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I currently invest in a 401k at work. I don't really understand it that well but I know enough to know that it is basically stocks. Since January of this year (I don't have last years info) my "personal performance" is -5.59%. Here is my question. Wouldn't it be smarter to stop investing in that and start investing in an online savings account? I do not want to hear the usual are you stupid lines. I really want to know if this is going to benefit me in the long run or am I wasting my time. If I lose pretty much everything and then get the same amount back, I have not won anything. I am in the same place as I was, it just looks better cuz it raised after I was down for so long. I don't have alot of knowledge in this matter but I know that a negative for 5 + months is not a good thing. I am appealing to the ones who actually get 401k's and can advise the best path. I would be considered a medium risk by the way. and no I am not willing to be the high risk. I am willing to change it to low risk though. My group contributes half up to 3%. I do know that is like free money. but I could lower my contribution even 1% and put the rest in an online high yield savings account and possibly make more. Is that possible?
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How old are you? -
1. You should keep your money in the 401(k) for the tax savings you'll get. You contribute to your 401(k) pretax. The savings account would be after tax contributions.
2. You should take advantage of the company match to the fullest extent possible. It sounds like you are getting a guaranteed 50% return upto 3% of your contribution. You can't pass that up!
3. It's probably not a big deal that your fund is down right now. Markets fluctuate, but they always tend to have an upward trend over the long haul. You need to speak with your fund company, to evaluate your target retirement date, risk tolerance, etc. Then research all of the available funds and pick an asset allocation that fits your needs and comfort level.
Good luck.Comment
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I don't know why anyone would think you're stupid. There's nothing stupid about asking important questions.
401(k)s are meant for retirement, and as Lux implies, if you're relatively young and have a long retirement horizon, it's best to leave the money where it is, in the 401(k).
However, if this is short term, then yes, 5 months of loss isn't exactly encouraging and it's worth seriously looking into other options.
In the end, if this is for retirement, I wouldn't let short-term market conditions dictate your actions.Comment
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Originally posted by cicy33 View Post
You should check first to see if you have different fund type options, you may be in a less aggressive fund and can move to a better performing fund.Comment
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5 months is just a blip. I'm full throttle on buying stocks right now. We'll look back at this in 5-10 years and wish we had invested even more.Comment
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Yup, I front-loaded my 401k buying this year to do the bulk in Q1. I'm 34. I got 30+ years.Originally posted by sweeps View PostComment
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cicy33, think of it as a giant fire sale and STOCK UP!Comment
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Amen!Originally posted by sweeps View Post
I called bottom back in January, Merch called it in March. Upon a second look, I think Merch is right.
But regardless of where the bottom is, NOW is the time to BUY! I've already gone all-in!Comment
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sorry for delay, crazy weekend! I am 40 years old. I just don't like losing money at all! thanks for the answers so far. I look forward to seeing more.Comment
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okay, so I looked at my 401K stuff today and I have been following the numbers pretty closely since my last paycheck. I am paid every other friday. Two weeks ago I was $2011.00 vested and today with a new contribution 4% from me and 2% from my job (approx $65-$70) I am $2018.00 vested. That does not make a lot of money sense to me. in watching it over the past two weeks the dollar amount has dropped almost daily from the 2011 to around 1987 or so. So basically I netted $7 out of around $65. That is horrible to me. Am I just freaking out for no reason? I realize that I don't get all of it vested but even 1/2 would have been nice!!!Comment
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Yes, you are freaking out for no reason. The stock market went down over the past week. You bought more shares since the price was lower. When it goes back up, you will make money. You are years from retirement anyway, so the only thing that matters is that the stock market is up 20 years from now. There's a real good chance it will be.Comment
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Thanks to all for the nice responses. I feel a little better now. I sure don't feel like retirement is that far away! I know that it is 20 years but sure feels like it is breathing down my neck!Comment
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You shouldn't think of your 401(k) in the short term. In fact, it's best to contribute to it and don't even think about its performance (to a degree.. obviously you want to be sure you're in a good investment, but don't be concerned that it's down 5%).
I always chuckle when I hear people freak out about short-term downward trends. Why? Look at this graph:
^DJI: Basic Chart for DOW JONES INDUSTRIAL AVERAGE IN - Yahoo! Finance
It's the Dow Jones Industrial Average from the 30's until today. This is why you should think long term. Sure, there were some serious downward spikes over the years, but just look at it from the 80's until today. That's about 30 years. If you had invested in a 401(k) 30 years ago, and kept contributing to it, imagine what it would be like today?
Think long term (i.e. 30 to 40 years depending on your current age).Comment
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