Should I Even Touch Our 401k?
January 17, 2008 – 2:39 pmWe started contributing to my husband’s 401k two years ago in 2006. We didn’t contribute in 2005, which was his first year with his company. I wish we would have, but we can’t go back in time. Before that he was in the military.
- In 2006 the 401k’s YTD (Year to Date) performance was 10.8%
- In 2007 the YTD performance was 15.6%.
- 16 days into the new year and the 2008 YTD performance is -8.1%. Yes my friends, that is a big NEGATIVE sign in front.
I know the market is crazy right now with the recession, declining housing market, credit losses etc… But I’m beginning to wonder if I should make some adjustments to our 401k.
- Should I change where our contributions go this year? (Currently we are only contributing 4% to meet the company match until we out debt-free)
- Do I take money out of certain funds altogether and invest them in different funds?
- Or just hang on for the ride?
The 401k is for our retirement which is decades away. I know there will be ups and downs in the market over that time. I’m just wondering if I should make adjustments over the years as the market changes or do nothing? The last thing I want to do is make rash decisions that hurt our portfolio; but I also don’t want to fall asleep at the wheel.
I’ll include a little peak at our portfolio. We currently have our contributions invested in the following funds with Fidelity.
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43.29% | HARBOR INTERNATIONAL | ||
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30.92% | FID FREEDOM 2040 | ||
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14.86% | WFA SM CAP VAL INST | ||
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5.62% | FID OTC PORTFOLIO | ||
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5.31% | EXTENDED EQ MKT IDX |
Our current contributions are invested each paycheck into the following investments:
| FID OTC PORTFOLIO | 30% |
| HARBOR INTERNATIONAL | 30% |
| Blended Fund Investments* | |
| FID FREEDOM 2040 | 40% |
For those that are more experienced with 401k’s what have you done when the market goes down? Do you adjust if needed or stay the course?
12 Responses to “Should I Even Touch Our 401k?”
Honestly, I don’t look. I’m strictly into buy and hold index funds, and I check performance about twice a year. I assume mine have gone down as well, but I haven’t checked.
I don’t know whether you’re in good investments or not, but 16 days performance is nothing especially compared to the number of years to go until retirement.
Investments are volatile, if you should alter the funds you’re in, that’s basically independent of the performance over the last fortnight.
By plonkee on Jan 17, 2008
Thanks Plonkee. I think you are doing the right thing, I’d be better off to not even look
By Momof3 on Jan 17, 2008
No, don’t transfer it out, if anything invest more. Have some faith. Watching your retirement fund like a hawk is like watching a pot boil.
By Klassh on Jan 17, 2008
What you need to do is determine your risk tolerance and develop an asset allocation based on that.
You several funds including a target date fund, target date funds are generally supposed to be a one stop solution and the vast majority of your money should be going that way.
If it were me though, I’d look for the Spartan Total Market Index, the Spartan International Index and a good bond fund and send all my money into those three in an asset allocation I am comfortable with and hold on.
By justin on Jan 18, 2008
Thank-you Justin. I’ll look into those.
As far as our risk tolerance goes, I’m not really sure what it should be? I’m willing to go a little risky as opposed to super conservative. We are 30 and 31 so we have awhile until retirement.
By Momof3 on Jan 18, 2008
It can be heartbreaking watching those numbers go down. So don’t watch. If you are in it for the long haul, then it would be foolish to try to micromanage based on the day to day, week to week or even month to month.
By the way, when the market goes down–think of stocks being on sale then. That’s when you should “stock” up!
By Karen on Jan 18, 2008
Unfortunately determining your risk tolerance is a very personal decision. There are some rules of thumb that make the rounds, 110 minus your age in Bonds/fixed income for example.
I am mid 30s and I have about 70/30 Stocks/Bonds and I have 50/50 of the Stock portion in Domestics/International. I am using Vanguard index funds, but the Fidelity Spartan funds are just as good for the most part.
I used to check my balances every couple of days, but I just check once every few weeks to make sure contributions are going in and all that stuff.
By justin on Jan 18, 2008
Remember that when the market is down you are actually able to buy more shares with each contribution. You don’t actually loose money until you sell.
By Mary on Jan 18, 2008
I personally have no idea, but Gather Little by Little has a post on this very subject today.
By Lynnae @ beingfrugal.net on Jan 18, 2008
Do NOT take your money out now! You will lose your 8% and then when the market goes backup, you will miss that run and be wondering if you should get in. Then you will put it back in close to it’s new peak and at best see it gain slowly. The big guys (Goldman Sachs, hedge fund managers, etc.) love to see this happen, as this is when they are buying. Just watch the news. Everyday a few billion from some overseas fund rolls into one of our beaten down companies. They aren’t doing that to be nice…it’s going to go back up at some point.
You have plenty of time. Relax and keep thinking…”Wow, this market is cheap. What a great opportunity for us right now.”
Also, the risks you are taking in your portfolio are more than the average person usually likes. However, the average person is almost always wrong, so keep the risk for the next 20 years and then lower it the final 5-10 as you get ready for retirement. I’m 100% in stocks and will be for at least 20 years. Putting 10% in bonds makes no sense. It lowers my return and doesn’t really change the risk, as I have such a long time frame.
By H_Roarke on Jan 22, 2008
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