So while we were gone the details were announced for my wife’s 401k. It appears that there is a 1.5% flat contribution (regardless of how much you contribute) instead of the match that was mentioned previously, and also some sort of performance-based bonus of up to another 1.5%. So far it is very vague as to what those performance targets are. Another piece of good news is that the plan administrator is Fidelity.
We only have a few days left to sign up with our own options, otherwise we get put initially into the default plan, which is just the 1.5% flat contribution invested into Fidelity’s Auto-Pilot Freedom Funds.
How Much To Contribute?
Since there is no match now, we really don’t have to put anything more in there. We probably will, but it’s hard to decide. Up to now I was going to set up a SEP-IRA or Solo 401k on my side which would have allowed me to contribute just about as much as we would want to.
Another way to think of it is to bank her 8% raise straight into the 401k, although we would mostly likely save it anyways.
What to invest in?
The choices are relatively broad, we change invest in either a Fidelity Freedom 2000-2045 Fund, or one of their 15 fund choices. The choices are okay, I’m happy that they have some of their Spartan index funds, all with tiny 0.10% expense ratios:
Spartan US Equity (Total US) Fund
Spartan Extended Market (Wilshire 4500 Completion Index) Fund
Spartan International (MSCI EAFE Index) Fund
I’ll probably round out our portfolio using the index funds, but I also want to take a closer look at what’s inside the Freedom Funds first.
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Everything I read says the stock market is going into a downturn. Wouldnt investing in a Fidelity fund bascially track the downturn? I cant get myself to invest until the end of the year, when stocks should be on the rebound per historical trends.
Actually, everything I read says that timing the market is exceedingly difficult 🙂
I’ll be interested in what you choose. I’m always wondering if my 401k is set up the way it should be.
Yea, read “A Random Walk Down Wall Street”. You can’t predict the market like that, no matter how easy or obvious it might look.
Anon, some long term investors view a downturn in the market as a good opportunity to buy (cheap) into the market..
Re: anon
And you know exactly when this will be that you should get back into the market? I think I have a bridge I’d like you to take a look at…
I believe I once read something on the Diehards boards something to the effect that on average a year’s returns is gained during 3 days of the year. I wish I had bookmarked that.
I have read that too, and its also interesting that most of this year’s gains were basically lost in the span of the last 7-10 days. Also, everything I read seems to indicate that while the market is volatile right now, the underlying economy remains pretty solid, so we’re trying to hold steady and stick with our longterm plans.
The area I am watching most closely is the international funds. We have done very well in those funds in the last couple years and I had a feeling that they were getting overvalued. Now that they are tanking, I’m glad I didn’t buy any of the emerging market funds that were looking so good late last year and early this year.
Of course, the market is difficult to time. If you could time it, you would never have to work another day in your life. Of course, that begs the age-old question of why your stock broker continues to require comissions if they were good at their job.
When I have a chance, I read articles from CNN money. Most of them indicate that the stock market as a whole is losing steam. Of course, I dont know this for a fact, but I am just repeating those opinions from such organizations as CNN, MSN, etc…
Yes, post 9/11, stock was on “Sale”.
Im holding out for a Dow Jones slide of 15% from 11,000.
Time IN the market is key, not Timing.
As for long term timing, believe what you want but I’d read over the key concepts at http://www.hsdent.com. Harry Dent has been right on every since he started studying the birth rate.
Market is down. Time to scoop in and buy some in increments. 401k contributions amounts will buy more shares now the the prices are cheaper. Invest for the long haul and stop timing the market.
The only fund that Fidelity offers that’s better than any other is FSIIX (MSCI EAFE; the foreign developed markets fund). In a tax-deferred account, it’s the best option for that asset class.
I agree with everyone that market timing is a terrible idea. If all those people writing articles about what the market was really going to do really knew what was going to happen they wouldn’t be writing those articles they would be on some island living the good life.
Re: Joaham
> The only fund that Fidelity offers that’s better than any other is FSIIX
have you taken a look at DODFX, it’s a pretty nice looking foreign investment fund.