investor. The total cost for the Vanguard variable annuity is about 60 basis points, 0.60 percent.

But since your surrender value is only $6,000 over your cost basis, deferred taxes aren't a big problem. You can reduce expenses still further by redeeming your investment, paying taxes on the $6,000 of investment gain and moving directly to your existing taxable account. This will reduce your annual expenses to about 0.20 percent, probably about one-tenth of what you are currently paying.

You'd be hard pressed to find anyone complaining, today, of how much taxable income his or her investments are yielding. In addition, broad index mutual funds or Exchange Traded Funds are very tax efficient. That's one of the reasons Couch Potato investing beats the vast majority of comparable risk variable annuity commitments.