The United States also represents the largest economy in the world ($27 trillion) followed by the EU ($20 trillion) then China ($17 trillion).
The US Dollar also represents over 58% of global currency reserves.
So is there another entity you envision as being more financially stable?
The main 401k plans in the US, like Fidelity or Vangaurd, have a number of different ways to invest. In all of those options you can either make money or lose. If you think that it is a good time to invest in European stocks, move part of your money there. Safe or risky is up to you. You have options to vary the percentage of money you put in each section. 20%, 40%, 5%, 35%. You decide and if you follow the progress of the various plans, you can move money from one option to another.
You have to become your own investment advisor, or just let it ride. And that kind of sucks if you don’t want to follow your investments.
Always play the game. Put $1 into the 401k fund and the company matches. Now you have saved or parked away, $2 dollars without doing anything. How many times would you like to play this game.
Always invest whatever you company match is. They have a 13% match, you should at least be putting in 13% no less.
If your pay allows you do to so, at any rate.
There are some cases, where the full company match might be a lot. For example, Buc-ee’s offers all employees a match up to 6%. For a cashier just starting out, I would understand not being able to take full advantage of it.
But that’s a comparatively rare case. Usually 401k’s are the realm of the relatively privileged, salaried workers. And for those, certainly match as much as possible.
At some level, there’s also the possible consideration of the annual cap. The annual contribution limit for a 401k this year is $23,500 and $7000 for an IRA. If your annual salary and/or company matching is high enough that you are worried about this, (1) kudos! and (2) still get the extra $23,500 you’ve earned from your company.
Another concept that I didn’t see mentioned here is “dollar cost averaging”. That is to say, the market may go up and down, but if you are consistently investing the same amount every period (which you will be with a 401k), those market fluctuations average out over time.
With dollar cost averaging and a long term time horizon one actually appreciates the occasional big drop. I’m buying low now baby! The risk of the market returning less than say 7 to 8% a year on average over a several decades time course is very low.
The thing you can’t do is sell out of panic as it drops.
Right now is of course a special time. We’ve a very long run of great market returns and many are … anxious … that even without Trump shenanigans the market is at risk of a major correction. And with Trump craziness, maybe more so.
But assuming you have a moderately diversified set of funds that do not consistently travel in lockstep you are prepared for a drop in the market, able to effectively buy stocks low when you rebalance next year. Then wait. And stay the course.
I just want to note that at cursory glance at the Guideline links that the OP provided, it looks like this is a very employee friendly 401k provider. With the annual fee of 0.15% to 0.35%, and an offering of only Vanguard funds with expense ratios ranging from 0.04% to 0.17%, this looks like a very good plan compared to some that I have read about. The OP may not realize it, but this is a decent 401k plan. One thing that may make it better is if there is a Roth 401k option.
OP, you can’t avoid risk. Putting your money in a bank appears to be safe, but inflation risk will eventually get you. You will lose money, but you will be losing it very safely if that makes you feel better. It shouldn’t.
Since you can’t avoid risk, what you need to do is to determine the amount of risk you are comfortable with, select funds with an asset allocation that fit with your risk tolerance, and determine what the average return is for that asset allocation. Then use that number for planning purposes to determine how much money you will have at retirement (or at least at age 59-1/2, which is when you can access the funds without penalty). Or go with one of the managed portfolios.
I’m going to veer just a bit off topic here:
I’ll suggest that he OP put as much money in the 401k that he can, suppressing the urge to spend more now and save less. Keeping living expenses low is a key part of retirement savings. The following is simplified in that it ignores inflation, but that is offset somewhat by wage increases over the years. For my example, I assume that a person makes $100,000 per year. If they save $5,000 and live on $95,000, after 30 years at 5% return they will have $332K. Now if they save $20,000 and live on $80,000, after 30 years they will have $1.32 million. Well, duh, you say, they saved 4 times as much so of course they will have 4 times as much money at the end. But the person who saved $5,000 is used to living on $95,000 per year, and at that rate the $332k will be spent in 3.5 years. But the person who lived on $80,000, his $1.32 million will last 16.6 years simply because he has lower living expenses. This should be common sense, but I admit it took me a while to understand. And it applies regardless of the actual income level.
You can’t go back in time, there are no do-overs, so get it as close to right as you can as soon as you can. Retirement is not an unforeseeable event. Don’t act as if it is.
Another thing to remember is that Donald Trump or any administration doesn’t control the market. The market consists of thousands of individual companies that all are looking to stay in business.
I understood this in the sense that I saved as much as I could* - but I didn’t really understand until I retired. I did all this planning , expecting to spend say 75% of my pre-retirement income after retirement. But I forgot to account for the fact that I wasn’t spending 100% of my income pre-retirement - I was only spending 80-85% because the rest was going to retirement savings.
* while still living a life I was happy with - for example, I bought my cars new but drove them for at least 10 years.
OK, folks… thank you for all the answers and thoughtful feedback. Work was busy and it took me a bit to read and think through all this, which I’ve now done. Sorry for the delay.
So here’s what I’m going to do:
Accept that I have limited financial know-how, and listen to the advice of posters with more experience and wisdom (and money). It was, after all, a thread from last year (Explain "retirement" to me) that made me consider having a 401k at all, vs not contributing anything in the past. So, then as now, you’ve convinced me to do something I otherwise wouldn’t have. Thank you.
Contribute the maximum amount my employer will match (“free money” at 100% return, as you all insisted)… it’s something like 4%. It will mean cutting back on my monthly spending a bit, but I think we can make it work, just barely.
For the time being, put it all into the Vanguard Federal Money Market Fund, despite knowing that it will absolutely lose real value relative to inflation every single year. This is less due to risk tolerance, and more just because I have vague and ill-defined ethical problems with Wall Street, the stock market, and US-style capitalism in general. It’s an emotional reaction, as several of you correctly pointed out. More on this later.
When work settles down, spend some time and mental effort learning about existing financial markets and exploring other investment opportunities, both domestic and abroad, that might better align with my personal philosophies, and reconsider my investments then. Worst case, I might move some/all money out of the 401k at a penalty and reinvest it somewhere else — but only if I can understand the relevant systems well enough.
It’s not a perfect plan — far from it. It’s constantly losing real value. But it’s still more money than I would’ve saved otherwise. It’s a start.
The “risk” aspect, despite the topic title and OP, was only one part of this thought process. I’m not actually very risk-averse, all things considered… it’s less that I’m worried about losing my savings to a crash in the next few years, and more that I don’t like the general idea of participating in speculatory investments, especially when they’re managed solely for growth & profits (as opposed to ESG funds, for example, which are also flawed in their own ways).
But more importantly, this topic helped me recognize and process some of the unspoken, well, feelings that I’ve held towards American capitalism over the decades. I’ve had various gripes and whines about it, which, in totality, would put my financial literacy somewhere between “disillusioned leftist memes” and “angsty uninformed teenager”. That’s probably not a good place to be when it comes to managing my future 
These thoughts are not well-informed enough to gel into any sort of cohesive argument, even, much less a defensible economic outlook.
So, I’ll spend some time learning the history of the markets (how did the stock market even come to be), the current practices (the longs and shorts of it, I suppose), the alternative practices, the esoteric philosophies, arguments and counterarguments, etc. before revisiting this topic in the future. It will be an interesting, exhausting, and honestly long-overdue journey. Any book recommendations, etc., would be welcome (less “this is how you save for retirement”, and “this is how the US got its modern financial system, and this is what other countries have tried”).
My ultimate goal would be have a fund set aside for retirement (or, more likely, early withdrawal due to some unforeseen emergency) that doesn’t entirely compromise my personal ethics. But that requires a more thorough understanding of all the systems involved. I’m OK with a lower ROI, but it should be out of “informed consent”, so to speak, not just some loosely-held feelings.
Thanks, all! I have to get to back to work for now, but it’s something I’ll think more about over the next few months.
On edit - cross post w/ OP’s most recent post
Just a note on this, for some people early in their careers, contributing to the maximum match may not be practical.
If it will strain your finances to do so, and you don’t have a lot of disposable income, certainly do not feel compelled to make the maximum match. Just as much as possible within your means.
You don’t want to sacrifice your future for the present, but you shouldn’t do that by sacrificing so much of your present that your future is compromised anyway. That defeats the purpose.
What problems do you have with American capitalism specifically, and not, presumably, with capitalism in other countries? Is there a difference?
Since this thread is already pretty long, I think it’d be better to make a linked topic instead if you’re interested in discussing that? I’d be happy to… but wouldn’t it be more fruitful to have that discussion after I do some self-edumacating first?
While I’m happy to share my current thoughts, again, they’re more just ill-defined feelings rather than cohesive arguments right now.
I would advise you not to reject investments that will keep place with or outplace inflation simply due to these ill-defined feelings. And note that the link in the OP to your investment options includes an international bond fund, an emerging market equity fund and multiple international developed market equity funds. All three will avoid American capitalism to a certain extent.
I’m not seeing how purposely making yourself poorer is “sticking it to the rich”, but you do you.
A 401K plan helps you save money pre-tax. Even without the match, that’s a hugely consequential advantage, and then the match is just free money from your employer on top of that. And as noted elsewhere, you can simply choose minimal-risk money market funds if you like.
If your analysis is rooted in this:
This is a very poor analysis. The US dollar is the world’s reserve currency. Even if something should happen to change that status, it’s still the most stable currency in the world.
If you hate the current administration, you certainly have my agreement and sympathies. It’s morally true that having a deeplly stupid head of state ought to destabilize government finances, that his choices will result in catastrophic impacts to US stocks and bonds alike. But it’s a financial mistake to assume that what should happen is what will happen. Yes, there’s likely to be a recession from Trump’s missteps. No, you shouldn’t bet on an utter collapse of the USD as a “screw-you” to the current administration, because you’re only screwing yourself.
I’m glad to hear you decided to participate in your 401k. I think your investment choice will be a good way for you to initially get comfortable with saving for retirement without having any risk. Once you’ve been doing this for a while, you may feel more comfortable investing in other funds.
I did want to mention one thing about pulling money out of the 401k:
Your 401k is pretty good in that it has a wide variety of funds with a wide variety of investment opportunities, including international funds. Unless you want to invest in something completely different, like real estate or crypto, you can probably keep your money in that 401k and use their funds. You can invest in multiple funds at the same time and you can move money between the funds at any time. Only pull your money out of the 401k if you’re really certain it’s worth the penalty.
Keep in mind you can also change your contribution at any time. If something comes up and you need cash in hand, then you can reduce your contribution so there’s more in your paycheck. You may also be able to take part of your balance as a loan to yourself. For instance, if you have a balance of $10000, you may be able to take $5000 as a loan that you’ll pay back with interest. So while it’s best to be socking away as much as you can, there are ways for you to get more in your pocket if you need.
And one more thing, your employee benefits may include free consultations with a financial advisor. The advisor can work with you one-on-one to discuss various investment strategies that work for your goals and comfort level. Ideally, the advisor should just be giving you general guidance about investment strategies rather than acting like a salesperson for their firm’s funds. If your company offers that service, it may be worth checking out.
I’m glad that the posters here were able to talk you down off the ledge a little bit. And while it’s wise to take the time to read and learn as much as you can, don’t delay the actual 401k contributions. Start them today if you have not yet done so.
Besides retirement plans like the 401k and IRAs, there are two other common ways to prepare for retirement. Starting a business is one, and owning rental real estate is the other. Both are harder than investing in the stock market, require a lot of work, and are exposed to their own particular risks. And both will put you right in the maw of the capitalism beast that you distrust. But they are options.
See post 22. We are long overdue for a recession, so this is an excellent time to start investing, so long as someone can keep their job.
Having a cushion of money in case one doesn’t is also a good thing.
I liked Millionaire Next Door, but my recollection of it was as a better guide to not overspending than for investment advice. My wife and I have used those guidelines for 46 years, long before the book came out, and they work.
I’m glad you’ve decided to get the free money, but the first thing to do is to make sure you have a buffer (I’ve heard six months of income) in non-retirement savings. There is a big penalty for withdrawing money from a 401K. It really helps to have a cushion if you get laid off. I never had to use mine, but it was nice to have.
Those savings should be in a money market fund, of course, not invested in the market. That’s a place where caution is warranted.
Question for some of our more knowledgeable:
Let us assume he is at a lower tax bracket right now. After the moneys are in his account would moving them to a Roth make some sense?
He may have more options for funds more aligned with his worldview there, and more flexibility for timing of future needs?