401k stupidity
I suppose the "great minds" of the financial world will say in a crisis like now:
1) Keep your 401k as-is if your young and far from retirement.
2) Market downturns are GREAT times for investing.
For all I know they're right, but for me, I'm just pissed. I started my 401k in 1999 and gotten an average return basically lower than my SAFE-AS-ANYTHING credit union Roth IRA returns, and that was before the stock market turned into a black hole of death swallowing everything.
Now I can play the "Deer in headlights" as well as ANYONE, and say my already deposited $50k, or whatever it's down to now is a lost cause, BUT I do wonder if I should stop playing the deer in putting MORE money into the black hole of death.
SURE I'll accept perhaps the market will return to good times, or at least perhaps beat inflation, but I'm equally open to the idea that a great depression (and inflation) will kill all value, and I'm better off throwing the money NOW into something worth something in the future!
It's all nasty crap. My employer matches my contributions, so I put in $100 and my employer puts in $100, and its tax free. If I cut my contributions, I lose the $200 and gain back $100 taxable income, so perhaps worth $70. Is that $70 really worth more NOW than $200 of pretend compounding in scary 401k funds?
It's all sort of funny to me. Paying down my mortgage seems a no-brainer to me, guaranteed interest returns, saving for retirement as good as anything for me now. And I have have an ARM which just started adjusting, so far only 5.375% (5.51% APR), but might keep going up with the Libor rate. And my rate and minimum mortgage payments are recalculated every 6 months, so the lower my principle balance, the lower my minimum, which might be useful if I lose my job and have to living on savings for 6 months!
On a quick calculation, I'm putting $192/month into my 401k, so perhaps $134/month of net increase in my paycheck if I cut my 401k contributions, or $1600/year. That's nothing to sneeze at, but won't much dent my mortgage debt in the time scale of a few years.
So sadly, I'll hold the course, throw bad money at bad money, and maybe it'll turn out okay.
My position is extravagance anyway. I can throw $1000/month away and make a good living as long as I have a job. Scarier is friends who CASH OUT their 401k to pay for car repairs to drive to work, and all the tax liability and penalties. That's seriously throwing away money!
I just won't look at my 401k, and I won't get pissed off.
1) Keep your 401k as-is if your young and far from retirement.
2) Market downturns are GREAT times for investing.
For all I know they're right, but for me, I'm just pissed. I started my 401k in 1999 and gotten an average return basically lower than my SAFE-AS-ANYTHING credit union Roth IRA returns, and that was before the stock market turned into a black hole of death swallowing everything.
Now I can play the "Deer in headlights" as well as ANYONE, and say my already deposited $50k, or whatever it's down to now is a lost cause, BUT I do wonder if I should stop playing the deer in putting MORE money into the black hole of death.
SURE I'll accept perhaps the market will return to good times, or at least perhaps beat inflation, but I'm equally open to the idea that a great depression (and inflation) will kill all value, and I'm better off throwing the money NOW into something worth something in the future!
It's all nasty crap. My employer matches my contributions, so I put in $100 and my employer puts in $100, and its tax free. If I cut my contributions, I lose the $200 and gain back $100 taxable income, so perhaps worth $70. Is that $70 really worth more NOW than $200 of pretend compounding in scary 401k funds?
It's all sort of funny to me. Paying down my mortgage seems a no-brainer to me, guaranteed interest returns, saving for retirement as good as anything for me now. And I have have an ARM which just started adjusting, so far only 5.375% (5.51% APR), but might keep going up with the Libor rate. And my rate and minimum mortgage payments are recalculated every 6 months, so the lower my principle balance, the lower my minimum, which might be useful if I lose my job and have to living on savings for 6 months!
On a quick calculation, I'm putting $192/month into my 401k, so perhaps $134/month of net increase in my paycheck if I cut my 401k contributions, or $1600/year. That's nothing to sneeze at, but won't much dent my mortgage debt in the time scale of a few years.
So sadly, I'll hold the course, throw bad money at bad money, and maybe it'll turn out okay.
My position is extravagance anyway. I can throw $1000/month away and make a good living as long as I have a job. Scarier is friends who CASH OUT their 401k to pay for car repairs to drive to work, and all the tax liability and penalties. That's seriously throwing away money!
I just won't look at my 401k, and I won't get pissed off.
posted by Ares Olympus at 12:59 PM
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