1. Have you installed the new JSF Mobile app? Check out all the details here.
    Dismiss Notice
  2. One account & one avatar for all of JSF. Unified login and profile. Forum alerts on the main site, and more. Check out the details here: Forum & main site unified account feature is live!
    Dismiss Notice

Going crazy with my 401k!

Discussion in 'Off-Topic Discussions' started by akm3, Jun 27, 2008.

  1. akm3

    akm3 Well-Known Member

    Joined:
    Jan 23, 2004
    Messages:
    1,461
    Likes Received:
    2
    I did something scary today. I raised my 401k contribution from a paltry 4% (which my company matches) to 24% (which will have me contributing the maximum into my 401k...and to save you math, this means I make 64k a year.). This will be very, very tight on my budget, but we'll manage, it is still a very respectable income in this area, we just have to tighten the belt a little.

    Why? I believe the hits the stock market and economy have been taking represent an excellent buying opportunity. I don't believe we are at a 'bottom' yet, but plan to keep plugging in 24% of my income until we come out of this bear market, which I expect could take several years. When we do come out of this bear market (and I believe we will), I will have invested a tremendous amount of money at very, very low prices.

    "Buy low sell high" - we always say that, everyone knows it, but hardly anyone does it.

    Many people believe we are the precipice of a tailspin that we will not recover from. 'This time is different' then the previous bear markets. But, but HOUSING! But, but OIL! But, but DEFICIT! But, but CHINA!.

    Every bear market seems different, but I have faith that we as a nation will prevail and eventually companies will begin earning money again. So, I guess that makes me a contrarian.

    The worst case of course is I could personally be hit with a layoff or something and wish I had been saving in an emergency fund. Well, that is why investing involves risk!

    Also, I could be wrong and 'peak oil' could be true and everything goes to hell with food shortages and riots - in which case I'd be screwed even if I wasn't investing all this money.

    Also, I believe consumer demand and ingenuity will allow us to transition quickly enough (but painfully) to alternative energy and avoid TOO major a disruption of American life. Maybe I'm naive.

    So, I've made all these statements, who thinks I'm crazy?
     
  2. guava

    guava Elite Member
    Lifetime Platinum Member

    Joined:
    Feb 15, 2004
    Messages:
    12,607
    Likes Received:
    19
    I'm not sure what difference the economy plays in all of this. Do you mean that you've started saving a larger percentage of your income instead of spending it? Or did you have your investments in some other form before? Because if it's the former, then I don't see how it could possibly be at all dangerous. Can't you access your 401k in case of emergency?
     
  3. danswanton

    danswanton Well-Known Member

    Joined:
    Jan 8, 2006
    Messages:
    131
    Likes Received:
    0
    I don't think that's crazy at all. Regardless of what the economy is doing, it makes sense to save as much as you can afford to, and the best places to save are those with tax advantages.

    The only crazy part of your post is the thought that you can time the market.
     
  4. zenpharaohs

    zenpharaohs Elite Member
    Lifetime Platinum Member

    Joined:
    Jun 21, 2005
    Messages:
    17,144
    Likes Received:
    14
    Maxing the contribution to the 401k is normally one of the best investment opportunities you have, especially if there is any employer match at all. It's as close to a no-brainer in investment that I know of.
     
  5. jason12676

    jason12676 Active Member

    Joined:
    Aug 8, 2007
    Messages:
    141
    Likes Received:
    0
    I dont think your crazy at all !! I can tell you that I am in the Financial industry and have been for quite some time.

    Over the last few weeks I have met with several portfolio managers from companies like Pimco, Franklin Templeton, American Funds, MFA, TransAmerica and just last weekend in Chicago with Rydex.

    All the money managers are saying the same thing! It's a great time to buy and they do see better times ahead.

    Also, I look at it this way - If your company matches you the same % you contribute, right off the bat thats 100% return :tucool:

    If you were to get laid off you do have access to the vested money within your 401k due to a qualifying event - however if these are pre-tax contributions which most are you will be subject to taxes and pre 59 1/2 distribution penalties if you don't put the money back into a qualified plan (Typicall an IRA) within 60 days.

    Personally I contribute up to my companies match to get my 100% return and invest other monies in a SEP Ira.

    However if I wasnt an LLC I would do the same in a Roth Ira.

    This is just my opinion and if I was right more than 50% of the time I would quit my job and move to Vegas :D
     
  6. Robert2006

    Robert2006 Active Member

    Joined:
    Sep 20, 2006
    Messages:
    1,695
    Likes Received:
    0
    That's the only thing that would bother me. In Canada it's much easier to pull money out of a RRSP so it wouldn't be an issue.

    Other then that I'm with you :tucool: Assuming you're making good choices.

    Some thing for people to think about. The US car fleet gets about 25 mpg. The 2012 EU fleet standards are 47mpg. If all the US did was copy the EU standards the world would be floating on oil. But instead all the US consumer hears about is expensive hybrids :rolleyes:
     
  7. Shamie

    Shamie Senior Member

    Joined:
    Jan 21, 2004
    Messages:
    7,428
    Likes Received:
    16
    This is off the topic, but what kind of car gets 47 mpg that isn't a hybird. Even the tiny Smart car doesn't get that kind of mileage. I don't even think a Toyota Hybird Prius gets that many mpg.
     
  8. Chadster

    Chadster Well-Known Member

    Joined:
    Dec 16, 2004
    Messages:
    1,055
    Likes Received:
    0
    Even if the worst case did occur (whatever it would be), at least you didn't blow the money - you tried to stash something away. :nod:

    On a side note, I work for the 10th largest roofing contractor in the US and we work on many very large projects. The commercial construction market is as strong as I have seen it in 10 years. Hospitals and arenas are going up like weeds and every contractor in the country is booked solid with good work. But costs are really inflating strongly and companies are going to be hurt in the near future. In my work I am seeing inflation really hit its stride and I think Warren Buffett has it pegged right on the nose. For example, steel is going up 10% a month and petroleum-based products are climbing at 8-10% a month. What long term impacts will this have?
     
  9. akm3

    akm3 Well-Known Member

    Joined:
    Jan 23, 2004
    Messages:
    1,461
    Likes Received:
    2
    The 1989 Honda CRX got 49 city / 52 highway (although that would be under the old calculation method, so it would have dropped a bit...and cars today have to carry a lot of safety crap that makes them much heavier (and more dangerous...to others))

    The 2002 TDI Beetle got upper 40's on the highway.
     
  10. Robert2006

    Robert2006 Active Member

    Joined:
    Sep 20, 2006
    Messages:
    1,695
    Likes Received:
    0
    My Citreon C3 is getting 50+ mpg real world. 1.4litre diesel engine. I think it's similar in size to a Honda Civic.

    The Smart is a city car. The most important thing is small size so you can park it and move around crowded European cities. Fuel mileage isn't a big thing. The average city car driver isn't doing a lot of miles.

    http://www.citroen.co.uk/new-cars/citroen-C3/

    Almost all the toys and it was 14K euros. Could have had it for around 12K and not given much.

    They sell a little mini-van with the same engine and tranny. It gets the same mileage. Great for somebody like an appliance repairman or other worker that needs to haul some tools and some parts around. You won't fit a whole eight person hottub in the back -) but how often do most people need that?

    Or think of it this way. Supposedly the 2009 Porsche Boxer-S will hit 40mpg highway and about 30 city. That's a 300+ hp engine :drool:
     
    #10 Robert2006, Jun 29, 2008
    Last edited: Jun 29, 2008
  11. Robert2006

    Robert2006 Active Member

    Joined:
    Sep 20, 2006
    Messages:
    1,695
    Likes Received:
    0

    How long ago did these projects get funded? There have many quite a few stories last few months of hospitals not being able to getting funding for things like equipment.

    The loan market is basically dead and won't get better soon.
     
  12. KT Monahan

    KT Monahan Active Member

    Joined:
    Jan 5, 2007
    Messages:
    972
    Likes Received:
    0
    This is your 401k. You won't tap it for decades. At the age of 31, barring the complete collapse of the US economy, it's fair to say that you will be selling higher than you are buying now.
     
  13. Chadster

    Chadster Well-Known Member

    Joined:
    Dec 16, 2004
    Messages:
    1,055
    Likes Received:
    0
    The funding is current, but owners are requiring contractors to bid on the work a year ahead of schedule to fix their costs.

    I recently bid on the roofing for the new University of KY Patient Care Facility. We were the only bidder which is very unusual. Contractors are very insecure about guessing material costs a year into the future.

    In another example, I recently bid the roofing package on the new Pittsburgh Penguins Arena. The roofing contractor won't set foot on site until September of 2009, but our hard bids went in last Monday. No one knows what material costs will be.
     
  14. zenpharaohs

    zenpharaohs Elite Member
    Lifetime Platinum Member

    Joined:
    Jun 21, 2005
    Messages:
    17,144
    Likes Received:
    14
    This got me - a couple years ago I was considering building something and because it took a year to get the project approved by the town, the materials cost had increased by about 50%.
     
  15. OrangeTiger

    OrangeTiger Active Member

    Joined:
    Jan 16, 2007
    Messages:
    434
    Likes Received:
    0
    They tell us, in construction management class, that construction traditionally lags behind the economy 0-5 years in terms of a downswing or upswing.

    Bids and the bid process, I imagine, play a large role in that, but I'd guess so does the time line for completion of projects :confused:.
     
  16. KT Monahan

    KT Monahan Active Member

    Joined:
    Jan 5, 2007
    Messages:
    972
    Likes Received:
    0

    Hmmm.... What did I say back in June?:cry:
     
  17. DFS

    DFS Well-Known Member

    Joined:
    Oct 24, 2005
    Messages:
    641
    Likes Received:
    0
    June was a paltry 5 months ago, and the economy has hardy collapsed. It's just correcting itself, and it's very good at that.

    Everybody, keep contributing, stop watching the market every day, and stay the course. You only get hurt on a roller coaster if you jump off during the ride. Stay on till the end and you will have only the fondest of memories of the ups and downs, and a mountain of money!!!

    To use a weight loss analogy, imagine standing on the scale all day long, every day, and waiting for the weight to go down (or up).

    And as Dave Ramsey always says, 100% of the stock markets 10-year time periods have made money. THAT'S EVERY SINGLE ONE OF THEM!!! :tu:
     
    #17 DFS, Nov 7, 2008
    Last edited: Nov 8, 2008
  18. KT Monahan

    KT Monahan Active Member

    Joined:
    Jan 5, 2007
    Messages:
    972
    Likes Received:
    0
    Yeah, I was actually just trying to be funny. It's not a complete collapse. If you are young, this is a buying opportunity. This is the time to max out your contributions to your 401k so you're in there completely when the market turns and the gains start to come back.
     
  19. Robert2006

    Robert2006 Active Member

    Joined:
    Sep 20, 2006
    Messages:
    1,695
    Likes Received:
    0
    It's not so much about being young but not needing the capital in the short term. If you can stick your money in a basket that pays around a 6% dividend and not worry about the basket for the next five+ years then it's okay.

    If you need the money six months from now then it's a different story. Or if you're the type that worries.

    I'm not sure about that 10 year bit. But even if it's true remember between survior bias,expenses and just bad luck there is no reason to believe you'll always do better then the market or even match it.

    I'm guessing that 10 year bit always starts on the 0 year of a decade? if you bought at the peak in 1929 it would have taken 20+ years to get even.

    One thing that today should show is the risk of over concentration. Too many people thought houses were 100% safe and put most of their money into one house. Or one town. Don't try and be too cute putting everything in one thing. No matter how safe you think it is.
     
  20. iceweaselsarecool

    iceweaselsarecool Well-Known Member

    Joined:
    Mar 16, 2006
    Messages:
    4,464
    Likes Received:
    3
    I believe the stat Dave quotes is "Since 1930."

    I've contributed to retirement since the market's been in the 9k range. Hooray for buying low. Basically you're wagering that everyone else is going to continue working hard and trying to get ahead, and that they'll be working for companies that your mutual funds of choice hold. So all you bizatch's get to work, mmmk?

    And, Hey, is that gas going back down?:claphigh:
     

Share This Page