how can my 401k gain any interest when the economy sucks so badly?

Question

It's up, it's down. Basically, my company matched 401k has basically been the money from me + the money from the company. The interest is nothing to write home to mom about! I'm diverse too, with most in a 2040 fund, and the rest in bonds, euro/aisa (I know that sucks now), and large-cap. I can only choose what my company offers. I just don't see how any of this will work in the future. I'm 27 years old, and I feel that retirement will be a forgotten word, especially if SS is non-existent also.

Answer 1

Patience is the key here. From the little you have told me, you sound fairly well diversified.

Here is the deal. Let's suppose you and your company are contributing $4000 total to your 401k. Let's also suppose your account is earning only 8% annually. It should be earning more but let's assume 8%. By the time you retire, if you you retire, at 65 you will have contributed for 38 years.

If my math and assumptions are correct, you will then have $881,263. Maybe not a terrific amount but enough so that it will be earning you $70,500 a year in interest and dividends and appreciation.

Now historically equity investments over the long term have yielded at least that. But a more likely figure is about 10%. You are not fully invested in equities however, so you will not be approaching the 10%. You have too many bonds. Bonds suck for 27 year olds. Their 4.8% return is worthless.

If you have the option in your 401k to invest in a foreign investment fund, it would be a good idea to move some of your money into that type of investment. Sort of a hedge against the falling dollar. Actually the 2040 fund should have some money invested in foreign markets already, but they normally do not invest very much.

Answer 2

You are not earning interest (unless you are in the wrong funds). The "gain"is called "Capital Appreciation".

The 2040 fund is most likely a good idea for you. Have you checked its performance against its peers. Sometimes, with the limited choices in a 401K you may have good growth funds and poor "asset allocation" funds (or the opposite). Pure growth funds have not done great in the past 5 years. The real question(for all the funds) is how do they do against their peers.......

Even if you're in average funds...... over 25 years you should do very well. Judge each fund on a 3,5 & 10 year time period.

You need to take some resposibility here. The answer to your question is somewhat complex. Read a couple of books on retirement investing over the year. You don't have to become an expert. The "investment" in time will be well worth it (over your life time)........

BTW: Avoid tips (friends/relatives) & radio/TV personalities that always have a favorite investment for the day.

Answer 3

401(k)s work over the long term not the short term. If you have had your 401(k) for more than 10 years then you should have seen significant interest. The stock market will always have ups and downs so dont worry about it. If you are only 27 take the money out of large cap and bonds and put it in more stocks with higher risk/growth potential.

Answer 4

Yes, the market is not doing so well the last few weeks. I've lost a considerable amount of money as well, given up all the gains I had this year, and then some.

But if you take the long term view, you will realize that it just means this is a good time to be buying. Buy low, sell high. The market is low now, so every paycheck you are getting a bargain.

Answer 5

in case you opt for to finish your targets undesirable adequate, you'll locate a fashion to do it. era. that is so elementary as that. at the same time as your irritating about your facebook and being "lazy" inspired human beings are available getting the job finished and attaining they are targets and pleasing their desires. Are you going to be one in each of those mediocre human beings that merely does what everybody else does? Or do you opt for it undesirable adequate that no one is going to end you? purely you could fairly answer that query.

Answer 6

If you contribute the minimum for matching, you are already getting 100%. By the time you retire, you will be sitting fat.