401K plan questions?

Question

Hey Guys, Im 23 years old and I work 2 full time jobs... I already have a 403B plan with one of my jobs and the other offers a 401k plan. But in my 401k plan I am going to have them manage it because I dont have the time to take and watch for what is rising or not. But my question is there are 5 types of portfolios... The Conservative, The Moderate, The Balanced, The Growth, and The Aggressive... Should I be aggressive with this portfolio or kinda laid back with it. I only plan on staying with this job for about a year or 2... My other job is my career and they offer 403b because they are non profit.

Answer 1

congrats. at your age and working two jobs as well as starting your retirement investing. your light years ahead of most people your age.

an aggressive approach @ your age is easily the best way to go. that will usually put you into mutual funds w/ growing small and mid-sized companies (think Microsoft or Intel or dell from 20 yrs ago). your window is the next 30-40 yrs, so even if you see turbulent times in the market, you have plenty of time to recover.

don't invest in anything other than your 401k or other qualified plans until you've maxed out on the tax qualified amount, not just the limit on the match from the employer. not having to pay taxes on your gains is one of the few tax breaks uncle sam gives us average joes.

google search "financial calculators". you'll get all kinds. try the retirement calculators. stay away from the calculators sponsored by companies trying to sell you something or to manage your money, they generally under estimate your future worth. the calculator on the motley fool website is a good one. you will be amazed at your financial future if you stay with your investment plan.

good luck, you're on the right track.

Answer 2

If I were 23, I'd opt for the aggressive first, and growth second, but only because I hadn't a clue to how to 'read the tea leaves' about the world we are in. If you can change things, the conservative or balanced might be good for the moment, then once things seem to sort themselves out in the near future, then go for growth. You've got time to recover from the risks the fund managers are taking with your money should they figure wrong, but with the growth fund there is supposed to be a good deal more sense and a lot less risk applied than for the aggressive funds. The conservative or balanced right now might be appropriate financial markets are sort of on the edge right at the moment. If they turn down, you will likely lose less value in those two should the market tank. On the other hand, there are indications that the market may go up in a significant way. So if you can change things without a lot of problem a few months down the road, take the conservative or balanced path for now and change to something more like growth or even aggressive, if it all sorts out well later.

Either way, with mutual funds, you don't have to sit and watch. Checking every couple of months is probably more than enough. A lot of my money is in some funds and I can change whenever I like. I haven't needed to change anything in almost two years, but about a month and a half ago, I got out of the US stock funds and changed my holdings to something considerably more conservative. I have a TIPS fund that made really good money at the last economic downturn, so I loaded up on it along with a certain global fund and a really good REIT that has some superbly steady commercial properties. If the market does a crash and burn (which I'm not convinced but do hear a lot), then I'll still be hurt, but not nearly as bad.

Figure out which is more comfortable for you if you set it and forget it. Make the decision and get on with life. Part of what you are paying fund managers for is to manage, so let them manage that and you do what you do best in the rest of life. Don't let it pressure you, even if you get it completely wrong, you likely have all kinds of time to recover later.

Answer 3

Dang, with 2 full time jobs,you probably don't have time to manage your portfolio at all!

If your company gives you a match in your 401K, make sure you are putting in enough money to get the full match. As for what you should invest in, since you're only 23, I'd put it in the Aggressive fund. You have a long time to go till retirement.

Answer 4

How long you plan on staying at your current job should have no bearing on the investment style. You're 23 year's old...that money is going to be invested for a long time. Unless, of course, you kill your retirement by taking a cash distribution when you quit. At any rate, the conventional wisdom says choose the aggressive mixture due to your age and the ability to recover from negative returns. I, personally, say choose that one because it likely holds the highest mix of international funds which will likely outperform our market over the next 2-3 years.

Answer 5

I think how aggressive you want to be depends on how long you plan on having the money in the market. When you quit this job in 2 years, if you plan on spending the money, you should probably be fairly conservative. If you plan on letting them continue to manage your 401k or transferring it somewhere else, I would go with a more growth strategy. In the long run, this will increase your returns substantially and allow you to save more for retirement.

I hope this helps.
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Answer 6

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