I currently put 15% of my income into my 401K. Given market conditions, do you think I should continue contributing? During any "normal" downturn, I would continue to contribute and take advantage of the lower fund prices. But I worry this is more serious and I run the risk of losing all of my contributions. The flip-side would be to put it directly in my money market account earning 3.2% What do you think? My gut says to continue contributing to my 401K. If I don't lose my job and the market doesn't go all the way to zero, I feel investing at these low prices (which will be around for years to come) will eventually pay big rewards once I retire (25 years away). I feel a little guilty thinking about it in that way considering many elderly are/will lose their nest-egg (like my mom and dad).
401K and the market
- Thread starter ryansride2017
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I don't have any real financial advice, but from a "reading the writing on the walls" perspective, I'd automatically assume that whatever you're expecting in big rewards will be well neutralized by the surrounding environment "wrapping around" you and your peer group (being exactly in the same "reward" status) at the time of your retirement.
That is, forget "living normally" outside of your "planned" retirement preparations and eliminate all debt, invest in a ROTH, and consider other forms of sequestering value out of a devaluating currency.
That is, forget "living normally" outside of your "planned" retirement preparations and eliminate all debt, invest in a ROTH, and consider other forms of sequestering value out of a devaluating currency.
One thing I forgot to mention, if it matters, is that my account balance in my 401K isn't that large so I wouldn't have too much downside loss. Just recently I started contributing significantly more to my 401K. In fact, what I contribute this year will very nearly equal what the current balance is. My biggest potential downside loss will be contributions I make from this point forward, if you know what I mean.
Your gut is telling you right. Keep buying in now with cheap shares and you will be rewarded. It always seems different "now" when we experience these economic downturns. I remember the late 90s when the young investment "experts" said that it was a new age and a new paradigm and that the old investment rules no longer applied. We all know what happened to that bubble.
Gary is right, if you stay in broadbased mutual funds you limit your upside to the norm. In other words you won't be able to gain on your peers, your competition. Learn to invest in stocks.
Hint: Don't limit yourself to US stocks.
Gary is right, if you stay in broadbased mutual funds you limit your upside to the norm. In other words you won't be able to gain on your peers, your competition. Learn to invest in stocks.
Hint: Don't limit yourself to US stocks.
My 401K doesn't allow investing in individual stocks, just funds. Although I am invested in more aggressive funds that are not necessarily mainstream.
Ryan, you should do what most of the investors do - buy high and sell low. NOT!
You don't mention your age and risk tolerance. If you can afford to wait for a couple of decades then you should not pay much attention to the market conditions now.
One thing to remember - a 3.2% annual return is lower than the inflation, which, I think, is close to annual rate of 5% recently. In effect, you would be losing money anyway.
But you know, this advice is worth as much as you paid for it.
You don't mention your age and risk tolerance. If you can afford to wait for a couple of decades then you should not pay much attention to the market conditions now.
One thing to remember - a 3.2% annual return is lower than the inflation, which, I think, is close to annual rate of 5% recently. In effect, you would be losing money anyway.
But you know, this advice is worth as much as you paid for it.
You are worrying WAY too much.
Of your pretax savings 15% is fine, 20% would be better. OTOH, if you are younger, just get the matching and the remainder of the amount to reach 20% of your PRE-tax income should go in a ROTH IRA.
As for what funds, and exactly how much in each fund, that is where your age and risk tolerance kick in. Percent of saving should NEVER be based on the current state of the economy.
Of your pretax savings 15% is fine, 20% would be better. OTOH, if you are younger, just get the matching and the remainder of the amount to reach 20% of your PRE-tax income should go in a ROTH IRA.
As for what funds, and exactly how much in each fund, that is where your age and risk tolerance kick in. Percent of saving should NEVER be based on the current state of the economy.
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I'd say that Ryan is around 40 years old. He mentioned a 25 year horizon. He's actually a bit late for a long term accumulation. The time from 20's through 35 is more than all contributions afterward just due to compounded gains. If he's under 40 ..then his retirement is longer than 25 years (it's already at 27 and they can change the target date without notice).
I missed the 25 year part....
But the bigger worry is this part:
Quote:
my account balance in my 401K isn't that large so I wouldn't have too much downside loss. Just recently I started contributing significantly more to my 401K. In fact, what I contribute this year will very nearly equal what the current balance is
So you have like $40-50K tops. Dude, max it out. To the hilt. Trust me you'll kick yourself for not doing it. I'm 50 now so I MAX it out PLUS max out the catch-up provision. 25 years. Don't worry.
But the bigger worry is this part:
Quote:
my account balance in my 401K isn't that large so I wouldn't have too much downside loss. Just recently I started contributing significantly more to my 401K. In fact, what I contribute this year will very nearly equal what the current balance is
So you have like $40-50K tops. Dude, max it out. To the hilt. Trust me you'll kick yourself for not doing it. I'm 50 now so I MAX it out PLUS max out the catch-up provision. 25 years. Don't worry.
Originally Posted By: ryansride2017
My 401K doesn't allow investing in individual stocks, just funds. Although I am invested in more aggressive funds that are not necessarily mainstream.
Cash fund? that's what I did back in 2005 till now, other than US dollar loss, I survived.
My 401K doesn't allow investing in individual stocks, just funds. Although I am invested in more aggressive funds that are not necessarily mainstream.
Cash fund? that's what I did back in 2005 till now, other than US dollar loss, I survived.
I had about $300K in my 401K when I left the real world. I rolled that over to a self employment plan (SEP) IRA and since then I have tapped into the "tax deferred" account to support large purchases for my business when necessary (i.e. an instron burst/creep tester, lease on an office, an ICP/MS...etc.). What I've paid a 10% penalty upon has added up to a 250% return even in these rough times.
IMHO the 401k and other deferred tax accounts (except roth) are akin to the bar pressed in a Skinner box by the rat. If you have NO self discipline with your dollar and are absolutely adverse to risk prescribe in the existing belief that 401K's are rocking! If you see things as an eternal downward spiral for those of us who don't live near mesopotamia then forget about the burden and posture yourself on a 7 year plan! I have purchased over $40,000 in pennies (cent for cent) minted before 1968 lately with my "retirement" funds to ensure that at least the material (not the green dyed denim) I invest in is fungible. Do what you feel is correct, but I decided to CYA my friends!! Social security isn't a blanket that I count on!
Good luck my friend!
IMHO the 401k and other deferred tax accounts (except roth) are akin to the bar pressed in a Skinner box by the rat. If you have NO self discipline with your dollar and are absolutely adverse to risk prescribe in the existing belief that 401K's are rocking! If you see things as an eternal downward spiral for those of us who don't live near mesopotamia then forget about the burden and posture yourself on a 7 year plan! I have purchased over $40,000 in pennies (cent for cent) minted before 1968 lately with my "retirement" funds to ensure that at least the material (not the green dyed denim) I invest in is fungible. Do what you feel is correct, but I decided to CYA my friends!! Social security isn't a blanket that I count on!
Good luck my friend!
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Quote:
I have purchased over $40,000 in pennies (cent for cent) minted before 1968 lately with my "retirement" funds to ensure that at least the material (not the green dyed denim) I invest in is fungible.
Well, I guess no one can call you a two bit investor
I have purchased over $40,000 in pennies (cent for cent) minted before 1968 lately with my "retirement" funds to ensure that at least the material (not the green dyed denim) I invest in is fungible.
Well, I guess no one can call you a two bit investor
JHZR2
Staff member
3.2% in money markets will devalue so quickly that its buying power will drop like a rock, and your real return will be negative.
Decide upon a way to maintain your real buying power given the severely dropping dollar that will come along soon...
JMH
Decide upon a way to maintain your real buying power given the severely dropping dollar that will come along soon...
JMH
Originally Posted By: Pablo
Percent of saving should NEVER be based on the current state of the economy.
That's not bad advice for anyone.
Although I have heard youngsters at work (under 30) talking about "why bother ?"...borrow for everything you need (want), and by the time inflation kicks in, your loans are worth that much less.
(wonder where they got that idea ?)
Percent of saving should NEVER be based on the current state of the economy.
That's not bad advice for anyone.
Although I have heard youngsters at work (under 30) talking about "why bother ?"...borrow for everything you need (want), and by the time inflation kicks in, your loans are worth that much less.
(wonder where they got that idea ?)
there is a downside to putting more into your retirement fund... you won't see that money for a long, long time.
I just do the minimum 9% which the employer has to give you anyway, and try and invest from my normal pay. at the moment my tax rate is so low because of family tax benefit (all australian families get) that I pay more tax (15% in my retirement fund on contributions and growth) than I do in the "normal" cash / available money environment.
I just do the minimum 9% which the employer has to give you anyway, and try and invest from my normal pay. at the moment my tax rate is so low because of family tax benefit (all australian families get) that I pay more tax (15% in my retirement fund on contributions and growth) than I do in the "normal" cash / available money environment.
I'm 35. I'm retiring at 59.5 (as soon as I can access my 401K funds). I'm increasing my deferred percentage into my 401K by 5% per year since my debt load is rather small and I can afford it. I should hit the maximum allowable limit in less than 2 years. I actually have more money in my money market fund, than I do in my 401K, just in case something happens to my job.
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The stock market can be a good place place to park money long term.
The stock market can also be a an extremely poor place to park money long term.
It all depends on when you start and end.
Look at the period 1970 to 1980, looks pretty bad to me. 1970 to 1990 does not look a whole lot better. 2000 to 2008 does not look real good. 1990-2008 looks okay, but it is not materially better than 1990 to 2000. You can pick other long intervals where it stunk. In the last decade, people that got in and out at the right times did okay. People that held long term have squandered a decade.
Wall Street has done a good job of advertising itself as an environment where money will always grow, without risk. A lot of people are learning a terrible truth about that right now.
There is a very good reason they call real property real property.
The stock market can also be a an extremely poor place to park money long term.
It all depends on when you start and end.
Look at the period 1970 to 1980, looks pretty bad to me. 1970 to 1990 does not look a whole lot better. 2000 to 2008 does not look real good. 1990-2008 looks okay, but it is not materially better than 1990 to 2000. You can pick other long intervals where it stunk. In the last decade, people that got in and out at the right times did okay. People that held long term have squandered a decade.
Wall Street has done a good job of advertising itself as an environment where money will always grow, without risk. A lot of people are learning a terrible truth about that right now.
There is a very good reason they call real property real property.
WIN is on to something. Secular bear markets can last up to 2 decades. If you hit it at the wrong time, good bye retirement. Look at DJIA or S&P 500 in *real* terms not nominal terms and the picture looks quite different from the b.s. most financial advisors sell you. Average returns (ex divident) are pretty dismal too.
Unfortunately, for someone who is not constantly staying on the pulse of markets, it can be really dangerous too try to time the market. So I won't even try to tell you to time the markets because that would be irresponsible advice. So I don't know what advise I would give. The only thing I'd say is to diversify across a *broad* spectrum of investments, domestic and international equity, commodities, precious metals, the who bit. Also, try to time-average - that is, invest small chunks frequently rather than big chunks periodically. This lets you weather the bear/bull cycles a little better.
Unfortunately, for someone who is not constantly staying on the pulse of markets, it can be really dangerous too try to time the market. So I won't even try to tell you to time the markets because that would be irresponsible advice. So I don't know what advise I would give. The only thing I'd say is to diversify across a *broad* spectrum of investments, domestic and international equity, commodities, precious metals, the who bit. Also, try to time-average - that is, invest small chunks frequently rather than big chunks periodically. This lets you weather the bear/bull cycles a little better.
You could say the same thing about real estate as well.
Neighbor right across the road paid $529,000 at the top of the craze. Maybe his house is worth $400,000 now.
Neighbor right across the road paid $529,000 at the top of the craze. Maybe his house is worth $400,000 now.
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