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Financial Planning / Foolish 401(k)s


Subject:  Re: Foolish or foolish? Date:  12/19/2018  8:29 PM
Author:  CMF_Fuskie Number:  26181 of 26270

Is this an annual election? Are you suggesting contributing 40-50% of your paycheck year round? Can your budget afford that? I think from your post you are suggesting large contributions until you reach the $19,000 limit for 2019, then changing your elections to not contribute anything the rest of the year.

For me, that's a gamble. You achieve a lot more dollar-cost-averaging if you spread your purchases throughout the year. Chances are this won't be the only market downturn over the next 12 months. Personally, I wouldn't be afraid of some purchases being above the mean and some being below the mean. But I suppose if the downturn is short lived and 2019 blasts out of the starting gate, you could still adjust your contribution rate back to spread your payroll deductions across the remainder of the year.

Fools try to prepare for discount market opportunities but that's different from market timing, which is waiting for the perfect opportunity to take action. Yes, buy low and sell high is always the goal. And who knows how long we'll have the kind of discounts we're seeing right now. We could see better discounts tomorrow or we could have already hit bottom and bounced back. That's the market timing think. My think is that if you have a watch list of companies in which you want to invest, then whether you're at the bottom or not, now could be a great time to act. Whether you buy in whole or buy in thirds or some other strategy.

One thing I might consider, if you are income-eligible, is to first set aside cash for a Roth IRA contribution if you have not already done so, $5500 for 2018 and $6000 for 2019. Then if your budget still can afford the lower net income over the short term as you maximize your contributions, you still have that option.

Who thinks there are probably negatives to your plan beyond what he thought of but Survivor just started so this is all the thoughts you'll get from him tonight...

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