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401(k) Just a Few Thousand Away From Previous High

By JLP | September 17, 2009

I was checking my wife’s 401(k) balance last night and noticed a couple of interesting things:

1. The balance is just a few thousand shy of its previous high-water mark. Yes, that number includes contributions but it’s still shows drastic improvement from the low.

2. Last year’s personal rate of return was somewhere around -40%. This year’s is currently at 29.3%. Remember, the personal rate of return takes into account contributions.

I don’t know where the economy/market is headed but I’m content to stay the course and believe it will pay off in the long run. I have tweaked our 401(k) investment selections a bit but haven’t moved money from asset class to asset class. We are still 100% equities, divided evenly between large-cap, midcap, smallcap, and international. NOTE: I’m NOT recommending this allocation for anyone. I’m just telling you how we are investing our 401(k) account.

Topics: 401(k), Personal Rate of Return, Retirement Planning | 5 Comments »


5 Responses to “401(k) Just a Few Thousand Away From Previous High”

  1. BG Says:
    September 17th, 2009 at 2:18 pm

    JLP: For comparisons, here is what my 401k shows for my Personal Rate of Return.

    +17.0% (YTD)
    -22.8% (last year – 2008)
    +08.2% (rolling 1 year)
    -10.2% (rolling 2 year)

    I’m currently at 30% stable, 10% bonds, 60% equities. I did make some drastic changes in 2008 as market-timing moves trying to avoid the big dropoff (and reassessing my risk tolerances). Also, back in July 2007, I had stopped all 401k contributions (even giving up employer match) to pay down consumer debt. I was not contributing for about six months, which (pure luck) turned out to be a good time to not be buying high-priced stocks anyway. So my losses (at least to me) don’t feel so bad because I know I have gains outside of the 401k by paying off those debts.

    As long as you are comfortable with the fact that you can lose 50% (or more) of your portfolio in a year if it is invested 100% equities, then go for it! The past few years taught me that I’m personally not comfortable with that much loss in a short-time frame, which is why I reduce the volatility with the Stable-Value fund. But with that reduction in risk, I’m missing out on a lot of the gains that you’ve gotten since March, but I’m comfortable with that too.

  2. Sam Says:
    September 17th, 2009 at 10:25 pm

    I don’t see the economy too rosy in the future. So I personally would be very reluctant to invest too heavily or at all in anything because of this slow and poor economy. With unemployment rates so high, this is a sure indicator of where things are headed.

  3. Tim Says:
    September 18th, 2009 at 3:58 am

    For retirement accounts, I’m 100% equities too. i haven’t checked our percentage up or down, because i’m fine with what we are invested in, so i find no use in needing to know x% up or down, b/c that’s simply a meaningless snapshot to me.

  4. Tim A Says:
    September 18th, 2009 at 1:57 pm

    I like how BG relayed it. Here are my stats from Fidelity

    +57.5% (YTD)
    -46% (last year – 2008)
    +20.3% (rolling 1 year)
    -10.4% (rolling 2 year)

    I’m 95% equities and 5% bonds. Of my equities I’m about 60/40 between index tracking and higher risk options. Funny how even though my gains and losses are bigger, we ended up about the same for the 2 year rolling.

  5. BG Says:
    September 19th, 2009 at 10:48 am

    Tim) Wow, that is a pretty crazy rollercoaster ride! What fund do you have that pushes you up to 57% YTD?

    We have a benefit with our 401k plan that allows us to use the ‘Financial Engines’ website. That site employs monte-carlo simulations to predict how likely someone is to reach their retirement goals based on investment choices, savings rate, assumed income increases, pensions, social security, years till retirement, Roth IRA contributions, life expectancies, etc. If you’ve heard of ‘post-modern portfolio theory’, then this site is basically that (finding the optimal portfolio based on risk tolerances and goals).

    With all of my data entered, and based on the retirement goals I chose, FinancialEngines is predicting that I have more than a 95% chance of reaching my retirement goals.

    So, even though I am taking on much less risk than you are (smaller equities position), I am taking on the minimum amount of risk to reach my goals (based on my current savings rate). If I saved more, then I could reduce risk even further to meet the same goals. If I saved less, then I’d need to increase my risk levels to meet the same goals.

    I love goal-based savings.

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