Don’t Bail on Your 401k
May 21, 2008 – 6:07 amWelcome to Working For Financial Freedom. If this is your first visit please read about this blog. You can keep updated by subscribing by email or to my RSS feed. Thanks for visiting!
Earlier this year when the stock market really started to dive I got a little nervous. There was no way I was going to take money out of our 401k although I wondered if I should change my future contributions to go to different funds. After getting some feedback both in comments and reading some really great advice on the net I changed nothing. I left the 401k alone and we continued to contribute 4% of my husband’s pay (we are doing the minimum right now to get the company match. We’ll up it later after we pay off our debt).
I stopped checking as often as I used to on the progress of our 401k. Whenever I did I would see the Year To Date Return numbers look this -10.9 and -8.2. Yes, those are negative signs in front of those numbers!
I am happy to report that we are finally in the positive.
- Personal Rate of Return from 01/01/2008 to 05/19/2008 is 1.6%
Of course this really doesn’t mean too much because tomorrow the account could be back in negative numbers again. Oil hit $129 a barrel today and is edging closer to $130 so the stock market is taking a beating. What is shows is that the market will improve. It may not all happen tomorrow and it might just taken some time to do it.
It’s ok to be nervous when the stock market takes a dive. But trying to keep up with (or ahead of) market fluctuations is like trying to convince your two year old to go back to sleep when he awakens at 5:30 am bright eyed and bushy tailed. It’s almost always fruitless.
Photo by OmirOnia
3 Responses to “Don’t Bail on Your 401k”
I have to disagree with you. I think the stock market could drop much further this year, and therefore this is not a good time to continue investing in your 401k.
Unless, you are investing in foreign equities or international companies that are getting most of their income from outside the US. But, even then, trapping your money in your 401k until retirement is not a good idea with the dollar dropping in value and inflation eating us your gains.
If you are up 1.8% and the dollar is down 8% this year, then you are actually down 6.2%. You have do get out of dollar bases assets and into foreign currencies or commodities like gold and silver.
Here is a related article:
2008: Bad Time to Invest in your 401k
http://www.pennyjobs.com/pp/public/Articles.aspx?aid=8
By Curt on May 21, 2008
Curt,
That is good food for thought. I am not an investment expert by any means so you brought up some good points. I think about 40% of our money goes into international stocks/funds.
So if now is not a good time to put money in the 401k should a person just save the money they would have put in and then invest that large amount saved when the market has dropped more? How do you know when it’s the right time to invest again?
By Momof3 on May 21, 2008
I have moved my investments to commodities like oil ($134 per barrel today), until the Fed starts fighting inflation by increasing interest rates - which they will have to do soon - maybe by the end of the summer.
Also, make sure to have 3-6 months cash, to help you if you get layed off during the recession.
By Curt on May 21, 2008