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physical_graffiti402 | I'm 27 years old. Should I be more aggressive with my 401k??? |
Additional Details
What I mean by aggressive is the level of risks I should take. Not how much i contribute.
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derobake
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If your time horizon is long, then yes you should be more aggressive. This means holding a high percentage of stocks in your portfolio. In general, at your age you will probably want to hold about 70 - 80% stocks, with 20 - 30% bonds. But this is just my opinion.
In my free book at http://www.invest-for-retirement.com I address the issues of asset allocation and how to choose your stock to bond ratio. Each person is different, so I present different opinions. Chapter 23 will address this. |
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jack of all trades
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I don't know how aggressive you are now, but you should absolutely think about saving for retirement right now even though you are young. Social Security couldn't pay for a really comfortable retirement in any case, and the govt. is trying to get out of the medical insurance business, so you may well have to pay for a larger portion of your health care when you are more likely to have costly problems and more medication.
So, in general, yes. Diversify and put away as much as you can. You will only profit in the long run. |
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muncie birder
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More aggressive than what? There are two ways you can look at your 401k. I am not sure which is the correct way. Since the 401k is retirement saving and will be taxed at the full tax rate when removed even though deferred until removed one way to view the 401k is as an investment vehicle for basically conservative investments that would be taxed at the full tax rate anyway. IE especially TIPs bonds and other debt instruments, money market accounts, etc. But that strategy has the distinct disadvantage of generating poor returns though relatively safe returns. However, in conjunction with other investments outside the 401k account there is a distinct advantage.
Since equity investments are taxed at advantageous tax rates there is an advantage to holding those investments outside of the 401k. Especially the agressive kind but generally even the more conservative equity investments. Especially those in equity based index funds which can be held for long periods of time accumulating unrealized capital gains that are not taxed until sold and then at a very favorable tax rate not available to 401k accounts.
The other way to look at a 401k account is as a long term investment vehicle for retirement. As such one would certainly want a decent long term return. And equity investments are best able to provide that return. Much better able than the less aggressive investments. There is however a tradeoff. More aggressive means more risky and more risky means the possibility of taking a really big hit during a market down turn. If you do not believe that is possible, ask those who invested their 401k money into internet and telecom stocks during 1999 2000. I doubt they have yet been able to claw back to break even. |
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divya_jesuraj
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As a 23F who wants to retire at Age 45 - the answer is yes. Many companies offer differently blends of funds - you should probably stick 50% (or more i have 70%) in stocks as for us being so "young" now we have to recover.
I also have the remaining in the blended fund for the target date of 2030 (retirement year) as back up. Now I always put in the max allowed (2007 Max is $15.5K) and live on what I have left...yes simple living now in my early 20s will reap me a good retirement at 45+...
And this advice isn't just for you - for your sig.other - While the retirement is in your name - what fun it is if you don't have the one you LOVE isn't available? |
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Nisha
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If you are able to I highly recommend that you be more aggressive with your 401k. Considering you are young, you can afford to be aggressive because if something should go terribly wrong, you will still be able to bounce back with ease. I am a government employee...our equivalent to a 401k is TSP. I use to contribute 18% to my TSP, but stopped once I realized I could be making more money off of the additional 13% that my job does not match. I put the remainder in a Roth IRA account in hopes of making my money grow faster. |
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Rachel-Pit Police-DSMG
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Yup! You should contribute 5%, more if you can afford it, and invest in some of the more agressive options that your company offers. |
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bradxschuman
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Depends on what you mean by aggressive. Don't take MORE out of your pay than you can afford, since you can't get any of that money back without significant penalties if you withdrew before you were 60.
You could try a few higher risk funds for it to go into...they tend to have faster growth in a good economy....just don't lump everything into one basket. You're young enough to weather the down times. |
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Cad
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Yes! The more money goes in the better it will be in the end.
Make some calculation, for example put $200 in each month and see that it will be very much in 30 Years. |
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