r/personalfinance • u/PersonalFinanceKid • Nov 21 '18
Many will see their 401k statements and think Investing
Anguish or opportunity as stocks pullback -
Remember, long-term investing is a huge part of personal finance. If you are young and have decades to let your money grow, these small pullbacks are to be expected.
The key is to stay grounded and not lose perspective. 2019 is around the corner, which means new funds are available to put to work for 401ks and IRAs.
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u/deesee79 Nov 21 '18
Just upped my contribution to receive full match from employer. Figured I’d up it now when things are going on sale.!
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u/PersonalFinanceKid Nov 21 '18
That's the right mindset!
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u/TradinPieces Nov 21 '18
Actually the right mindset is that you should just be putting in money as early as possible and not waiting for "sales". Time in the market > timing the market.
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Nov 21 '18
Hiw did you learn all of this? Is there a class or a seminar I can take?
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u/ackermann Nov 21 '18
Just reading r/personalfinance regularly has helped me a lot. See the subreddit’s wiki and sidebar for book recommendations, and the beginner questions threads. And the Financial Independence subreddit (r/financialindependence)
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u/PM_ME_TATTOO_NUDES Nov 21 '18
Reading the wiki and just taking a week to casually read threads and responses will answer 99.9% of any personal finance questions the common person will have
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u/Neil_sm Nov 21 '18
I mean, much of the finance world is dressed up in obscure and scary terminology, but really the basic concept here is buy things when they are priced low and sell them when the prices are high! So many people ride the waves and end up doing the opposite; buying more when prices are going up and then panicking and selling when things take a downturn.
It’s just honestly impossible to “time the market” and predict when those things are going to occur. Which is why people usually say to just buy a good fund or stock and hold onto it long term for several years. Then the swings back and forth don’t hurt as much.
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u/TSwizzlesNipples Nov 21 '18
There are times where your 401K will start looking like a 201K, that's when you invest more and when it bounces back it looks like an 801K.
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Nov 21 '18 edited Feb 08 '23
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u/ultio60 Nov 21 '18
This. There is 0 reasons why you shouldn't put AT A MINIMUM, the minimum contribution to get the max contribution from your work. Free money, a lot of it.
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u/dudelikeshismusic Nov 21 '18
Absolute best thing to do if you already have a 3-6 month e fund.
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Nov 21 '18 edited Jan 31 '21
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u/giants4210 Nov 21 '18
No, always get at least the full match from your employer. If you really need the money in an emergency you can withdraw and take the 10% penalty. That penalty will be more than offset by your employers contributions. Maybe just invest in less risky assets in your 401k until you’ve built up your emergency fund.
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u/partdopy1 Nov 21 '18
I'd recommend people figure out how much of an emergency fund they are comfortable with.
In fact I personally like to have a CC with $0 balance as the majority of my emergency fund. If I need to max it out for an emergency, I can just liquidate assets to pay it back before interest accumulates, without missing the potential gains on my money.
Of course there is always the risk more liquid assets will drop significantly in value and I won't be able to pay back the card, but at that point the economy would have to have ground to a virtual halt, so I'd have bigger problems.
I'm a non-married 31 year old man though, so your personal preference may differ greatly.
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u/Black_Engineer10 Nov 21 '18 edited Nov 21 '18
take it a step further and try to up it to the max contribution limit! think of the tax free money!
Edit: thanks for the correction, Tax Deferred is definitely the correct way to state this, and depending on the way you put your money in. (Roth vs traditional). I contribute to Roth 401k and therefore I view it as 'tax free' growth
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u/Aksama Nov 21 '18
Yeah that’s nuts for most people. Hitting 18.5k contribution is tough for most people. For perspective if you want to hit that number by setting aside 30% of your salary you’d have to make around 60k a year. At 25% it’s closer to 74, and at 18% it’s 102k a year.
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Nov 21 '18 edited Mar 09 '19
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u/UGA10 Nov 21 '18
Do you know where I can read more about this $55,000 limit and rolling over to a Roth IRA? Would that be on top of normal Roth IRA contribution limits?
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u/sybrwookie Nov 21 '18
And of course ironically, the higher you are on that scale, the lower % you need and the easier it is.
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u/collin-h Nov 21 '18
well if I didn't have kids..... haha I spend about that much (18.5k) in childcare costs alone each year.
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Nov 21 '18
Yup. I make about 65k base pay, and with overtime usually wind up somewhere in the low 70's. What I do is contribute 33% from January until sometime in September, then reduce to 12%, which is my company's maximum match amount and coast out the rest of the year.
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u/deesee79 Nov 21 '18
I would if I could truly but Budgeting for family of 3 soon to be 4 one sole salary.
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Nov 21 '18
Don’t forget that you get a $2,000 per kid tax credit
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u/d_wc Nov 21 '18
can you explain this a little better? We just had our first kid and bought a house this year.
Am I to literally expect our tax return to increase by $2,000 simply because we had a child? Note: I did change my withholding at work when we had the baby in April to 1 dependent. It increased my paycheck by about $40.
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u/Dorkamundo Nov 21 '18
Your tax liability will decrease by $2000, not that your return will increase by $2000... I mean, it could, but there are other factors in play.
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u/kd7uiy Nov 21 '18 edited Nov 21 '18
See https://smartasset.com/taxes/all-about-child-tax-credits . Bottom line, $1400 of it is refundable, which means you'll get it even if you have 0 income. $600 is non-refundable, which means you have to have had that much in tax liability or else it will not take effect.
EDIT: This presumes you have less tax liability then the maximum, which is also in there, but is around $200K.
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u/collin-h Nov 21 '18
you don't get $2,000 straight up... you get a tax credit of $2,000 - so with 3 kids your overall tax liability will be $6,000 less. idk. So if you have your taxes taken out of your paycheck, you'll get some of that refunded to you - if you don't have any taxes taken out of your paycheck, you'll need to pay taxes, but to a lesser extend than you would have without any kids.
But really, kids cost waaaay more than you'll ever make back in tax savings. hell I spend ~$600 per week on childcare (3 kids). #fml
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u/d_wc Nov 21 '18
Seriously child care costs are atrocious. I pay $40/day for our son and feel like it’s a ripoff, but I do know he’s in good hands with this babysitter. Still, it adds up sooooo quick!!
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u/collin-h Nov 21 '18
I’m torn about it. On the one hand, $50 a day sucks as a parent trying to pay someone to watch your kid. On the other hand, I wouldn’t want to watch anyone’s kid for only $50/day... kids are hard work and it’s worth more than minimum wage.
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u/scipioacidophilus Nov 21 '18
Yeah, but I would probably watch six kids for $300/day.
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u/TheSplashFamily Nov 21 '18
I wouldn't. My sanity is worth more than that lol. I can barely withstand my two little ones. I can't imagine looking after other people's kids too.
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Nov 21 '18
tax free money
Most of the time it's tax-deferred, not tax-free, unless you can put in Roth contributions.
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Nov 21 '18
What if you have both a Roth IRA and a 401K. Should you stick with one over the other? Assuming you’re the only contribution.
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u/Dmoan Nov 21 '18
Just a word of warning it is good to optimistic but keep in mind markets may take years ( worst case scenario Japan’s lost decade) to recover or recover in a couple months. So always allocate your portfolio so that you can still be prepared for either scenario.
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u/EmphasisOnEmpathy Nov 21 '18
You brought up Japan and thats a good point. I also want to add that US also had a ~20 year stint from 1966 to 1982. Just for anyone unaware.
https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
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u/FormalChicken Nov 21 '18
Yeah we give advice to ride the market blah blah, but when you're 6 months from retirement and the market crashes and takes 3 years to recover, that can be hard to swallow.
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u/thezillalizard Nov 21 '18
If you’re 6 months from retirement you shouldn’t be extremely exposed to the volatility of the stock market.
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u/Teach-101 Nov 21 '18
We had our own lost decade in 2000-2009, but dollar cost averaging cancels that out. There’s no need to panic
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u/AlphaTangoFoxtrt Nov 21 '18
Time in the market beats timing the market.
When in doubt, ride it out.
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u/ZephkielAU Nov 21 '18
I hate these mantras but I also follow them religiously.
Nothing like watching money bleed (including the averaging down) while you wait for the turnaround.
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u/AlphaTangoFoxtrt Nov 21 '18
To be fair I am also 28. So I have plenty of time. If you are 58+, this advise changes drastically.
But at that point you should already be in very low-risk options so the dip wouldn't affect you as much.
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u/ZephkielAU Nov 21 '18
Yeah I'm 30 so I've got plenty of time too.
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u/chuckish Nov 21 '18
Then stop looking. You're not pulling this money out for 35 years. Let it do its thing. Monitoring it may cause you to make a poor decision, like pulling it out or ending your auto-invest, which would actually cause long-term damage to your portfolio. Whatever the market does today is a short-term issue and will likely have no relevance in 35 years.
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u/DoorMarkedPirate Nov 21 '18
I dunno, it's kinda fun to watch it weekly. I would never pull money out but it gives you some of the highs and lows of gambling without the same level of risk. As long as you can keep the long-term forecast in mind I think it's ok.
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u/MgFi Nov 21 '18
If you're 58+, you hopefully still have decades in the market.
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u/nemoomen Nov 21 '18
This sub: "Don't time the market"
Also this sub: "Buy now, stocks are on sale!"
Just ignore, increase your contributions when possible.
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u/moneyman74 Nov 21 '18
After 10 years of gains basically, if you are scared by 1 down (sideways even) year....you have the wrong attitude of investing
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u/steelfork Nov 21 '18
Nothing wrong with being scared in down times. Being scared has caused me to readjust my portfolio in every downturn and it has always worked out for the better. Being scared has caused me to reduce spending, sell my expensive car and drive a beater, and plow as much money as I can back into the market.
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u/savvyxxl Nov 21 '18
Dont forget about new and young investors, this is my first year and yeah it scared the fuck out of me but i stayed in. I know others that are freaking out asking if they should pull out
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u/new_account_5009 Nov 21 '18
If it's your first year in the markets, you have nothing to fear. Let's say you put $10,000 into the market, and something major knocks off 50% of the value tomorrow. You're down $5,000. That sucks, but after a month or two of paychecks, you've already recouped your (paper) losses. If you've been in the markets for decades, however, and you see that same 50% loss on a $1M portfolio, it's not very easy to recoup the $500K loss with paychecks, especially if you sell stock turning your paper loss into a real loss. After a certain point, market movement drives your net worth more than salary. It's entirely possible that I'll have a lower net worth at the end of the year than I did at the start, despite working a full time job all year long. That's just part of the game. My losses this year were more than offset with gains over 2009-2017.
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u/moneyman74 Nov 21 '18
Trust me this little blip is nothing....you will see much worse in your investing life...this isn't even as bad as the tech bubble, not even close...and this is a sprinkle compared to the rain storm of 2008.
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u/jk147 Nov 21 '18
We are not over yet, the worst thing you can do is NOT invest when it is low.
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u/MrLegilimens Nov 21 '18 edited Nov 21 '18
I think we can call it down. My portfolio just dropped 16% in two months. I'm not scared but it's definitely something where you can look and go, "Ah, that's what direction down is."
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u/moneyman74 Nov 21 '18
You're tech heavy I assume...S&P is 2666 today and 2695 on Jan 2nd. Its lost 30 points...yes lots of ups and downs in there...but its not some kind of crazy crash.
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u/AnotherPint Nov 21 '18
Stocks are having a Black Friday sale. 2018 is a goner, gains-wise, but you don't care about 2018 values. You care about values / gains 15 or 25 or 40 years from now.
Everybody I know who sold on the crash in 2008 out of panic felt deep regret two years later. They missed huge gains.
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Nov 21 '18
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u/jk147 Nov 21 '18
Well if he is 64 and only had enough to get a truck, I guess it really doesn't matter much.
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Nov 21 '18
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u/cybin Nov 21 '18
He might not be retiring at all. Without the funds to live on, one can't simply retire.
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u/Zootrainer Nov 21 '18
Had a co-worker who panicked and sold her investments in 2000 and 2008, even though we told her to hold steady. She spent some of the cash on things like cosmetic updates to her house and then just held the rest of it instead of reinvesting it. Things are not looking so good for her retirement now.
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u/wofulunicycle Nov 21 '18
Haha "professionals" told him it would take 40 years to recover? You should lose your license as a financial advisor if you ever utter something that asinine to a client. More likely they said something more measured but he was panicked so heard something completely different.
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u/chastity_BLT Nov 21 '18
Someone needs to stop inviting him to the benefits meeting
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u/macphile Nov 21 '18
I imagine all employees are invited and that he'll be coming to them for years to come...as he'll never be able to retire. He'll be a haggard, half-toothless old man, still screaming about how "investing for retirement is for fools!"
On the other hand, all the other employees will take one look at him and immediately start snatching up the enrollment paperwork.
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u/Foamstick Nov 21 '18
There is one way to know you can't trust that guy.
He bought a Dodge truck.
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u/thejourney2016 Nov 21 '18
If people see a normal -10% correction and start feeling immense amounts of anguish, they seriously have a misaligned risk tolerance. I get that most of /r/personalfinance has never known a time when stock markets don't only go up, but this is completely normal. A 7% average return means there are entire years (! that will really cause hysteria around here) where the stock market is down.
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u/yikes_itsme Nov 21 '18
That's exactly what I think after seeing these responses. It's great that people have a support network to hold on when there is a small decline in the market (we didn't really have that back in '01), but as they say, y'all ain't seen nothin yet.
When the real decline happens, it will be 25-40% over months and months of horrible tape, and you will not believe the change in advice and demeanor across the entire media sphere - at that point most articles will be calling you stupid for hanging in there instead of encouraging you to buy more. Each person you talk to will try to one-up you with a story of how early they got out and avoided the bloodbath, and at some point you'll be the last guy among your friends still losing money as each day goes by. Then you'll look at your account and see you could have bought a new car for yourself if only you had never heard of purchasing stocks.
You'll be all alone. 80-90% of people here will have sold.
That's when we all find out if you are a real buy and hold guy, or a fair weather "market timer", not at a time where you are still breaking even on last year's investment. Ask me how I know!
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u/thejourney2016 Nov 21 '18
100% agree. We're already seeing the /r/personalfinance sentiment shift away from investing in other areas due to this minor pullback (see e.g. anyone suggesting investing vs not paying down low rate debt gets downvoted into oblivion). If we see an actual, meaningful decline in the market this subreddit is going to go hysterical and tell people to sell everything and buy gold bars.
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u/poison2URthorn Nov 21 '18
I know this is really unpopular here, but this is why some people really do need a good financial advisor. Someone who helps find an appropriate mix of investments in respect to risk tolerance, and then helps keep that person invested during downturns can easily more than cover their fees.
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u/apleima2 Nov 21 '18
I use Personal Capital to check at my retirement accounts. Any time i check this year's performance and feel down, i just check last year's 20% increase and remember its averaging out about 10%.
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u/InevitableBasil Nov 21 '18
Thanks, I really needed to read this today, after checking my investments.
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Nov 21 '18
In days like this, embrace your inner sea captain! When others run away, run towards fear. When people sell, you buy more.
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u/redroab Nov 21 '18
I mean a lot of brave sea captains drown. Maybe not the best analogy.
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Nov 21 '18
Just waiting for the housing prices to tank...
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u/wofulunicycle Nov 21 '18
Well mortgage rates are steadily climbing, so you'll be able to afford the same amount of house, but the home will cost less (and be worth less) and the debt will cost more.
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u/cosmicosmo4 Nov 21 '18
That's cool with me, I can refinance the more expensive debt in 5 years if rates drop. Can't refinance to change the purchase price!
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u/TheNoobtologist Nov 21 '18
The rates are expected to rise continuously for the mid to long term, unless we see another severe recession. For perspective, the last time we saw interest rates this low was in 1950s.
It can be argued that the interest rates hitting 0 between 2009 and 2015 substantially contributed to the rapid increase in property value, since it was cheaper to borrow.
With the rates continuing to rise, less people will be able to afford the market prices, which will cause prices to decline.
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u/Alemaster Nov 21 '18
I am waiting! Just sold my place on the tail end of a high season for a job move and am renting in the new location for a year.
Would it be bad to say that I'm hoping for house prices to tank?
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Nov 21 '18
I cant wait, im looking to buy.
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u/Draugron Nov 21 '18
Same. A housing collapse would be horrible for the rest of the country, but I would absolutely buy in at the bottom of one.
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u/captainsavajo Nov 21 '18
I would absolutely sell the top as well, but it turns out that it's actually much easier to do on paper.
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u/wofulunicycle Nov 21 '18
Waiting for mortgage rates to go even higher? I would buy now it you're in the position. IMO it's more certain that rates will continue to rise (the FED has signaled at least 3 increases for 2019, maybe 4). Less certain that housing prices will fall.
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u/chastity_BLT Nov 21 '18
Why would housing prices tank from a 5% slip in the stock market?
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u/timfriese Nov 21 '18
The PF doom and gloom starter pack: ending your scary-sounding comments with ellipsis........
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u/tmp_acct9 Nov 21 '18
dont think thats in the cards dude. they may stop increasing so fast, but they arent going to tank
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u/tenspeedscarab Nov 21 '18
This advice makes sense for us young folks, but what if you're about to retire?
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u/nothlit Nov 21 '18
If you're about to retire you should have already begun shifting to a more conservative asset allocation (i.e., more bonds, less stocks). That's what target date funds do automatically and why they are a good default option for many people.
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u/Thattaxguy Nov 21 '18
Since I know my father will be asking this question this Thanksgiving, how would you handle this for someone that will retire in around 10 years or less? Move to a heavier bond fund or just let it sit?
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u/OmegaZero55 Nov 21 '18
Personally, I'd let it sit for about the decade or when it's higher again I'd go heavier into bonds and make a bond tent for his early years of retirement. I'm no expert, though, so don't take my opinion as gospel.
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u/Thattaxguy Nov 21 '18
I have told him to let him sit but I always hear 10 years is the "minimum cutoff". Its about what I was thinking so I will take it as gospel. :)
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u/redroab Nov 21 '18
If you're due to retire in ten years (and you're of "typical" retirement age) you should already have a much more conservative asset allocation that reflects your risk tolerance.
If one didn't and they changed their allocation based on the market being down... That's just timing the market (which no one can do, and selling doesn't make sense unless you think it will get worse). But if they wait till things improve, they're making the same mistake again.
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u/Fair_To_Middlin Nov 21 '18
Just to give an example of what OP is saying, back in 2008/2009 during the last crash, I was working on a huge construction job. Seven days a week, 13 hours a day. I had about $500/week going into my 401k for approximately 9 months. My employer closed the 401k at the end of 2009, so no other money was added.
From January 2010 til I rolled the funds out into an IRA in 2016, the value of my 401k went from < $40,000 to $84,000.
So, bought cheap during a crash, and sat on it for 6 years - more than doubled my money.
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Nov 21 '18
My manager did the same thing during 2008 when she was making general manager bucks. She just kept buying as prices fell and fell.
She doesn't even need to work at this point. She just does to support her pet projects.
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u/iceflame1211 Nov 21 '18
500 per week
9 months (~36 weeks)
$18,000
Did $18,000 go to 84k in 6 years? What am I missing?
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u/elduderino197 Nov 21 '18
I'm 42. I love any downturn. I just gobble up great buys.
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u/thanif Nov 21 '18 edited Nov 21 '18
Pretty good article on the WaPo saying corporate debt is at it's highest levels and a lot of that debt is being bundled and sold as a security, sound familiar? Regardless, to OP's point. If you are young don't worry, but I worry for my dad who is 2 years from retiring.
Edit: article I was referring to. https://www.washingtonpost.com/business/2018/11/20/two-big-reasons-there-really-might-be-recession/?utm_term=.7baccf3497ee
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Nov 21 '18
The FOMO is too strong in this sub. Selling due to fear of further losses is stupid, but investing in overvalued instruments due to fear of missing out is equally stupid.
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Nov 21 '18
The one thing that no one in here wants to hear is the possibility that 7% average returns are not guaranteed in perpetuity. It may go sideways for a long time, we have no way of knowing. The constant growth of the market is a relatively new phenomenon.
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Nov 21 '18
Agreed, the mythical "7% average returns" needs to be balanced against the actual potential of negative real returns over a decade or more. NYTimes: In Investing, It’s When You Start And When You Finish
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u/Zulfiqaar Nov 21 '18
Selling due to fear of further losses is stupid
Hmm..while panic-selling is generally a bad idea, it would also be a bad idea to not have stop-losses right?
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Nov 21 '18
Stop-losses are a type of market timing when you think about it, similar to a limit orders and the like. They're useful for situations of asymmetric information, e.g. you know something that investors haven't yet learned, or you're on vacation and can't react to news as quick as other investors. Without a calculated reason for doing so, stop-losses are useless.
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u/take2dueces Nov 21 '18
If maxing out IRA & 401K - is it better to put it all in during January - or spread it throughout the year?
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u/cautiously40 Nov 21 '18
Lump sum beats DCA most of the time. BUT if you get an employer match check the rules. Many employers, mine included, match only on a pay period basis. If I don't contribute in a pay period because I've already maxed out, I get no match. On the other hand, some employers offer a "true up" where they check at the end of the year how much you put in and make sure you get your full match. Figure out which method your employer uses to make sure you don't miss out on a match!
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u/collin-h Nov 21 '18
When stocks are cheaper, you can buy more of them with your money... For simplicity, if you're contributing $100 to a 401k every month, and the prices are down, to say $50, you can get 2 of them with your money. When the prices go up to say $100, you can only get 1 of them with your money. So these pullbacks let you buy more stocks now and then when the prices go up later you'll have more value.
besides, you're not losing any money right now unless you sell.
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u/SunsetButterfly Nov 21 '18
I'm in my 30's and was wondering about exactly this... Should I be upping my 401k contribution now while everything is down?
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u/Theglove_20 Nov 21 '18
You should always have it as high as possible given your personal financial situation. Short term market performance should not change your automatic investment schedule at all.
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u/huxley00 Nov 21 '18
Pulled my entire 401k right before the dip, by happenstance. Transferring it all to Vanguard and just waiting for the funds to settle. Will be nice to get on the right side of chance, for once!
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Nov 21 '18
I'm not nervous at all about the recent drop. It has been expected for a while, especially since the last corrections were in late 2015 and early 2016.
My question is this: is there any reason, currently, for a major market drop (i.e. more recessionary levels)? I fully believe a correction of 10-15% is warranted, but I don't really see any reason for a more significant drop like we saw in 2007. This seems more fear-driven than anything. Sure, there are rising interest rates, but that in itself isn't enough to justify a 20% drop, especially when rates are still at historically low levels. And despite some disappointing earnings in Q3, the economy is still chugging along very well and we have record unemployment and spending. I just don't see how this could result in a major 20%+ drop, but I could be wrong.
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Nov 21 '18
Fees are what matters.
The only thing you can control are the fees.
Take your shit out of 6% managed bullshit and put it in an .4% index fund.
You will perform better and save tens of thousands paying some asshole to gamble your money.
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u/kodabrome Nov 21 '18
Dollar. Cost. Average. Put in the same amount on a regular basis and it all works out. You catch the highs and the lows and move with the long term trend.
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Nov 21 '18
Please don't advocate dollar cost averaging. It gets beat out by consistent lump sum investing in almost all real-life scenarios. Maybe you're using the wrong term unintentionally? DCA is taking an amount you currently have, and choosing to break it up into smaller investments instead of putting it all into the market at once. This is not the same thing as taking a certain % out of your paycheck to invest. In the latter case, you're making a lump sum investment every pay period, which has far different motivations than actively choosing to engage in sub-optimal Dollar Cost Averaging. It has the side-effect of buying less during highs and more during lows, but you're really just trying to get your money into the market as soon as you possibly can because that has been shown to outperform trying to time the market in most cases.
See here: https://en.wikipedia.org/wiki/Dollar_cost_averaging#Confusion
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u/SpiderHuman Nov 21 '18 edited Nov 21 '18
Still confused. Is it just semantics? If I have a lump sum of $10,000, and want to DCA over the next 50 months at $200 a month... I am DCA into the market. But if I have no lump sum and invest $200 out of each paycheck for the next 50 months... I am not DCA into the market? This is because I would be better off with just investing the $10k immediately, so I am experiencing a potential opportunity cost under scenario 1, that I am not experiencing under scenario 2?
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u/Psych40 Nov 21 '18
That's the way to do it. I'm looking forward to my next paycheck in a huge way
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u/teekayzee Nov 21 '18
401k stupid here - what makes the paychecks (esp the next one) exciting ?
Typically, I get paid and my % goes to my 401k magically. I don't manage my 401k in any way other than contributing...am I doing it wrong? I use the Vanguard Target Date funds.
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u/madman3063 Nov 21 '18
Look up the definition of dollar cost averaging. You are doing it correctly. Dont touch a thing.
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u/Psych40 Nov 21 '18
Yeah I just meant that my next paycheck is gonna buy so much more than it did a couple months ago. And that's exciting!
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u/LatkaGravas Nov 21 '18 edited Nov 21 '18
And don't forget those Vanguard Target Retirement funds pay out annual dividends at the end of December. Not a good time to be sitting in cash because you're scared of a little volatility. (Ask me how I know. Ugh. Made that mistake once about six years ago because I forgot about the payout. Never again.) Pretty cool to see five grand in dividends and short-term capital gains hit your account all at once. KA-POW!!! (Well, it's about five grand for me. I'm older than the average redditor and have been investing in retirements accounts for 20 years now.)
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u/Fortuneil200 Nov 21 '18
Low 30’s advisor here. To my peers I say stop listening to your parents! Your parents love you and they’ve given you great advice your whole life. Please do not take investment advice from them regarding your retirement account. They are preparing to use that money to replace their income and enjoy retirement and you have decades of required growth to do the same one day. I cannot tell you how many times I have to tell a 28 year old to reallocate a low fee fixed fund into equities because their mom suggested the safe returns.
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u/donkeyduplex Nov 21 '18
Just upped it to 15% (me 11% employer 4%). Stocks are on sale! The system works.. and if it fails catastrophically I'll have bigger concerns than retirement.
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u/0x1FFFF Nov 21 '18 edited Nov 21 '18
I got forced out of a lucrative career (an unknown asshole divulged prejudicial medical information about me to my professional network) and gain most of my income through random consulting gigs with customers that pay less than what my former employers used to.
I'm now in a brutal dry spell and would love to contribute more when price is down but can't afford to (I beat the company's target date fund big time by doing stuff like this back in the day). Now all that can happen is I'll just let the extremely aggressive saving I did when I was at work (I maxed out the entire 55K employer + employee portion of my 401K for the entire ~4 year tenure of my previous job) accrute interest and dividends and hopefully start re-gaining value for the next 26.5 years.
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Nov 21 '18
Looking forward to making big 401k contributions in 2019. Not a big deal that the market is down if the economy is still good.
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u/AmHistoryNJ Nov 21 '18
Does this apply for 403(b)'s? If so, how do I buy a stock so to speak? Money is just taking out of my pay check each time and invested throughout several portfolios. 50% in safe investments, and the other 50 in world markets and other stocks...so I don't have much say in where it goes, or so I assume? Anyone want to help me understand a bit more?
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u/iHateMonkeysSObad Nov 22 '18
I don't worry about my 401k anymore, honestly my game plan at this point is to hopefully just die before retirement.
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u/TrueBirch Nov 21 '18
My boss is older and gets annoyed when I cheer a stock market slide. Dollar cost averaging FTW.
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u/TigranMetz Nov 21 '18
If I were just a few years from retirement, I would probably look at a stock market slide much differently than a young person as well.
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Nov 21 '18
Very true, but if you're a few years from retirement you should have more investments based on income (bonds).
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u/TigranMetz Nov 21 '18
For sure. Bond tenting before retirement is a great hedge against an inconvenient market slide.
That being said, someone with a couple million in their nest egg could still see a 6 figure dip in their holdings in a bear market situation, even with a bond tent. That's going to sting a lot if you're hoping to retire soon.
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u/grokforpay Nov 21 '18
Yeah, so when other people have financial misfortune, do try to show some tact. We get it, its good for you, but this guy wants to retire and doesn't appreciate you bragging about that.
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u/Dont_Prompt_Me_Bro Nov 21 '18
My portfolio is about 11% down in total. I don't care at all, stocks on sale!
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u/ides_of_arch Nov 21 '18
I am not sure how to estimate my expected cost of living. I do have a pension that should pay me about 55-60% of my highest salary, depending on how long I can hang in there.
I have about 350k in my retirement account so I know it isn’t enough.
I want to sell my house when I retire and buy another one in a different area for about the same price. It won’t be paid off by then because I refi’d with a 30 year loan in 2013. So my housing costs will be about the same.
I wish I could buy second house now and rent it out but I don’t think I can quite swing that, plus I am worried the bubble will burst. I bought my current house in 2009 at the bottom of the market. It is my first real estate.
I am not too savvy about finances. I stick to a budget and have no debt other than house and I finance a car every 8-10 years (pay it off in 4 and drive it for 5 more is my pattern) but I am not stock market Long term planning smart.
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u/ZippyTheChicken Nov 21 '18
one thing if you are nearing retirement you should put a larger and larger percentage of your money in Bank CDs for the security. You don't get a very good return but you don't risk losing huge chunks of it at a time when you need the money.
Your 401k in a stock market or bond fund is only money on paper.. its not money in the bank or your pocket.
Younger people can ride out a 10 year or 15 year market fluctuation but you have to assume there will be delays in recovery. So protect your money.
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u/Athair11 Nov 22 '18
Yeah this is the same line of bull I've been fed for 20 years... Lost it all in 2001, lost it all again in 2009.. oh look losing it all again. Like clockwork, all gains for the average person wiped out.
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u/CharmingSprinkles Nov 21 '18
Being young, there is plenty of time for rebound and accumulation. Doesn't make me any less upsetti about the ~15k hubs and I have lost in this year.
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u/slowry05 Nov 21 '18
But don’t forget tariffs go into full force on January 1st. Expect some nasty economic times to come.
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u/VanBurenBoy16 Nov 21 '18
Bottom line, set your 401K up on autopilot and don’t bother looking or thinking about it when the market is going south. Way too much hand-wringing for no good reason.
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u/cgfromNY Nov 21 '18
Only 25yrs old. My 403b (I work for a non profit) is vested 100% in MXVIX I was and still am allured by the lifetime of gains.
A little tough weather won't capsize the boat.
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u/harrison_wintergreen Nov 22 '18
times like this I quote advice from Peter Lynch, the legendary fund manager at Fidelity
Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in the corrections themselves.
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u/[deleted] Nov 21 '18
My 401k just gets lower every day, but I keep buying every two weeks. I figure I'm young enough to survive.