# What's a reasonable rate of growth for a 401(k)? **URL:** \ **Category:** Factual Questions\ **Created:** [July 6, 2014, 12:02am UTC](https://boards.straightdope.com/t/whats-a-reasonable-rate-of-growth-for-a-401-k/692443 "2014-07-06T00:02:49Z")\ **Posts on this page:** 8\ **Page:** 2
**Author:** ![Bill\_Door](https://avatars.discourse-cdn.com/v4/letter/b/50afbb/32.png) [@Bill\_Door](https://boards.straightdope.com/u/Bill_Door)\ **Post date:** [July 7, 2014, 10:10pm UTC](https://boards.straightdope.com/t/whats-a-reasonable-rate-of-growth-for-a-401-k/692443/21 "2014-07-07T22:10:27Z")
> [@Dewey\_Finn](#): > > FYI, Warren Buffett has a slightly different plan for the money his wife would inherit upon his death, “Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P > 500 index fund. (I suggest Vanguard’s.)” With Warren Buffett’s inheritance 10% in bonds is plenty, but with the much smaller pile I’m leaving behind the 35% Vanguard Wellington has allocated to bonds is much less risky, and the Admiral shares (VWENX) have a 0.18% expense ratio. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [July 7, 2014, 10:25pm UTC](https://boards.straightdope.com/t/whats-a-reasonable-rate-of-growth-for-a-401-k/692443/22 "2014-07-07T22:25:51Z")
My point is that he suggested an S&P 500 index fund for the majority of the investment, as opposed to Vanguard Wellington or another actively managed fund. ---
**Author:** ![That\_Don\_Guy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/that_don_guy/32/538_2.png) [@That\_Don\_Guy](https://boards.straightdope.com/u/That_Don_Guy)\ **Post date:** [July 8, 2014, 1:11am UTC](https://boards.straightdope.com/t/whats-a-reasonable-rate-of-growth-for-a-401-k/692443/23 "2014-07-08T01:11:25Z")
[Here]([http://www.hey-arnold.com/TSP](http://www.hey-arnold.com/TSP) Graph June 2014.png) is the latest graph of the federal employee 401(k). The five lines indicate the five oldest funds: Blue is C (stock market based) Pink is F (bond based) Yellow is G (government fund based) Cyan is S (I think that’s small-cap stock based) Orange is I (international based) The graph at each point in time indicates the current annual return for money invested at that point. For example, at the start of 1990, money put into the C fund has gone up just under 10%/year, while money put into the G fund has gone up just over 5%/year. As I said before, the entire length of each graph can change from one month to the next. At the start of the recent stock market crash, the C line was at about 5% for 1990, and parts of it were negative (i.e. you wouldn’t get all of that money back, much less with any interest). ---
**Author:** ![Hampshire](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hampshire/32/4887_2.png) [@Hampshire](https://boards.straightdope.com/u/Hampshire)\ **Post date:** [July 8, 2014, 2:36am UTC](https://boards.straightdope.com/t/whats-a-reasonable-rate-of-growth-for-a-401-k/692443/24 "2014-07-08T02:36:27Z")
(Disregarding that the OP said no matching funds from the employer) a lot of people do overlook their employer’s matching contribution power. Even if they only match 25 cents for every dollar you’re getting an immediate 25% return on any contribution made. Some employers even match dollar for dollar (up to a certain contribution%). Where else are you going to get 100% return on your money invested in year one? You take a pass on that it’s like taking a pass on free money. ---
**Author:** ![Bill\_Door](https://avatars.discourse-cdn.com/v4/letter/b/50afbb/32.png) [@Bill\_Door](https://boards.straightdope.com/u/Bill_Door)\ **Post date:** [July 8, 2014, 12:35pm UTC](https://boards.straightdope.com/t/whats-a-reasonable-rate-of-growth-for-a-401-k/692443/25 "2014-07-08T12:35:09Z")
> [@Dewey\_Finn](#): > > My point is that he suggested an S&P 500 index fund for the majority of the investment, as opposed to Vanguard Wellington or another actively managed fund. Really depends on your age. Keeping 100% of your investments in stocks works well for youngsters, but people in the last quarter should be a little more conservative. Plus, I don’t take much stock advice from Warren Buffett, it’s terrible advice for the average investor. The last time I looked at Berkshire Hathaway’s portfolio the top four holdings amounted to 60% of the value. I like a little more diversification. Warren Buffett doesn’t buy stock, he buys companies. He’s in a different market than me. ---
**Author:** ![HipGnosis](https://avatars.discourse-cdn.com/v4/letter/h/76d3ee/32.png) [@HipGnosis](https://boards.straightdope.com/u/HipGnosis)\ **Post date:** [July 8, 2014, 6:14pm UTC](https://boards.straightdope.com/t/whats-a-reasonable-rate-of-growth-for-a-401-k/692443/26 "2014-07-08T18:14:25Z")
> [@Dereknocue67](#): > > I just checked my 401K and over the past 25 years the average annual gain was 12.35% but that includes contributions as well. Then you haven’t actually calculated (or understand) gain. ---
**Author:** ![dracoi](https://avatars.discourse-cdn.com/v4/letter/d/90db22/32.png) [@dracoi](https://boards.straightdope.com/u/dracoi)\ **Post date:** [July 8, 2014, 9:02pm UTC](https://boards.straightdope.com/t/whats-a-reasonable-rate-of-growth-for-a-401-k/692443/27 "2014-07-08T21:02:55Z")
> [@Machine\_Elf](#): > > 1. **Once per year, on the same date every year,** you reexamine your portfolio and buy or sell assets as needed in order to restore your chosen allocation. It doesn’t really matter if you pick the same day of each year or not, as long as you pick some method that doesn’t rely on trying to time the market. If you keep waiting to sell stocks at their “peak” then you’re doomed. For example, I examine my IRA funds each quarter, roughly - I pick an afternoon when I have time. On any quarter in which I need to reallocate more than 5% of the funds to get back to my targets, I do so. If the difference is less than 5%, I let it ride. ---
**Author:** ![dracoi](https://avatars.discourse-cdn.com/v4/letter/d/90db22/32.png) [@dracoi](https://boards.straightdope.com/u/dracoi)\ **Post date:** [July 8, 2014, 9:06pm UTC](https://boards.straightdope.com/t/whats-a-reasonable-rate-of-growth-for-a-401-k/692443/28 "2014-07-08T21:06:15Z")
> [@Bill\_Door](#): > > Really depends on your age. Keeping 100% of your investments in stocks works well for youngsters, but people in the last quarter should be a little more conservative. There’s research that shows that having at least 10% of your portfolio in bonds not only reduces risk but actually increases net return over a 100% stock portfolio. More than 10% bonds continues to decrease risk, but also decreases the overall return. (I don’t have a link to it now, but the American Funds presentation I saw a while back had a great little chart of risk/return for portfolios of various stock/bond mixes.) [Previous page](https://boards.straightdope.com/t/whats-a-reasonable-rate-of-growth-for-a-401-k/692443.md?page=1)