401k vs. IRAs - Investing Advice Please...?

Question

I have been investing in a 401k through my employer for about a year now. I started out investing 2%, then at the beginning of this year, I upped it to 4%. This week, due to the losses I've experienced (over 11% just this year) I have decided to cancel my investments into my 401k. So right now, there's a little less than $2k in my 401k. I've also considered investing into IRAs. Though I know nothing much about IRAs, or even 401k, I know I should invest in something for my "future."

With the way the economy is, I'm not sure what to invest in or what I can do to get by anymore. My husband even switched jobs and is making $200 more per pay period and we still see ourselves struggling. Food costs and gas prices are up, and it's almost getting too expensive for both of us to work. Does anyone have any suggestions about investing or any other suggestions? It's appreciated.

Answer 1

IRAs also are down.  All retirement vehicles depend on the stock market.  Keep putting in your 4% and forget about it.  Your money will be buying stock at bottom prices and when the market starts climbing your money will grow.

Answer 2

You would be in the same situation with an IRA.  Get back into your 401k.  You are young.  Your contributions buy more when security prices are low.  Over the long term you will make money.  If you stop you're losing more money in the future than you are in the present.

Answer 3

Get out of the stock market and 401k's.

Government employees for the STATE of Nebraska had the option of 401Ks for over 50 years or pension plans, since 1948. The FEDERAL goverment copied them in the 1978.

(states can do things that the feds can later copy or reject. notice CA legalized medical marijuana while the feds outlaw marijuana) Thus 401ks have really been around since 1948 in Nebraska.

The people who had 401Ks did not have a happy retirement, the money did not really compound as all the slick 401k salesmen all of the country keep saying they will. This is probably because inflation killed all their earnings over time. The government bailed the government workers out and allowed them into the pension plans to give them a retirement. Lesson: 401K did not equal a retirement.

End result, 401K is a smoke and mirror plan for retirement. It gives people the illusion of control and independence.

STOCK MARKET.

INFLATION KILLS YOUR RETIREMENT

Adjusted for inflation the stock market still has not return to the peak of the early 1960's. The US is a debtor nation without a manufacturing base. Adjusted for inflation US dollars are only going to get weaker and weaker. as the Fed prints more and more to pay off the debt. The Fed has said this is the policy now they do it to keep people employed.

INFLATION

This is a hidden tax on you. It makes your money worth less. End result, a retirement 500K is really worth 50K in today's dollars. Right now it is 10-15% over the long run, of say 10 years.

Look at the price of gas. It has doubled in only a few years. When you retire in 37 years it will be like $40 a gallon. A 500k retirement (you do not have enough being contributed or make enough to ever have this amount) will be gone in a few years just to buy food.

The economic outlook is terrible everywhere.

GREAT SIMPLE INVESTMENT FOR RETIREMENT

You want to make a good simple and easy investment, just pay down a mortgage faster. It is something like a 4-6% return to do so. More depending on other factors. It is RISK FREE. Never worry about the stock market swings, just pay more of the mortgage down and become debt free sooner. The sooner you do that the sooner you can buy an investment property as described below.

HOW TO RETIRE?

- for 1/3 of the population they have an inheritance to pay off their mortgagees or use to retire with. For the rest of us this is what I would do:

I would buy investment properties to provide a stable stream of income for retirement. Like another house or a condo/apartment building/multiplex, duplex, etc. For your income I would say a duplex. Condos have a lot of annoying fees and you probably  do not have enough to finance a multiplex, unless you're sophisticated in business to convince the SBA or a bank to give you a loan to build one or buy and update one.

Rich people got rich owning land, not by flipping, it but by holding on to it.

Lesson: look to the rich and copy them to make money!!!

Buying properties to rent or lease out, even a commercial building during an economic downturn can be a great investment once the economy recovers. Right now land values are still headed south for a lot of the country.

At your income you would need at least $660,000 to $880,000 to maintain your standard of living to retire on. If you do contribute to the 401K now your money is worth negative value since the purchasing power is gone. If you want to get to that kind of money do it after the kids are out of the house and your house is paid off. Build up that income right before retiring like when you're 60-65.

If you need money for a rainy day 401K loans have to be repaid and you are taxed to take it out and then have to repay with post tax dollars so it's a double tax. No NO not a good idea.

ignore the negative thumbs down and watch PBS Frontline at their website.

"Can you afford to retire?"

Answer 4

When you go to the store and shoes are 2 for the price of 1, you buy them don't you....well stocks that go into your 401k are on sale. This is the best time to invest in yourself. You and your husband should put a budget together. Cut the coffee and donut, Take lunch to work, less McDee's. Is it cheaper to take the bus. Can you change your tax with draw? Go to your HR and ask to change your deduction, they should have a chart to get money back w/o paying at the end of the year. If you got $5000 back change it so you get $2000 to $2500 back instead. That gives you $200 more a month. Bush isn't giving you any interest for holding it is he. Also take a close look at the funds your company offers. They can't tell you which ones to take(by law they can't) so look them up on the computer and see their history. Yep homework, It's your future. $200 a month in 30 years will give you $1.2mil. That's with a 12% return. In 30yrs will that be anough to live on?

Answer 5

stop putting money into the 401k if you can't afford it but what you'll find is that you will find a way to afford it.  If you stop, you'll be hard pressed to restart.    

What I'm trying to figure out is how Nebraska state workers could be in 401ks for 50 years when code was enacted in 1978 and put into law in 1980.   Take a look at annual S&P 500 returns and see if you notice a trend regarding annual returns exceeding 20%.   You'll find that they happened far more often AFTER 1980 then before. Of course big downturns also occurred but the overall return is still 7-8% annually which exceeds inflation AND the market returns for most real estate.  So what do you do?  Do both...pay off your home AND invest in the market.  But do not do either if it means you have to live on credit cards.  Better to tread water for a few years then put stuff on credit and go backwards.

Answer 6

Times are indeed tough, and it's a shame it has to affect your family so much...sounds like you have the right plan/ idea , but just can't " catch a break".

Just a couple of things that worked for my wife and I ( plus three kids )... always cook... take-outs or eating out very sneakily raises food costs  ... and buy " house brands" ..man, the food is the same... it's all in the preparation that makes it special. ( ...and this is tough..don't let your kids become " picky eaters"...that is SUCH GARBAGE... eat what's in front of you , I did .  If it's not too late..go the juice route... lemonade, fruit punches, etc... buying Coke is like buying gas.

We were lucky enough to be able to work opposite shifts for years...it's hard, but it made me a lot better " Dad"... I cooked dinner..we did homework..got everyone ready for bed ( and usually had some kind of " treat" at night )

....now for the bad news... you've got to get back in the 401...especially if your employer " matches" some part of your contribution...it's like getting a raise...but you just can't touch it now...   an IRA would be great, but it's no different than a 401...it's invested in the market...and no one matches any bit of what you put in...in YOUR case the 401 is better.

Go over your budget and find out WHERE you can squeeze to get 10, 15 or 20 dollars a payday into that 401.( AND, things will swing around...you WILL be making money in it sometime...and it turns out to be a " money snowball" )

...back to the family...I learned to fix bikes...I don't think my kids ever had a new one... my wife got some of their play clothes at " thrift stores"... $ 1.50 for jeans as opposed to $ 25.00... and my kids NEVER wore Air Jordans, or Abercrombie, or whatever was " hot" that year.....and somehow they all turned out OKAY... pretty smart and thrifty/ frugal themselves, now (  and proud of it )

We're in great shape now...getting to 60... thanks to property and scrimping...401..IRA..  Really cutting down on any driving...( SAD..we covered the country...when it was cheap.)

I don't know what else to say... add leftovers to Ramen noodles... put something different in rice ..spice it up or add vegetables or pieces of chicken, beef...  it can be Oriental, Cajun, or plain ...we liked mushrooms ( at least I think WE did..no one complained )  

That's another thing...whether you know it or not..kids figure out what's going on ...and they appreciate the effort...whether they let you know it or not (or even whine a little)

Good luck.