Dumb question: please help. I am now eligible for a 401k ...

[Myrina]

... through my company. Given all the instability, is this a good time to open one?

My thought is: stock prices have no place to go but up, so why not invest 2 or 3% of my salary on the 'non aggressive' side?
(My company matches 50%.)


But I admittedly know next to nothing about this kind of thing and appreciate any input from fellow DU'ers.

Thanks!!! :hi:

[lonestarnot]

1. Depends upon how old you are. If I were young I would think about it.

My experience was that they have to much control over my money. If they match just think about contributing what they match.

[Myrina]

7. I'm 40 ...

...the company will match 50% of my investment, up to 6% of my annual salary (which means, they max at 3%).

I bought a house last fall and live basically paycheck to paycheck ... some little bitty kind of savings would
help me sleep easier, and knowing myself, the only way I'm going to make that happen is if they TAKE it from
my check before I can spend it on something else. :blush:


Thanks for your input!! :hi:

[lonestarnot]

20. You better get in on that then.

:hi: But plan on at least a year trying to get it out if you want it before you retire. :hi:

[GOPisEvil]

2. It may be all you have on which to retire.

i would definitely open a 401(k), if only for the current tax benefits. I would most definitely invest non-aggressively for the time being. But, you've got to do something to supplement your retirement, since no one has pension plans anymore.

[fishnfla]

3. your thinking is right but dont go it alone

there is devil in the details check out clarkhoward.com

[kath]

4. Stocks are not the only option - usually there are lots of choices, with varying degrees of risk

Money market funds or bond funds are lowest risk.

[Vincardog]

5. Invest and get the 50% match but invest in index funds and not any individual stock

The growth industries of the 21 st century age going to be Conservation, recycling and green energy

[A HERETIC I AM]

17. Index funds?

10 year performance of a well known index fund vs. a well known actively managed Growth Fund;

Index fund; Spartan 500 Index Fund - Investor Class (FSMKX)
http://personal.fidelity.com/products/funds/mfl_frame.shtml?315912204

10 year = 2.95%


Actively managed Growth Fund; The Growth Fund of America Class A (AGTHX)
http://www.americanfunds.com/funds/details.htm?fundNumber=5#returns-expenses

10 year = 7.85%



On edit to add this. Index funds are fine so long as you are willing to watch your balance rise and fall exactly in tune with the market. If the fund has a Beta of or near 1.00, it will be exactly as volatile as the index it is modeled on.

[PeaceNikki]

6. If your company matches, participate in the maximum match without question.

[blount]

8. This investment is hard to beat

Max matching as soon as you can afford it.

[livetohike]

9. It's never a bad time to save money especially if your company

matches part of it :-). The rule of thumb is to try and contribute the maximum amount allowed by your company. Read the choices they give you carefully, there should be written information rating the risk of the mutual funds you have to choose from for your investment. That way you can be comfortable investing in a fund that has low risk or whatever risk level you feel you can take....if you're young, you can probably tolerate a more aggressive mutual fund because you have years to build up that income.

[A HERETIC I AM]

10. Do you think you will be able to put away enough money in a bank account...

at 1 or 2 or maybe 4% max interest and have enough to live on when you get to the point of wanting to retire?

A 401(K) is one of the most effective ways of putting away a large sum of money over time and provides for an opportunity to take advantage of the long term gains historically realized with a well diversified portfolio typically available with such accounts.

[iris27]

11. at least do enough to get the maximum match...that's

free money you're walking away from otherwise. Keep it in one of the more conservative funds if you're wary.


Personally I haven't changed anything about my 401k since moving all of my money out of any real-estate-related stuff over a year ago. The market sucks right now, but I'm only 26 so I've got the time to wait, and right now I'm getting a heck of a lot more shares for my money than I did in better times...should be nice to see when things start to recover.

[Mind_your_head]

12. If your company is going to match anything you give, go for it!

It's 'free money'. Remember to save beyond what you will be giving to your 401K and the matching, invest intelligently, and never purchase on credit (unless it's a home). Corporations and the gubmint can't be trusted. Live wisely. ;-)

[Myrina]

13. THANKS EVERYONE for the quick and thoughtful feedback!!

:loveya: NOW I feel like I have some info to work with!! :applause:

[GirlieQ]

14. Great time to open one!

Although you must be careful where you put your money. My investment banker brother (who saw this whole disaster coming a year ago) has all of my 401k stuff in a money market account. I do the max contribution that's matched.

It's a great way to reduce your taxable income, and you can't beat free money from the company!

[OPERATIONMINDCRIME]

15. If You're Young Enough, Then This Is The BEST Time To Get In A 401K.

You aren't using the funds for a long time, and the stocks will more than rebound by them. So basically, anything you put in there now will be buying shares up, and you are getting those shares at a HUGE discount. You will earn far more in the long run due to getting in now, then someone who equally got in weeks or months ago.

Absolutely do it!

[dhpgetsit]

16. Absolutely a good idea.

Go for it!

Why?
It is a tax shelter. You get to recieve money tax free.
Your employer is matching 50%. Take all you can get!
I fully believe the market will rebound and you are getting in cheap right now.

If you are decades from retirement, don't go too conservative. When the market rebounds you will enjoy much bigger gains that way. Go conservative when you are getting close to retirement age.

I hope it's not one of those lousy 401k accounts where you only get stock in the company you work for. If it is, make the investment anyway but look for a job with a better company. You can roll it over later on.

[Liberal In Texas]

18. Absolutely YES. Otherwise you are throwing away free money.

Your employer is matching 50%, you can only come out ahead in the long run (even at 40).

[Warpy]

19. Better now than six months ago

because you'll get more for the money. Anything your employer matches is a good thing.

We haven't reached the bottom of the market yet, I'm afraid, but we're a lot closer to it than we were 6 months ago, so it's a better deal now.

The stock market has outperformed savings over time, and time is the operative word. Don't think of it as a savings account or a piggy bank you can raid, think of it as something that's untouchable over the next few decades and you'll probably do fairly well.

Just be aware that the numbers will go up and down. If you have any control over what's purchased in your plan, look for stocks that pay dividends. It's the income that will help support you when you retire.