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Tuesday, April 24, 2018
401k

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Listen to Elvis.After the big drop in the stock market earlier this week, all I heard about on the news was that “things” had fallen to their November lows again…

That struck me as a little odd.

Without even looking it up, I was pretty confident that my 401k balance was considerably higher than it was when everything tanked four months ago.

And it is!

My November “low” was $43,498.02. That was on November 21st.

Sure, I was upset that that was $21k less than it was just 8 weeks earlier, but I kept on contributing at my regular rate anyway.

Now I know that, in reality, I’ve technically been losing money on most of my contributions since then…but I’m a pretty simple guy — it’s the bottom line that matters most. That’s my balance.

Right now, my balance is $51,807.72.

Not even close to those November lows….

And why is that?

It’s because I never stopped contributing.

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Reviewing My ProgressWell, 2008 is all but over so how’d you do?

I did pretty well on my goals for 2008. I mean, I certainly can’t complain.

In order of completion, I managed to increase my 401k contributions to 15% of my income, I eliminated all of my credit card debt, I paid down enough principle on my mortgage to have PMI removed (though it never actually happened), and I paid off all of my auto loans.

That’s a pretty decent set of achievements and I’m proud of every single one of them!

But there were a couple more goals on my list…

One, that I considered lofty, was to have $10k in savings.

Here, on the last day of the year, I’m finding myself in a bit of a grey area. I don’t feel that I accomplished the goal but by a technicality (my paycheck was deposited today instead of tomorrow because of the holiday), I actually have $10k at my disposal.

Just saying that blows my mind but, honestly, it doesn’t feel real.

And it isn’t all in my savings account right this minute, but it could be, so that goal was pseudo accomplished as well.

The final goal was to increase my passive income. That was a wishy-washy goal from the get-go and though my “side income” decreased by over $13k this past year, I managed to increase my 100% passive income… by just $63 over the entire year.

Hey, it’s better than nothing, right? It’s not like I “worked” for it…

So, with that, I can’t say that I accomplished all of my goals, but I think I took care of the big ones.

Hopefully 2009 goes even better — though my goals for the coming year are far less specific.

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I Love my 401k!It’s like I said a few months ago, regarding my falling home value at the time… It doesn’t bother me much. I don’t feel as if I’ve “lost” anything because, really, I haven’t lost anything.

It was money that I never… actually… had.

My 401k has never helped me pay a bill. Not once.

It’s just a number on paper, err, I mean a monitor.

In fact, as I have for months on end lately, I feel like I’m 100% on the right track and it’s starting to show.

Sure, right now, my net worth is officially $1000 less than it was on January 1st. That sounds like terrible news.

But really, it’s not.

My assets, unfortunately, happen to be down $26k since the start of the year

My liabilities, though, are down over $25k since since then too. That makes for a net loss of the previously mentioned $1k.

Doesn’t seem like much to get excited about, huh?

But here’s the thing — I haven’t sold a single asset to pay down a liability.

Not one.

I still have everything (material) that I had at the start of the year — the only “real” difference is that my debt load has decreased by 25 grand.

It’s tough not to call that progress…

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Individual Retirement AccountHmmmmm… Which to choose… I’m not really sure. I’ve researched the advantages and disadvantages of both and it’s just left me more confused than I was at the start.

It seems most folks my age (32) lean heavily towards the Roth IRA because it’s taxed now and not in the future when you expect to be in a higher tax bracket.

But unlike most folks my age, I’m a little bit more realistic when it comes to my earning potential and what tax bracket I’ll fall in to fifteen to twenty years down the road. I’m not optimistic.

When nearing retirement, though taxes will most likely have gone up, I actually expect to be in a lower tax bracket than I am now so that “advantage” of the Roth is totally lost on me. The Traditional IRA wins out.

On the other hand, with a Roth IRA, you can make withdrawals all along without penalty. No waiting until turing 59 and a half. If I need another $5k to build my dream garage or something, I can grab it from my Roth IRA and not get hit with a bunch of fees, penalties, and/or taxes. In that respect, the Roth IRA is clearly better.

By the end of this year, I’ll easily have enough to fully fund one or the other. Obviously I’m still having a hard time deciding which is the wiser course of action.

Further, I still struggle to come to terms with the idea that being limited to $5k per year will add up very quickly or keep me interested.

I realized that the limit is increased slightly every few years, but even still — what takes me just three years of contributing to my 401k will take over a decade with either type of IRA.

It just seems…slow? It is slow.

The advantages, from my perspective, don’t outweigh the limitations — specifically, the low contribution limits.

It seems like they’re little more than a way to supplement your savings — being limited to such a small contribution, it’s certainly not jump starting anything. It can’t.

But maybe I’m *still* missing something…

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401k Nest EggCertainly can’t complain about the markets’ performance yesterday. My 401k balance went up $1078.72! Woo-hoo!

That is the second most on record for a single day not including days when a monthly contribution was applied.

It still wasn’t enough for me to reach a new all-time high — $68283.84 back on May 19 — but it’s put me back within striking distance.

As of this morning, the balance sits at $68173.03 — which is up nearly $5k since the start of the year.

That feels pretty nice considering this is a sum growing on its own from money that I never even see.

At the same time, when I do the actual math (adding up my contributions so far this year), I realize that technically I’m almost throwing money away.

At best, I’m breaking even — it’s close, but as long as the balance continues to increase, I’m not going to let it bother me.

Hey, if the balance is still rising at a pace of $10k per year in a down market, well, I consider that a pretty good thing.

I like to think, for 2008, that I’m stock piling when things are on sale… And I really look forward to the recovery because I think this strategy will pay off *very* handsomely…

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Nest EggAfter the past two favorable days in the markets, combined with my monthly contribution that was deposited earlier this week, I’m happy to report that my balance is *finally* higher than it was on January 1.

Now I know, it’s not really higher, since I’ve added thousands in contributions since the start of the year only to break even (and ahead) now, but it’s still nice (in a mental motivational sort of way) to finally see a number higher than where I started the year.

As of market close yesterday, I’m up $1230 since January 1 and at a new all time high! Woo-hoo!

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401k Nest EggAs of market close last night, the balance on my 401k is down $4600, or 7.25 percent, so far this year.

Dollarwise, that’s not really very much, but when you look at the percentage, well, the six-figure gains and losses you see occasionally on some NetworthIQ profiles start to make a little more sense. It’s all about the number of shares/units.

While annoying, neither number, the $4600 nor the 7.25%, really concerns me though.

I think a big part of it is because it (the market) truly is a level playing field. My holdings are pretty diverse, so my balance has generally paralleled what the markets have done.

The most comforting factor? It’s not just *my* 401k that’s tanking — it’s pretty much everyone else’s too.

The bright side is that my contributions usually go in right in the middle of the month, for this month I’d guess it’s lining up to be “deposited” this Friday.

With that in mind, I hope the market continues to fall so I can grab another monthly contribution’s worth at a discounted price.

Even chugging along with a -10.25% rate of return for 2008, things still look pretty good.

The market will turn around sooner or later, and right now, later is just fine by me…because the more I’m able to buy at a discounted price, the better off I’ll be in the long run.

Six-figure monthly swings, here I come!

(okay, maybe that’s thinking a wee bit far ahead…)

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Okay, so January isn’t quite over yet, but you get the idea.

I didn’t really have any New Year’s resolutions, but I did lay down a few goals for 2008 and I guess now is as good a time as any to see if things are still on track…

Eliminate all credit card debt by the end of June 2008. Current credit card debt is $10318. I’m aiming to achieve this goal slightly ahead of schedule, by about a month, according to the snowball plan I started in November.

Progress is far ahead of schedule on this goal. This morning, my total credit card debt is under $5000 and with Thursday being another pay day, it’s likely to fall even more by the end of the month. I’m hoping to have all of this wrapped up by the end of March now.

Eliminate PMI from the Mortgage by the end of December 2008. Right now, it’s costing me over $1000 per year. For what? Nothing. To meet this goal, I’ll have to contribute an additional $160 per month towards my mortgage.

I’m on pace for this, though it doesn’t really feel like it. At the start of the year, I began throwing $125 towards the principle each Monday. So, with the extra payments this month, I’ve climbed $500 closer to my target of $6100. In total, I have $5124 left to go.

Pay off my auto loan by the end of December 2008. Current balance is $7418. This is also included in my snowball plan and it’s scheduled to be paid off in October if all goes as planned. I’m not looking to speed this up; just finish it off.

Nothing worth mentioning on this one. I’m just making the payments…nothing extra. This goal comes in a distant second to the credit card goal. Current balance is $7177.

Increase my 401k contributions to 15%. This way I’ll receive the maximum match allowed from my employer. Right now, I’m contributing just under 10%. I’ll plan to make this move once the credit card debt is eliminated. Achieved 12-27-2007

I achieved this goal before the year even started, but with the way the markets have been going, my increased contributions habe only resulted in larger losses. That’s okay though — in the long run, it will be a very good thing that I got this back up to the full match percentage when I did.

Increase my passive income. Now that I’ve dumped my largest client, the hockey team, I’ll soon find myself bringing in a lot less income. But, I also find myself with a lot more free time. Free time that I should use to optimize my other ventures to make up the difference; except now I’ll focus on more passive income streams because, in all honesty, I’m tired of working so much. Right now my 100% passive income hovers around $50/month. With the least effort possible, I’m looking to triple that in 2008 and pick-up a few low maintenance clients as well.

I’ve made a few moves in the past couple of weeks to get this goal on track, but nothing really impressive. I missed out on a generous advertising opportunity last week because I took too long to respond to the email offer — but that won’t happen again. I’ve got everything forwarding to one address now so nothing sits and waits for a week. Eitherway, things are headed in the positive direction. Passive income for January is looking to top out around $80.

$10k in savings. This is my lofty goal. I’m not sure it’s even possible. Right now my ING account is holding a mere $1k. No matter how far rates fall, with a 5-figure balance working in my favor I’ll have to be making atleast $1/day in interest and for whatever reason, I like that. I’d also like to pay for some still needed interior renovations in 2008 with cash and this is where I’ll draw from.

I’m tanking on this goal. On January 1st, I had around $1000 in savings. Today, I’m well below that, and the interest rate is falling so I’m not real *excited* about trying to right the ship on this one. I haven’t thrown in the towel just yet, there are 337 days remaining in the year, but I’d be shocked if I come close to realizing this goal.

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