Should I lower my 401K contributions and opt for a savings/money market account?
June 5th, 2010
Given the economy, should I lower my 401K contributions and opt for something safer–like a money market or savings account? I current invest 9%. I’m new to my company, so they do not match yet.
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I would not stop investing for retirement because the market is down. This is when you want to increase your investment.
Remember, it’s "buy low sell high." — as opposed to "buy high and sell low."
Long term Idea:
Max out all pre-tax funds – lowers your current income tax bill.
After tax money:
Roth Ira
Overall basic long term strategy:
S&P 500 Index
S&P Mid Cap 400 Index
Dollar Cost Average every month
One of the investment options should be a cash fund or money market fund that you can put your 401k contributions towards.
I say stick with the 401K, but if you are running low on money due to economy , maybe decrease the % you contribute, at least until they start matching!
Investors will tell you though that a young persons best bet at saving is a 401K versus reg. savings accounts.
Good Luck!
probably not. how much is money/saving a/c pay these days? 3-4% the most? Stock market…while it is down these days, it will come back eventually. Of course there is no guarantee when the market will come back and how much it will rise but it is much better return in the long run.
One thing important is that how long until you retire? if you only have a few yr before you retirement, saving a/c will be a safer bet or else stick with your 401K.
Hope this helps
Do not change anything. You will miss out the period of growth if you try to time the market. If you retiring in 10 or more years, you have time to recover.
If you transfer money to a money market account, you will lose money because the inflation will devalue the value of your money.
NO!!!!
Right now stocks are on sale. If you are young then this is a good time for you. You need to be putting that money away and in a few years you will see it come back even higher and you will be rewarded. Don’t listen to day traders that are panicking. They have no idea which way the market is going to go in the next 6 months and neither does anybody else. You need to buy and hold. If you sell now you will lock in losses and you don’t want to do that.
People always assume a "cash" instrument such as a money market account is safer than stocks because they are unaware of the various types of risk associated with investing. People are only familiar with "market risk" meaning the risk that the stock market will go down and you will lose your money. Well every investment (including the so called "safe" money market accounts)incur risk. In the instance of a money market, you are incurring what is known as inflation risk meaning if a money market account is paying you .50% and inflation is going up 4% per year, the value of your savings is being eroded by inflation – so not only are you not gaining any money, you are also losing money! If you still feel strongly about lowering your stock exposure and increasing your cash exposure, look for the fixed investment in your 401(k) plan and put some (not all) of your contributions there. At least this way you’re getting tax-deferred savings and tax-deferred compounded interest. Albert Einstein calls compounded interest the 8th wonder of the world! Look it up – good luck! And keep saving for retirement – don’t make the mistake of relying on Social
(In)Security!! And remember, a money market account doesn’t offer FREE company match!