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Edvard. Tell that to Japan 1992 - market was at 20,000, today 10,000. That's 20 years, and in 20 years I plan on being retired, and I'd like to do with with more than half of what I have currently saved. Are we another Japan? Dunno, probably not, but maybe yes. (Its purely a gamble)
Your analogy assumes that stock prices are actually tied to a companies financial health and forecast and that P/E ratios correlated evenly with stock price. Those days are long gone. Your assumption also assumes that people have the continued cash to buy those products (today they don't which is a big part of the problem).
Â¥
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2011 Sep 23, 8:48am
Like it or not the cost of everything goes up.
But do profits?
But at the same time that means the companies that sell that stuff to you also charge more and in turn make more money.
Not if we consumers don't have any money. 70% of the economy is Joe Consumer.
Joe Consumer had been borrowing money to stay in the game, but that's over now.
Big Government has stepped in the gap, but it's unclear to me how long this is going to last.
So unless you think all companies will go out of business and we will stop buying things lock stock and barrel then the market is going to go up.
We've seen 35% inflation since 1998 yet the S&P is flat since then.
I think your theory needs more work.
You can move to a self directed IRA.
If your employer's 401(k) plan allows this option. Some employers don't have the option, others allow it without restriction, and some have certain restrictions (e.g. you have to have a minimum of $X in your account, and you can only move Y% of the account to the self-directed).
FortWayne
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2011 Sep 23, 9:00am
Flash there are no guarantees in life.
However, not investing into 401k would be pretty dumb. It doesn't hurt to plan for retirement, considering your work probably matches at least 3% of your salary dollar for dollar when going 401k or pension route.
If you want to get serious about RE, not the child play shit most talk about buying some SFH and renting it out... well go out to Detroit. Buy an entire apartment complex there. A fella I know bought one for roughly ~100 grand. You'll make money, could be a profitable business if you run it right.
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While I know every economic advisor always says to "always max our your 401k", I am beginning to wonder if that's analogous to real estate agents telling you property 'always goes up'. Am starting to think I'd be farther ahead if I bail on this 401k bandwagon. This recent article on marketwatch (http://blogs.marketwatch.com/thetell/2011/09/22/time-to-pull-in-expectations-for-a-decade-or-two/) kind of solidified my thinking.
If I can only expect 5-6% out of my 401K over the next 20 years (which IMHO is rather optimistic because I got nailed hard on both of the major stock blow ups and in the past 20 years have barely made 8% over the long haul, and those were supposedly the 'good times'). If I factor in the tax penalties and such, how much would I need to make in something like a real estate rentals to equal the 401k? At the moment in our local area, I am picking up rentals (mainly condos) and getting 10%+ cashflow (closer to 12 on most of them). I get a 2% match, and could keep the min going in to get that, but then should I yank it right back out?
Rentals, while a bit more work, certainly give me more flexibility to cash out when I want (if I decide to retire early), and *someday* they might even appreciate a couple percent. Not to mention I *despise* the fickleness of the stock market these days, its become nothing more than a casino where the values have nothing to do with the true health of a company.
Part of the logic with 401k's also is that once you retire your income is lower, but if my investment plan holds on rentals, my income in retirement (15 years away) will be higher than it is now. (Am at around $250k/yr now including the current real estate)
Anyone know of any good calculators out there for figuring out all the costs and tax implications associated with yanking your 401k, or a rundown of all the ways you get nailed in doing so?
#housing