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Started By
Message
Doubling 401K Contribution During Downturn
Posted on 7/31/22 at 8:56 am
Posted on 7/31/22 at 8:56 am
12/1/2017 7/31/2022 6.40% 33.56%
7/31/2019 7/31/2022 7.50% 24.22%
I'm doubling my 401K contribution betting that we will see an upswing in the market, buy low.
Company matches 3% so that's what I've been contributing, just upped it to 6%.
Returns above are from their web page today, five years/one year and cumulative
Any thoughts ?
7/31/2019 7/31/2022 7.50% 24.22%
I'm doubling my 401K contribution betting that we will see an upswing in the market, buy low.
Company matches 3% so that's what I've been contributing, just upped it to 6%.
Returns above are from their web page today, five years/one year and cumulative
Any thoughts ?
7
Posted on 7/31/22 at 9:09 am to The Torch
You should max it annually and live off the remaining income
Posted on 7/31/22 at 9:11 am to Mr.Perfect
Only matches 3%? Ouch
Posted on 7/31/22 at 9:40 am to The Torch
You are doing the right thing.
Never drop it back down though.
As your household pay goes up, try to keep increasing your percentage.
And 5 years from now when there is another large dip, double it again (once you are maxing 401k, look to max HSA).
Never drop it back down though.
As your household pay goes up, try to keep increasing your percentage.
And 5 years from now when there is another large dip, double it again (once you are maxing 401k, look to max HSA).
Posted on 7/31/22 at 9:42 am to The Torch
I’m doing 25% currently, it definitely makes things tight
Posted on 7/31/22 at 9:52 am to The Torch
I thought you had to max your 401k to be allowed to post on this board.
Posted on 7/31/22 at 10:06 am to The Torch
Max out 401k should be goal. Tax shelter time value of money for long period of time is hard to beat for most people.
Roth follows 401k, if income allows. If not, back door options exist to Roth.
Buy low and sell high.
FWIW - I attribute approaching 20% of net worth today is due to 2008 financial crisis "downturn", where we continued to max out 401k (among other investments).
Don't overcomplicate wealth building.
Roth follows 401k, if income allows. If not, back door options exist to Roth.
Buy low and sell high.
FWIW - I attribute approaching 20% of net worth today is due to 2008 financial crisis "downturn", where we continued to max out 401k (among other investments).
Don't overcomplicate wealth building.
Posted on 7/31/22 at 10:24 am to Turf Taint
What are the back door options for a Roth? My wife and I’s combined income is going to be over the qualifier but she would be fine if it’s only her income. Can you file married but separate and still get through with it?
Posted on 7/31/22 at 10:29 am to tigerbacon
"Only matches 3%? Ouch"
From my account web page
401(k) - Company match
100% of deferrals not exceeding 1% of compensation plus 50% of deferrals in excess of 1% but not in excess of 6% of compensation.
Is this common ? Looks like they match 50% up to 6% right ? so 3%
From my account web page
401(k) - Company match
100% of deferrals not exceeding 1% of compensation plus 50% of deferrals in excess of 1% but not in excess of 6% of compensation.
Is this common ? Looks like they match 50% up to 6% right ? so 3%
This post was edited on 7/31/22 at 10:36 am
Posted on 7/31/22 at 10:44 am to The Torch
Your company probably does more thank 3% match. Most likely something like 4-5% all in.
Mine has been negative for the last 12 plus months, I can see adding more to it right now.
Would love for some guidance on this topic.
Mine has been negative for the last 12 plus months, I can see adding more to it right now.
Would love for some guidance on this topic.
Posted on 7/31/22 at 11:06 am to meansonny
If you’re financially able I’d advocate maxing HSA after 401k match, then back to maxing 401k.
It’s triple net and overall “better” $ w/ 1 caveat…. Would mean paying medical expenses out of pocket today vs tapping the HSA funds
It’s triple net and overall “better” $ w/ 1 caveat…. Would mean paying medical expenses out of pocket today vs tapping the HSA funds
Posted on 7/31/22 at 12:17 pm to SwampCollie
Max 401k
Roth or HSA
That is exactly true and good advice!
But, like anything "risk" related (ie, price of risk/insurance)...context matters. If your family are trapeze performers in a circus, HSA (ie, the high deductible medical insurance) may not be right for you. I use example in jest but to make the point. I have personally too many X-ray bills in my family (kids in sports) and nixed HSA, although tried like hell to convince myself give triple value point. Did not pull trigger because of ankles, wrists, and other co-pays and bills!
HSA if you can make it work s/b high priority.
Roth or HSA
quote:
It’s triple net and overall “better” $ w/ 1 caveat…. Would mean paying medical expenses out of pocket today vs tapping the HSA funds
That is exactly true and good advice!
But, like anything "risk" related (ie, price of risk/insurance)...context matters. If your family are trapeze performers in a circus, HSA (ie, the high deductible medical insurance) may not be right for you. I use example in jest but to make the point. I have personally too many X-ray bills in my family (kids in sports) and nixed HSA, although tried like hell to convince myself give triple value point. Did not pull trigger because of ankles, wrists, and other co-pays and bills!
HSA if you can make it work s/b high priority.
Posted on 7/31/22 at 1:45 pm to The Torch
And we have people who think “the market” is discounting future cash flows 
Posted on 7/31/22 at 2:05 pm to Turf Taint
quote:
HSA if you can make it work s/b high priority.
I’m about to start my first job. Company only matches 1% 401K. Can you explain the importance of maxing HSA as opposed to Roth like I’m 5? Just trying to learn so I can set my finances up as best as possible.
Posted on 7/31/22 at 2:37 pm to The Torch
Assuming one has at least a decade or more until retirement, and since 401Ks (and other tax advantaged plans) are being discussed, even if one believes that this bear market will last a year or more, why not increase contributions, since most investors utilize dollar cost averaging for these plans?
If you’re attempting to trade or you tend to utilize lump sum investing and time your investments, agree or not with that strategy, I can see the hesitation. But like I said, in tax advantaged plans, most are DCAing in. So if you can plow it in during down or sideways times, do it. IMO, long term investors hurt themselves by staying glued to daily headlines and market gyrations.
Just my 2 cents based on what’s worked for me over the years.
If you’re attempting to trade or you tend to utilize lump sum investing and time your investments, agree or not with that strategy, I can see the hesitation. But like I said, in tax advantaged plans, most are DCAing in. So if you can plow it in during down or sideways times, do it. IMO, long term investors hurt themselves by staying glued to daily headlines and market gyrations.
Just my 2 cents based on what’s worked for me over the years.
Posted on 7/31/22 at 2:41 pm to HermanBoone
Congratulations and best of luck on first job!
Context matters, so presuming you have a LONG runway length to retirement (30+ years) and no family yet...
Answer to your question follows, but starting with my advice if I were you:
1st - live below your means (90% of gross income or less, if possible); therefore, use credit only for homes and cars. This alone is a $1mln+ decision most in your shoes do not realize, appreciate or both.
2nd - Take the 10% (or more, if possible) to build long-term wealth! I promise you your future self (and family) will THANK YOU!
Invest regularly, automatically, and NEVER take $ out (barring major and (hopefully, unusual events like major health or natural disaster)). $1 in stays to enjoy long-term growth and bring you many life options you have no idea yet that you will face as the future you. Options offered will be wonderful blessings.
Rainy Day Fund - Start by making sure you have rainy day fund, especially when you get in your first home. Aim for 2 month, then 2 months worth, then 3 months but ultimately you want to get to 6-months (that may be a few years down the road for you).
Once you have 1 moth worth, start 401K. It is tax sheltered, meaning you are deferring taxes until you pull the money out in retirement. Aim to put as much in as soon as possible.
Some argue putting in Roth IRA as well, and I do not disagree. Key point is to live below your means and get that money working for you as soon as possible.
The HSA is a Health Savings Account that offers triple value for most people:
LINK
1. Tax free contributions (like a 401k)
2. Tax free growth (like a Roth, meaning earnings is not taxed, unlike 401k that is eventually taxed)
3. Tax free distributions
The offset is you have to have a high deductible healthcare plan.
So, if you have low risk of lots of healthcare costs (ie, high deductible, where you are paying lots of healthcare cost in your deductible, is not a big factor), then you should pursue an HSA - to enable to you save and enjoy this triple opportunity.
Know some who have $250k or more in their HSA accounts over many years. That is sweet!
Good luck.
Context matters, so presuming you have a LONG runway length to retirement (30+ years) and no family yet...
Answer to your question follows, but starting with my advice if I were you:
1st - live below your means (90% of gross income or less, if possible); therefore, use credit only for homes and cars. This alone is a $1mln+ decision most in your shoes do not realize, appreciate or both.
2nd - Take the 10% (or more, if possible) to build long-term wealth! I promise you your future self (and family) will THANK YOU!
Invest regularly, automatically, and NEVER take $ out (barring major and (hopefully, unusual events like major health or natural disaster)). $1 in stays to enjoy long-term growth and bring you many life options you have no idea yet that you will face as the future you. Options offered will be wonderful blessings.
Rainy Day Fund - Start by making sure you have rainy day fund, especially when you get in your first home. Aim for 2 month, then 2 months worth, then 3 months but ultimately you want to get to 6-months (that may be a few years down the road for you).
Once you have 1 moth worth, start 401K. It is tax sheltered, meaning you are deferring taxes until you pull the money out in retirement. Aim to put as much in as soon as possible.
Some argue putting in Roth IRA as well, and I do not disagree. Key point is to live below your means and get that money working for you as soon as possible.
The HSA is a Health Savings Account that offers triple value for most people:
LINK
1. Tax free contributions (like a 401k)
2. Tax free growth (like a Roth, meaning earnings is not taxed, unlike 401k that is eventually taxed)
3. Tax free distributions
The offset is you have to have a high deductible healthcare plan.
So, if you have low risk of lots of healthcare costs (ie, high deductible, where you are paying lots of healthcare cost in your deductible, is not a big factor), then you should pursue an HSA - to enable to you save and enjoy this triple opportunity.
Know some who have $250k or more in their HSA accounts over many years. That is sweet!
Good luck.
Posted on 7/31/22 at 3:57 pm to Turf Taint
I don’t agree with HSA contributions for someone who is struggling financially. Sure, you can grow that money and get tax free distributions for health expenses, but you have to grow it first. And if you have to actually use your health insurance for critical illnesses, major surgeries, etc. then you’re screwed because you’re on a high deductible health plan. So now you’re hit with high medical bills after your HSA funds are exhausted.
Don’t get sick often and think it’s worth it? Great. I don’t get sick often either. But I’ll continue to keep myself covered in the best way possible for health insurance.
Don’t get sick often and think it’s worth it? Great. I don’t get sick often either. But I’ll continue to keep myself covered in the best way possible for health insurance.
Posted on 7/31/22 at 4:40 pm to dualed
I understand where you’re coming from. But some companies only offer HDHPs (like the last two that I’ve worked for). So in those cases, even if you end up pulling the money to cover expenses, you’ve still gotten the tax break on the contributions.
Posted on 7/31/22 at 9:20 pm to Jag_Warrior
I am behind the eight ball. Wife and I retired from military. We start our 401k in our early 50s. I still think we can live off our retirement. Wife is in GS system. She gets another retirement check in 10 yrs.
Posted on 7/31/22 at 9:32 pm to Mr.Perfect
I would say max until the match and them max a roth. If you can still put in then work towards maxing the 401K.
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