06 Aug
Curious to know -are you making money in your 401k and how long have you been investing in it ?
just curious. when I talk to most of my friends they seem to have exactly what they put in it or less -just wondering if this is a majority type thing happening . most of my friends have 401k's for about 10-15 years and again none have really made any money
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August 6th, 2008 at 7:05 am
I had been making money, but this year I have lost about 10% due to the stock market tanking. But my investments in my 401K are fairly agressive.
I don't agree with the comment below - obviously tax savings is a big part of investing in a 401K, but the goal is to make money! It's just a matter of how risky or conservative you want (or need) to be. For me, I am still relatively young and I feel the best chance for me to have enough money when I retire is to take some risk. As I get older I will change my investments to more conservative ones.
August 6th, 2008 at 7:05 am
Took mine out of the stock market a few years ago, not making much, but probably more than the average American.
August 6th, 2008 at 7:05 am
Hi
its a great curiosity though. As a matter of fact 401K's are not to make money they are to save taxes on your incomes.
People who claim that they make money with 401k's are not financially intelligent.
August 6th, 2008 at 7:05 am
No. I agree they are not to make money; they are to save. That's why you have to diversify. If you put all your eggs in one basket (Enron) and the market falls out from underneath it, you don't have that huge amount of money anymore that you thought you had.
But if you are in different markets with your money some will go down while others may/can go up. Which offsets the loss. In the meantime you've saved money that will be taxed at a lower rate when you go to take it out.
A Roth 401k is an alternative for some. Put it in pre-taxed and get it out without being taxed.
Personally I've got money sitting in a 401k and I only bother to glance at it. I don't worrry about reacting to todays market. I figure the storms will come and go.
August 6th, 2008 at 7:05 am
We have had our (mine and my husband's ) 401K's and IRAs (since I no longer work, he changed jobs) for 10 years, we are 36 years old, and we have over 5 times his annual salary saved up. They are for long term investing, not making money in 10 years. In 30 more years we are looking to have over $2,500,000 if we receive 8% in annual average yields, which is actually below long term averages. We are not relying on Social Security. Our IRAs are in Vanguard retirement target funds, his 401K is 80% stock, 20% bond right now, mix of mid cap, small cap, large cap, and international, plus he gets company stock as the match up to 6%.
August 6th, 2008 at 7:05 am
I've been in my company's 401(k) for about ten years. My inception-to-date annualized rate of return [1] is a little better than 7%. I invest mainly in index funds with almost no fund expenses. My investment horizon is long (about 30 years until I expect to withdraw any of this money), so I am invested agressively. I typically ride market volatility though I do occasionally take view on specific sectors. For instance, I am currently bearish on U.S. stocks. I am over-weighted to foreign and emerging market equities. I also have a somewhat greater allocation to fixed investments than usual [2].
Recently of course, I've taken some hits. My losses have been in the 5% territory. So you could say that until recently, I've done quite well. Even considering the recent market turmoil, I've done okay.
I would ask your friends what kind of fund expenses they're paying. If they can't tell you, it's probably a lot. I take a tempered view on the philosophy of a 401(k) as savings rather than investment. Some people do successfully use their 401(k) accounts to actively invest [3]. But for most people, it's a place to park your money with tax advantages. If you're thinking about investments, the most that you can do to augment your wealth is to invest in your skills in order to increase your current income. Some quick spreadsheet examples would show that the amount you save is the single biggest component of account value.
August 6th, 2008 at 7:05 am
Hello - I have been investing in my 401K since I started working (15 years). Now I am able to max out each year. I have about 500K in it now. That's 4 companies later. I roll it over each time, they match (free money right there), pre tax (forced savings), and yes, it is a good thing. I am not super aggressive with my investments in it, but its not all in cash either. It has gone down a little this past year, but since I view this as a long term thing I'm not worried about that.
For the match alone you do want to participate in your company 401K, but spend some time educating yourself and determining your risk tolerance and then it will work even harder for you.
Good luck!
August 6th, 2008 at 7:05 am
Taking a long-term view requires patience. Patience in the stock market can have its rewards. In spite of wars, depression, economic crises, political change, and environmental disasters during the preceding 80 years, the U.S. stock market has marched steadily upward. During almost any three-year given period, however, the market will have registered daily highs and lows that may have thrilled, or alarmed, investors at the time. There's a universally accepted rule that the longer you hold stock investments, the more likely you are to reap positive results. Historical returns show that there is a 74% chance of positive returns for a one-year investing period, 97% for a 10-year period, and 100% for a 20-year period.
My year to date return is -7% but 20% over the past 2 years.