I have been with my company for two years and investing in the 401k for 1 year (eligibility requirements). I'm putting in the max that they will contribute to. I don't plan on being with the company for more than another five years as I'm looking at moving. Would it be wise to put most of my contributions in safer investments, i.e bonds? Since it's not a "long term" investment, to keep from having large losses while getting all the "free" money? I'm fully vested in my 401k. Once I move to a new company, roll it over to that 401k or an IRA with long-term investing in mind?Dave
So long as you plan to roll the funds over to a similar investment, it should not matter. Therefore, its OK to go ahead and invest in stocks. One hopes the stock market trend will soon start upward again. If it doesn't, you will still be OK so long as the new investment is similar.
Do you have an investment plan for your retirement money? If not, you might work on developing one.If you do have an investment plan for your retirement money, follow it. If that means buying equities at this time, buy them; if bonds, then bonds. Except for surrender charges, ignore for the time that you are planning on moving that money in 5 years or less.When you leave your present employer, are you planning on moving the money to similar types of investments, such as from a predominantly diversified large cap fund to another diversified large cap fund? If so, you will probably be out of the market for a week to a month if the new custodian cannot handle the specific investments your 401(k) is in so the 401(k) custodian would have to liquidate your 401(k) investments and send cash to the new custodian, and the new custodian would have to purchase the investments you specify; or the assets may be transferred intact if the new location can handle the same investments.The advice to avoid selling low does not apply to moving assets from one custodian to another. Rather, that advice is for those who are getting out of stocks when stocks are low and into bonds when bonds are high, and for those who in some time in the future will be getting out of bonds once bonds are low and getting back into stocks when stocks are high.But the advice about not selling low does not apply to those moving assets between custodians nor to selling assets held by one custodian so one can buy similar assets with another custodian.
Would it be wise to put most of my contributions in safer investments, i.e bonds? That's up to you and what makes you feel comfortable.However, if you sell low and then buy low a few weeks later (as in a rollover), you don't suffer any long-term loss. If you sell low and then don't reinvest in the market, that's different. Another thing to think about: there is no way to "catch up" on your 401k investments...if you don't max out your investments for 2002, there is no way to go back in time and make them up. JDOyster
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |