Our 401k's....whatcha gonna do?

I think I said this on another thread, but we recently moved a chunk into a cash equivalent mutual fund. We had a lot of growth in the past six months and it seemed right to cash in some of the gains. My husband is retired and I want to retire in the next few years, so it feels good to have a nice cushion. If there’s a big correction we can live off that for a while.

Deciding how to withdraw from your retirement accounts gets to be kind of a conundrum as well.

@19,

Ignore nonsense like that. Investing & trading is not gambling, as someone compared it to. Gambling is a game of chance. Investing is a game of information and predicting where the puck will be not where it is which is why gibberish like that is worthless. Investing in a diversified mix of asset classes is fine and paying someone to invest your resources (a mutual fund manager) is fine also but if you prefer to the do the driving yourself understand that stock is evidence of ownership in a corporation and stock goes up or down based on the discounted cash flows of that organization. Therefore, to invest wisely one needs a thesis as to where the puck will go. Then a catalyst, such as the election, will move the markets.

I am trying to figure out driver less cars. If they are going to be all over the roads in under 10-years who are the winners and losers? One theory is the software companies win and the hardware companies like Ford and GM lose. I am also interested in other game changer things like using one’s phone to buy stuff instead of using a credit card. It completely changes which public organizations have billions in revenues over the next 50 years. It si why I sold covered calls against my only nonretirement position that ended up costing me a significant chunk of change even though I BE on the overall time I held that stock.

Big things like that can lead to huge, not normal, not average returns. Running with the herd is basically boring.

My brothers and I have some uninvested cash in companies owned by beneficiary IRAs, and we’re going to go to the tax sales this year.

The saying “Bulls make money, bears make money, pigs get slaughtered” holds true. Whenever I make a nice profit, I take some off the table so when the next buying opportunity comes, I will have more cash to buy.

Question – What percentage of your assets are in home equity vs. retirement vehicles vs. regular savings/investment assets? I worry that we are seriously short on the non-retirement funds, but have not found anything that would give me guidance on what kind of ratios make sense.

We ignored home equity, as we had and still have no intent of selling our residence or taking a HELOC on it. I honestly don’t know what % of our assets are in retirement vs regular savings/investments, but do know that we are able to live off H’s pension and RMD of his retirement without tapping savings or investments.

To me, the important thing is to look at cash flow. How much money do you currently spend each month (on average). How much income to you have each month (on average). How will both of these change (projected) in retirement. That was the approach we used to figure out how we would do. You may have to do several calculations–one before you and/or spouse start taking SS and one after.

I’ve found bogleheads.org and its resources very helpful for us in planning and thinking clearly without getting stressed by huge numbers that others throw out.

Our home equity is about 30% of our total net worth. I don’t expect we will need to “cash it in” in retirement.

@CountingDown, we don’t really consider our house other than to think we can likely most to most places (excluding NYC, Silicon Valley, Honolulu and others I’m not naming) and get a decent enough place to live for what we have in home equity plus what the bank still owns. Because I know roughly where you live, I’m guessing you have the same. We do have a fair amount in cash (probably too much), but most of our wealth is in retirement and investment accounts, plus we will get a decent amount in an old fashioned pension. I too worry about the ratios, and trying to figure out the right amount overall before retirement.

I am not quite understanding the question. Do you have control over how much in retirement account? Aren’t they fixed by an employer or the government?

I also dont count home equity in our net worth. DH wanted to, but my opinion is that we always have to have somewhere to live, and if we were to move it would likely cost more to find housing, not less.

@Iglooo -

When others here say retirement accounts they mean 401k’s, IRA’s etc. A person can put in as much (well, okay there is a yearly maximum) or little as they want. Plus they are invested so they may grow (or lose) money. So the amount saved will certainly be different for everyone. (Maybe you are thinking of pensions where an employer dictates how much you will get based on years of service, but that will also be very different for each of us. Some of us will have great pensions and others may not have a pension at all!)

DH is self employed. He controls his retirement account 100%. There is no employer match, but he has all the say. He has done better with our retirement account than any other money manager could have, imo.

I would be on the verge of a nervous breakdown if our retirement was 100% in stocks.

Isn’t there a limit to what you can contribute to retirement accounts? I would think in most cases, it’s better to max out their retirement accounts before saving in a taxable account. That’s what confused me about the ratio.

DH maxes out his 401k. I can’t contribute to anything except a non-deductible IRA. He will also get a pension. My concern is that almost all assets are tied to retirement vehicles and that we may be short on cash/non-retirement investments. If we needed large chunks of cash in retirement (house repairs, buying into CCRC, etc.), not having easily accessible $$ could be problematic, hence my question.

As far as how we invest it, we like the “sleep well at night”

Once you reach 59.5, there is no penalty for withdrawing funds from retirement accounts. Sadly we reached that age before we knew it! The good thing about tax-advantaged accounts is that they are helpful in shielding you from taxes either so they grow more and faster before you pay taxes or because you’ve already paid taxes and don’t have to pay taxes again when you take the funds out.

Adding to @ClaremontMom

Some of that retirement account money is also determined by WHEN a person started contributing, and how much they contributed.

I rolled my 401(k) from a long-time employer into an IRA.

My wife has her own 401(k).

We have some stocks also.

I’m 40 and she’s 33.

Going forward i’m leaving the IRA alone (it’s in an Oakmark retirement fund) and will look into blue chips that yield dividends, like IBM and Kraft-Heinz, as well as index funds. I think she’s going to continue with her 401(k) as well, since the employer contribution is pretty sweet. But eventually, that’ll be rolled into an IRA too, probably. Our current stocks bear 3-4% dividends annually and have kept a slight uptick in principal value, so we won’t mess with that until or unless we start losing to inflation.

“I also dont count home equity in our net worth. DH wanted to, but my opinion is that we always have to have somewhere to live, and if we were to move it would likely cost more to find housing, not less”

We don’t count it generally. But you do need to consider it for tax planning purposes if you have high net worth and live in a state with an estate tax ( which can be much lower than federal estate tax,but still only apples to small percent of people).

I moved 30-35% of my retirement funds from stock funds to money market when Dow was above 19,000. I regret a little bit now but I am waiting to jump back.

@prezbucky Why would she stop contributing to her 401K, even without a match?