How do I keep from blinking....

[dreamweaver]

I am sort of a risk taker when it comes to my 401K and other investment accounts. Now the market is up overall. And I want to blink. I watch my accounts well....but am fixin to go on vacation. So. Who else is nervous, and what are you going to do about it?

[Broken Arrow]

Um, isn't 401k not something one typically speculates?

I know mine only allows a maximum of 4 transfers per year.

I'm more of the Ron Popeil camp of investors when it comes to my 401k. I kind of just "Set it and Forget it". Within reason of of course. And OK, I still watch it from time to time, but only because I'm curious about how it's performing.

[dreamweaver]

I have 4 accounts. All thru Fidelity. One roth, one rollover IRA. One 401K and one 403B. The 403 is where I currently contribute. I know that the thought pattern is to buy and hold. But I got a very late start on my retirement. I was 40. Now I am 50. I will retire when I am 60. Those numbers don't let me take anything for granted. I watch MUCH more than the average bear. And it has payed me well. On the flip side, I could crash and burn in a heartbeat. And I can't tolerate that. First it was because I had so little money to lose. Now it is because there is so much more to lose. The individual funds have restrictions about fees for short term trading. I watch the fees in regards to when I trade. I have aprox 160 funds to choose from for my 401 and 403. So there is plenty to be made, or lost.

[anonymous_saver]

What is your asset allocation in all of your accounts? Or even better, overall?

[dreamweaver]

I am heavy in anything not american. The exception is fidelity leveraged. I would say overall I was about 25% canada, 25% latin america, 25% china and 25% europe. If you break it down again I would guess that overall I am about 25% invested in natural resourses. Volatile. I know. That is why I watch it so....

[dreamweaver]

Oh yeah, the REAL problem? On the 401 and 403 I can hit that "year to date" thing. 20 % in one account, 25% in the other. So....do I take the money and run? Or hold steady.

[lgslgs]

We keep our retirement accounts aggressively invested. Here's how we deal with the "what if" nerves. FYI - we retired early (mid forties) and draw off of savings - so we have as good a reason to be nervous as anyone.

I keep one spreadsheet that has our current total $$, with columns for regular and retirement accounts. One column has our expected rate of return, and I use a fairly conservative percentage guess there. I can plug in higher returns to see what might happen, but I plan using lower returns so I can see if we'll hit a pinch point in the future.


We keep good budget records so I know what our monthly draw needs to be. We run the spreadsheet up to age 100 factoring in growth, draw, additional tax and penalty for early retirement withdrawal, etc. In real life, we make a monthly game of coming in under budget (usually spending $500 less than our planned draw) - but the spreadsheet uses the higher number. That lets us build in reserves for surprise expenses beyond the surprises we already budget for.



So the way this fits in with market volatility is that I can run scenarios like "what if we have a 25% drop tomorrow, 3 years of 0% returns, and then 7 years of 6% returns or so before we get back up to an average 10.5%". Or what if we have a year now at 15%, followed by 10 years at 5% and then a lifetime at 8%.

I can see at a glance when our nest egg would drop to the point where I'd want to stop drawing temporarily to preserve assets. We view that as "if we get in a bind, we stop drawing for 6 months to a year, and get jobs sufficient to cover all outgoing monthly expenses."


My quick rule of thumb calculation uses the $ value of my accounts on the day I was layed off. At that time I felt that we had sufficient $ to retire for good as long as we lived within our long term budget plans and had moderate investment growth. That amount would also be such that we would have a few years "thinking time" to figure out what to do even if we had zero percent growth - without jeopardizing our long term retirement plans in the process. Every week or so I calculate the difference between what we have now and the nest egg on layoff day. Then I see how many months of living that gives us even if we had 0% growth. Once that number grew from months to several years I stopped being nervous about the possibility of needing to find a part time job somewhere down the road.




So on to your "real" problem. Don't do anything with your accounts until you have a good income/expenses spreadsheet that runs until you are 100 years old. Look at your current nest egg, and see whether you can coast through a market drop and recovery similar to that during the Great Depression. If you can, don't sweat the prospect of the occasional short term drop - even if they may be big or ugly.

If you are still nervous, run you spreadsheet and see what happens if you take your $ and switch into low return safe investments. If that still meets your long term goals, and the $$ you see at year 100 suit you - than lock in if you want to.

We prefer to have an aggressive portfolio and a solid enough nest egg to weather big drops as they come along. That lets us also catch the big gains. We could live fine either way (with conservative or aggressive investing) but accepting high volatility sets us up better for having a much larger nest egg when we die. That's important to us because we intend to use our nest egg to fund a charitable trust. We couldn't achieve our goal if we tied up our money in bonds.

Lynda

[Ima saver]

What does "blinking" mean?

[lgslgs]

One other thing - I started my spreadsheet while I was still working, as a way to plan for early retirement. I was also a late starting saver.

The first thing the numbers told me was that my long term $$$ were hugely effected by my current savings rate. As soon as I saw that I got rabid about cutting costs, banking away my paychecks, trimming down lifestyle, and getting my cash into mutual funds.

Even now, our monthly draw is a huge factor in determining what our Age 100 nest egg is going to look like. You might want to make sure you are really controlling your expenses well - because you've got a lot more power over those than you do over short term market trends.

Lynda

[anonymous_saver]

I can understand being a risk taker, but since you are a late starter, I think it would probably be a good idea to re-evaluate your asset allocation. Maybe you should include some of Vanguards 500 Index or Total Stock Market Index, so you would have some better diversification?

[Scanner]

Yes, I'm antsy - follow the "When to rebalance" thread.