Comments on: Changing Your 401(k) in a Treacherous Market

By: ????

???? — Sat, 25 Oct 2008 00:36:16 +0000

What about leaving what’s there and only putting enough to the get company match? Then take the “extra money” and pay down other things such as mortgages?

By: purpelnoon

purpelnoon — Thu, 09 Oct 2008 02:23:08 +0000

I totally agree. If retirement is a long way off, and money that we do need soon we keep in stable investments, then we shouldnt be pulling money out, we should be BUYING MORE. Everyone I talk to states they are pulling money out of stocks. I tell them, “Sorry, but its a bit late for that”. If they did that a couple of years ago fine, but not now. Take the hit and buy more. In a few years, your money will be worth much more than those that pulled out after the mayhem.

By: Sarah

Sarah — Wed, 08 Oct 2008 09:26:50 +0000

I maxed out my 401k contribution, with a lot of cutting back at home, to buy the most for the least.

By: Mike

Mike — Wed, 08 Oct 2008 03:54:05 +0000

“This is not a good time for the Baby Boomers.”

____

It depends. The 45-year old Baby Boomer may well have 20-25 years before he/ she needs ANY of his/ her stocks; and may well have 50 years before he/ she needs ALL of his/ her stocks.

Even the 63-year old Baby Boomer may well not need ALL of the stocks for another 20 or 30 years; and let’s give him/ her credit for having a little sense: OF COURSE he/ she knows as well as you and I do that money you need in the next 3-5 years should be in something safer than the stock market! (Still, chances are the 63-year old Baby Boomer has more reason to worry about the stock market than do their late-Boomer counterparts).

The idea that “if the market has collapsed just before I plan to retire then my retirement is in jeopardy” seems to presuppose that on Retirement Day the only available plan is to cash in EVERYTHING, and that’s that… and, what, buy an annuity with the whole sum? Therefore, naturally, it makes a huge difference if there’s a 20-50% stock market drop just before Retirement Day. But it looks a bit different if you ride out the Bear market by spending down your cash, and hold onto the stocks for rosier times. Granted, there’s no guarantee rosier times will ever come, but I doubt the economic crisis OR the Bear Market is permanent.

Personally, I’m far more worried about the real economy than the stock market itself. The stock market will forever go up and down, and I’m willing to predict that the long-term trend-line will continue to be up.

By: Emily

Emily — Wed, 08 Oct 2008 02:54:17 +0000

I am only 23 and don’t have a whole lot in my 401k yet, so I think I’m going to try to just stay put, but I just feel sick for people who are wanting to retire right now. Last year, my dad thought he would be retiring about now. Instead, he’s still working — he works for himself so he has the option to cut back a little on work, but he wishes he didn’t have to do any. This is not a good time for the Baby Boomers.

By: Money Lint

Money Lint — Tue, 07 Oct 2008 17:42:59 +0000

I’ve found it very difficult to find any sort of advice on 401K tactics in an environment such as this and for my investment time horizon. I have over 30 years of investing before retirement and with all the volatility in the market, i have watched my 401K balance go down hundreds if not thousands of dollars a day. Yes, I know these are “paper” losses but you cannot deny the immediate loss of value to my funds.

So in an effort to stop the blood loss, I transferred my stock fund balances into a money market fund but I continue to make contributions into my stock funds. My thought process was that I would preserve the capital I have but continue to buy into my funds at ever-lowering prices. I keep my eye on the market and am actually employed smack dab in the middle of it so when i see things start to settle down I’ll plow the money in my money market into the stock funds again, which should then be trading at much lower prices, and then ride the appreciation up again.

I know the pundits say don’t try to time the market blah blah but what does everyone think of this plan? It will require a watchful eye on the markets and I’m sure I won’t catch the bottom but I’m preserving capital now and not sitting out of the market forever.

By: Economist

Economist — Tue, 07 Oct 2008 17:04:48 +0000

If you have a portfolio, you have to be diversified. Most losses are caused by panic, but if you are smart, you don’t panic. I had a diverse portfolio I was tracking at the time of stock market crash of 9/11. Stocks were dropping and my portfolio was down by 30 percent. I choose not to act because if I sold I would have been at a loss and I just hung in there. Within a year, my portfolio was finally at break even and I had actually had gains by from the dividends. The market continued to grow and my portfolio followed suit.

The lesson was not to panic and to be smart about the companies you are invested in.

By: Anonymous

Anonymous — Tue, 07 Oct 2008 15:50:08 +0000

I am curious to know your thought on these variable annuities that my CPA keeps peddling. He states the insurance company will guarantee 5 -6% return each year no matter what the market does. Sounds suspecious to me.

By: Mr. ToughMoneyLove

Mr. ToughMoneyLove — Tue, 07 Oct 2008 14:49:31 +0000

I agree with staying invested but I think you are leaving some money on the table by not having some non-equity allocations. I would particularly look at some inflation protected securities.