I have about $120,000 in a Fidelity 401k and $3,000 in an Empower 403b (the 403b was begun only just a few months ago.)
I fully expect that Trump is going to lead the nation into a big economic slump sooner or later. Is there something I can do to make my 401k and 403b more crash-proof? Or are they destined to just go up and down with the market, and as the roller-coaster passenger, we have no choice but to go with it?
You can move into bonds or Money Market funds, but the risk is that you lose big if the crash never happens.
IANA financial planner.
If I remember correctly, you aren’t old enough to be close to retirement age, yes?
How much control do you have over the allocation/risk level in your accounts? If you’re really nervous, and you have the ability to re-allocate into lower-risk investments, you could do so.
But…in the long run, any losses you might suffer are likely to be short-ish in duration, unless the economy went into a deep recession/depression for an extended period of time.
I’m 61, and my 401ks and IRA endured the Great Recession of 2008, and the COVID recession of 2020/21. They bounced back strongly after those, which were, of course, years before I was even starting to think about withdrawing any money. I never touched my mix during those, and honestly, I even refrained from looking at the quarterly statements during those years; the losses happened, but, frankly, weren’t relevant.
If you re-allocate into low-risk investments, and the economy doesn’t tank, you lose out on the gains you would have otherwise gotten.
And, for what it’s worth, despite the war in Iraq, inflation, gasoline prices, etc., the S&P 500 is still up 7.9% on price return (8.5% on total return, including dividends) for the year to date, which is a pretty damned good performance, given all the reasons why it shouldn’t be.
I’m age 38, so, yes, I have a long time before I would retire.
I currently use the Fidelity Freedom Fund 2050, which is for people who expect to retire at 2050 or so. I only know that it’s some sort of blend of conservative vs. aggressive investments, maybe 300+ different small things blended in there, from what the Fidelity spokesman said when he gave a seminar at my workplace.
Thanks, I guess you two are right, going low-risk means absorbing less loss but then gaining no gain. Maybe no matter how much an idiot Trump is, the US economy may still be resilient enough to regain after he wrecks it.
I was around your age when the big 2008 crash came. I did nothing - didn’t sell and kept investing with my bi-weekly paychecks (also fretted mightily over my large on paper losses). The returns from that period now are huge. I wish I had more money to pump in during the sell-off. If I pumped more in then, I could’ve retired by now.
Go to cash and wait for the crash is challenging to get right. If FOMO is your driver, then keep on truckin! i suggest at a minimum any monthly contributions are into money market/short term treasuries until you feel better. to be more aggressive, switch a lot more into cash.
i was in the biz for most of the 90’s, and i’m also only worth about $10m now before the divorce, so take free advice for what it’s worth. We’re in bad times that globally is going to get worse given we’re at least a year or three before oil prices come back somewhat to where it was before the Iran debacle. Global economy is taking a hit IMHO.
Again, it goes back to greed vs fear. For me, three kids, one with special needs, employed in two industries with volatile lay off risks, was laid off a couple of times, I always had a couple years worth of liquidity. Peace of mind was way more important to me that FOMO. Only you can figure out your comfort zone. Best wishes.
You’re 38? Just leave it where it is and keep funding it.
Hajario doesn’t have an owl as an avatar for nothing. They are very wise. Leave it alone and consistently keep funding it.
Yep, this here, with an emphasis on “keep funding it”.
Look at it this way: if the market drops, and you continue investing, you are buying when everything is on sale. You are young enough to ride out - and eventually profit from - any downturns.
mmm
Don’t try to time the market. At age 38 you’re in it for the long term, trust the process.
Agree. Even the greatest money managers ever, armed with more data and information that an average investor could even dream of having, haven’t been able to “time” the market with any confidence.
Additionally, your Fidelity target date fund is an excellent vehicle to retirement. When the values of the stock and bond allocations fluctuate, it will automatically re-balance for you. I manage several multi-billion $ portfolios, each with different purposes. I can invest in all kinds of investments that most people can’t access; e.g. hedge funds, private equity, etc. But for my personal retirement portfolio? It all goes to my Vanguard TDF. Just “set it and forget it.”
I’m pleased to see so many of us agreeing with me. Read about our hero here:
I’m literally a self made multimillionaire. This is a large part of how I did it.
Right- at this point, you should conceive of your investments more as shares in companies, rather than dollar amounts. The value of the shares may change, but barring something dire happening to that company, you’ll still own those shares even if the market rises or falls.
Case in point- Cisco Systems. If you had bought it in 1998, you’d have bought it somewhere around $11/share. By the summer of 2000, it was $65. By the summer of 2001, it was $18. Fast forward to the summer of 2011, and it’s about $15. In 2021, it’s in the neighborhood of $50. Now it’s around $120 (a recent meteoric spike took it from around $78 in April for some reason). There’s every chance it’ll fall back down to something lower in the near-ish future.
My point? Having that in your portfolio from 1999 onward would be a good move, even though there have been a couple of dramatic rises and falls in the last 25 years. Looking at it as a token of some kind rather than as a dollar value fosters this longer-term view, while looking at your balance and freaking out as the market fluctuates does the opposite.
My former long time boss, who I consider a friend, is one of the most brilliant engineers I have ever known. He has a hole in his head when it comes to this. So many times he’s pulled out and put everything into cash either panicking or trying to time things. I retired at 56. He will be working well into his 60s.
I took a personal finance class when I was in my late 20s and when this was explained to me the scales fell from my eyes. It’s beautiful in its simplicity.
Thanks, good info everyone, especially the wise owl.
Yeah, I regret not having saved more into the 401k during age 23-37. Wish I hadn’t gotten into debt that I needed to pay off, I could have doubled my contributions.
I also kept things as they were during the 2008 crash and did very well. But I have one thing to add. Make sure you have enough money to live on if the crash results in you getting laid off. That will allow you to not touch the retirement money. Eating into retirement savings to live on is a real killer.
I too left my modest 403b funds alone in 2000 and 2008, even though my assets dropped by about 40% on paper both times (I invest pretty aggressively). A colleague who volunteers with me at the tax service listened to some financial “guru” – I think it was Jim Cramer – and sold everything in 2008. He’s still writing off his losses on his tax returns. I paid off my mortgage, added an ADU to my property, installed a power wall, and still have $1M + in assets. I did adjust my investment mix toward bonds and non-US index funds after Trump 2.0, and they are doing very well.
IMO, stay the course, don’t sell, remix prudently.
Another way to think of it is that if you expect to retire around 2050, you’ve got two decades or more after Trump leaves office before then. What happens then is more likely to impact your investments than whatever happens in the next three years or so.
I’m not a wise owl (I’m fairly dumb in terms of finance, sadly), but here’s a couple of things that have helped me stay calm.
About 40% of the total stock market is now retirement accounts. I think this is a large part of why “stonks always go up.” This stabilizes the market to some extent; we have hundreds of millions of people pumping money into the market every pay period, and most of them really can’t try to time the dips. I mean, yeah, it’s possible to move money from 401ks and whatnot into bonds (my wife and I tried that once, didn’t work out), but it’s a pain to do. That’s assuming you actually can time the dips, which
You can’t time the dips. The market makes no sense. See: any stock associated with Elon Musk. The economy has never seemed more fragile in my life than it does right now, and yet DJIA is up 17% over the last 12 months. On top of the irrationality,
You don’t have enough money to win the game. There is so much market manipulation going on right now, the game is so rigged against us, that it’s not worth even trying to play.
Will Bogling work out in the next 10 years? Probably. Maybe not, but it beats the alternative.
I did too (well, my Financial Planner did) but that’s because I am getting old. That 2050 plan will do something similar.