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Message
401K Contributions
Posted on 1/25/09 at 9:47 am
Posted on 1/25/09 at 9:47 am
At the moment, I am contribution 15%. It is all aggressive. Should I leave it that way or change it to bonds or more stable so I dont lose as much. Should I decrease my contributions? Any help is appreciated.
2
Posted on 1/25/09 at 10:19 am to LoyalTiger211
The only reason I know of to lower your contribution percentage is if you think you need the money before you turn 60. But if you can save it, put it in the account as fast you can to get the tax writeoff. Increase the percentage until it hurts, then increase it some more and start eating beans and rice.
If you're uncomfortable about it losing value after you contribute to the plan, that's an entirely separate issue. You could just invest it in cash or short-term treasuries (as in 1-year or less).
Point being, the amount you contribute depends on how badly you'll miss having the funds available before you can start withdrawing. Has nothing to do with return on investment. If you can afford to contribute to the plan, do it and worry about the investment allocation later.
If you're uncomfortable about it losing value after you contribute to the plan, that's an entirely separate issue. You could just invest it in cash or short-term treasuries (as in 1-year or less).
Point being, the amount you contribute depends on how badly you'll miss having the funds available before you can start withdrawing. Has nothing to do with return on investment. If you can afford to contribute to the plan, do it and worry about the investment allocation later.
This post was edited on 1/25/09 at 10:21 am
Posted on 1/25/09 at 10:44 am to foshizzle
based on the way the market is going, I have lost more than the 15% that I and my employer contributed for 2008. I was told by some, to change the allocation from stocks to bonds or some low risk offered by Fidelity. I just want to see if I can minimize the lost for 2009. I got about 25 years to go before I quit. Do you think this is wise? What would you do? and why?
Posted on 1/25/09 at 10:50 am to LoyalTiger211
quote:
based on the way the market is going, I have lost more than the 15% that I and my employer contributed for 2008. I was told by some, to change the allocation from stocks to bonds or some low risk offered by Fidelity. I just want to see if I can minimize the lost for 2009. I got about 25 years to go before I quit. Do you think this is wise? What would you do? and why?
You should be about 50% stocks because of your age, regardless of what the market is doing. Changing your allocation now, because of what the market has done in the last 8 months is like upgrading life insurance after you are dead.
Posted on 1/25/09 at 10:56 am to Parliament
So 50% in stocks and the other 50% in stable? Then if the market rebounds go back to 100% stock? By the way, when Fidelity invest my money, it goes by shares which has a certain value. Only the value changes not the shares right?
Posted on 1/25/09 at 11:12 am to LoyalTiger211
quote:
So 50% in stocks and the other 50% in stable?
Yes, or somewhere around there.
quote:
Then if the market rebounds go back to 100% stock?
No. As I said before, asset allocation is dictated by the working years you have before retirement. If you DID want to roll your allocation around, based on the market, you would want to go 100% stocks at the bottom. There are plenty of opinions on this board as to when and where that will happen. (I say DOW @ 6800 in May.)
That said, I don't advise timing the market. Go 50%.
Posted on 1/25/09 at 11:17 am to Parliament
Thank you Parliament and fosshizle for your advice
Posted on 1/25/09 at 11:19 am to LoyalTiger211
quote:
Thank you Parliament and fosshizle for your advice
You won't be thanking us if we prove ourselves wrong. I hope you read my signature.
Posted on 1/25/09 at 11:35 am to Parliament
All im gonna do is go 50 50 so cant lose more than I already have, which is 20K last year lol
Posted on 1/25/09 at 10:33 pm to LoyalTiger211
Did anyone ask your age?
That should be the first thing.
That should be the first thing.
Posted on 1/25/09 at 10:45 pm to LoyalTiger211
quote:
based on the way the market is going, I have lost more than the 15%
And I lost just under 25% this year.
On the other hand, I averaged over 30% the three years before, so I'm still doing fine. And the famed Warren Buffet lost 32% this year. It happens to the best of us sometimes!
The point is that nobody, anywhere, knows what "the market" will do in any given year. The trick is to buy a lot of index funds in a proportion equal to the size of the respective markets. That way you still do okay and (amazingly) beat most of the funds out there too.
Beating the market basically requires that you know something the rest of the world doesn't. If you manage a billion-dollar portfolio it can be worthwhile to dig up those nuggets, but for the typical individual the best thing to do is chase money in your own backyard and use Wall Street as a place to park money. Hence, index funds.
Posted on 1/25/09 at 11:13 pm to LoyalTiger211
This advice is worth what you paid for it, but I'm thinking that if your going to be invested in the 401k for at least the next 25 years, be aggressive and don't look back.
Unless you think the world is ending - there are some great values out there right now that will be appreciating significantly once the current mess gets straightened out.
Trying to time the market - or investing safe until "the bottom" is strategy that's doomed to fail.
Unless you think the world is ending - there are some great values out there right now that will be appreciating significantly once the current mess gets straightened out.
Trying to time the market - or investing safe until "the bottom" is strategy that's doomed to fail.
Posted on 1/25/09 at 11:56 pm to ewilliams20
quote:
ewilliams20
Personally, I'm hoping the current situation does not improve for the next ten years or so - because I'm 41 and still have 2-3 decades to go. A crash just means I can buy cheaply.
If I were 65 my opinion would be different, of course. But by that time I won't have as much in stocks.
Posted on 1/26/09 at 7:33 am to ewilliams20
quote:
Trying to time the market - or investing safe until "the bottom" is strategy that's doomed to fail.
Yes I regret wholeheartedly pulling out at Dow 13,800.... that strategy surely will lead to my downfall
I understand the buy and hold crowd and that strategy is probable best for most, but I hate absolute statements "strategy that's doomed to fail" that ignore the fact that anyone with an IQ above a trained monkey could see fundamental valuation showed we had a heck of a problem. I am not saying everyone should try to time the market, but I take offense that I am 'doomed to fail' because I have capital gains last year while most bombed.
Posted on 1/26/09 at 7:41 am to igoringa
Yeah, if I had not bailed during the dotcom mess and this summer my net worth would be about half of what it is now. Buy and hold is a pretty terrible strategy.
Posted on 1/26/09 at 8:54 am to Tigris
quote:
Buy and hold is a pretty terrible strategy.
The good Mr. Buffett would strongly disagree with you on that one.
Sure, anyone can get lucky with a call like that. For example, I was really concerned about the rise in real estate values five years ago. Fortunately I held on anyway and am still waaay ahead. Buy and hold can work just fine.
Posted on 1/26/09 at 9:11 am to LSUDad
quote:
Did anyone ask your age? That should be the first thing.
I am 42, and willing to work till 75 if I make that long lol. So for the next 25 years, just do aggressive and dont look back? in addition, this may be a stupid question, but when Fidelity invest my money, it buys shares, and only the value changes not the shares right?
Posted on 1/26/09 at 9:23 am to foshizzle
quote:
The good Mr. Buffett would strongly disagree with you on that one.
The good Mr Buffet buys and holds specific stocks based off fundamental valuation. he does not blindly buy an index fund. The key to his success is more in his valuation technique then anything.
If you bought and held the S&P in the last 10 years, you are down about 13% all in.
quote:
Sure, anyone can get lucky with a call like that.
I love how it is always 'luck' will people make educated decisions. Using this board as the example, JT, Colonel, Mile et al were not 'lucky' in their prognistication. They used sound judgment and made educated decisions (to which I like to think I did also)
quote:
Buy and hold can work just fine.
I agree and can understand how it works for most. I raise contention with those who read a book at Barne and Nobles and believe it is the only acceptable method and anything else is market timing and 'luck'.
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