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Old 10-15-2008, 05:03 PM   #1
DrDRum
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Question Would there be anything wrong with "pausing" my 401k investing?

Right now, investing is tossing money away, until we hit the bottom...

While it certainly makes sense to buy "at a discount"...I'd also really like to pay a few more things off, and currently investing about 20% of my income, and 18% of my wife's...well, that money could pay off school debt a bit faster, until things level out a little...
Is my donation of money into the market "helping" the market?

I'm not thikning of "pulling" any currently invested money out right now...but I'm thinking of using what's currently set for investing for debt elinimation , at least for a few months...
The market will still be "on sale" or recovering...

Anyone else doing this right now?


DRum
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Old 10-15-2008, 05:06 PM   #2
FunkerVogt
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If your disciplined enough to actually use every dollar to pay down debt that would have been invested, then it's an OK idea.
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Old 10-15-2008, 05:07 PM   #3
DrDRum
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Quote:
Originally Posted by Funker View Post
If your disciplined enough to actually use every dollar to pay down debt that would have been invested, then it's an OK idea.
Well, I'm disciplined enough to invest an average of 19% of my take home...and most can't do that.


EDIT: Not braggin'...just sayin' that its an indication I'm financially responsible.

DRum

Last edited by DrDRum; 10-15-2008 at 05:13 PM.
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Old 10-15-2008, 05:08 PM   #4
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Quote:
Originally Posted by DrDRum View Post
Right now, investing is tossing money away, until we hit the bottom...
Incorrect. Your investment strategy should be the same regardless of if the market is depressed or rallying.

Quote:
While it certainly makes sense to buy "at a discount"...I'd also really like to pay a few more things off, and currently investing about 20% of my income, and 18% of my wife's...well, that money could pay off school debt a bit faster, until things level out a little...
If the cost of having that debt is significant (as they usually are unless you're talkingabout a 1.9% student loan), then that's a reasonable excuse to redirect your funds to paying off the debt rather than padding your retirement--at least short term.

Quote:
Is my donation of money into the market "helping" the market?
Yes, you are playing a major role in keeping international markets afloat. *snicker*

Quote:
I'm not "pulling" any money right now...but I'm thinking of using that money exclusively for debt elinimation for a few months...
Few months? Sure thing. A year? Hell no.

Quote:
Anyone else doing this right now?
Yes, and we will be calling those people "the unable to retire" in a few decades.
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Old 10-15-2008, 05:09 PM   #5
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taxable income > Higher taxable income
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Old 10-15-2008, 05:10 PM   #6
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You will not be buying low and you will forfeit compounding: the more you have in there, the longer you have in it, the more you get. This is the time to buy.

Avoid it, if you are in a pinch, eat ramen noodles instead.
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Old 10-15-2008, 05:10 PM   #7
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buy low bitch!!!
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Old 10-15-2008, 05:12 PM   #8
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If your plan is to only buy at the absolute bottom, please PM me letting me know when that is. Otherwise, you are getting amazing deals on funds you were paying 30% more for a few months ago. By your logic, you shouldn't have been investing then.

If anything, increase your 401k contributions now.
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Old 10-15-2008, 05:18 PM   #9
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HAVING money in doesn't help right now. PUTTING money in does. So continuing to contribute to your 401k in "bad" market conditions is key.
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Old 10-15-2008, 05:21 PM   #10
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Most people are doing exactly what you're saying. They are paying down debt before they put money in the market. That said, there is a hell of a lot of debt to be paid down first. Only after the debt gets paid down to a reasonable level will money start pouring back into the 401K stocks funds. Of course I'm only taking about the average person. I'm not talking about the mega-rich sitting on cash waiting to jump into the market. For me, if I had to guess...I'd say this fasico would take at least 4 years to clean up. So I would only expect rather lackluster market returns until that happens. It all boils down to risk vs. reward. If you loan rate 4% or greater, I would just pay that off.
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Old 10-15-2008, 05:26 PM   #11
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http://www.itulip.com

http://www.shadowstats.com

http://www.rgemonitor.com/blog/roubini/

IMHO now is a really good time to "strengthen the balance sheet."

If Roubini, Williams, Janszen, etc. are right, the next year will be a meat grinder.

It's beneficial in these times to have a fat safety net:

12+ months expenses in cash (CD's or short term treasuries - GIS treasurydirect).

No or low amounts of negative cash flow debt (e.g., interest on savings < interest on debt).

If you've got investments in taxable accounts, and you believe that the market isn't going anywhere for the next month, you can sell now to realize any capital losses and buy back in after the 30-day "wash sale" period expires. These capital losses can offset ordinary income up to $3K per year, and can be carried over indefinitely until they are exhausted.

Bear in mind too that now MM mutual funds can opt-in for FDIC insurance - you'll have to check with your particular investment company to see if they've opted in (I know Vanguard has). The catch is that this only applies to assets in these funds prior to 9/19/08. Any additional cash, therefore, should be in a bank or in short term (30 day) treasuries.

EDIT:

I'd keep contributing up to the employer match. I'd be more hesitant about contributions in excess of the match if and only if:

1) You have not already fully funded your or your wife's Roth IRA

2) Your top marginal tax rate is less than 25%.

3) You have an inadequate cash cushion

Last edited by sadsack; 10-15-2008 at 06:00 PM. Reason: Reason? We don't need no stinkin' reason . . .
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Old 10-15-2008, 05:30 PM   #12
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Keep investing. P/E ratios are finally beginning to normalize.

My guess is, the economy will continue to decline until sometime next year. By next July the champagne will be flowing again! If it's not, well we'll all have bigger worries.
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Old 10-15-2008, 05:41 PM   #13
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Quote:
Originally Posted by Asinine View Post
Incorrect. Your investment strategy should be the same regardless of if the market is depressed or rallying.
Quote:
Originally Posted by HighWayDrifter View Post
taxable income > Higher taxable income
Quote:
Originally Posted by delongedoug View Post
If your plan is to only buy at the absolute bottom, please PM me letting me know when that is. Otherwise, you are getting amazing deals on funds you were paying 30% more for a few months ago. By your logic, you shouldn't have been investing then.

If anything, increase your 401k contributions now.
Quote:
Originally Posted by Matt K View Post
HAVING money in doesn't help right now. PUTTING money in does. So continuing to contribute to your 401k in "bad" market conditions is key.
+12345

This is the worst time to stop making contributions to your 401K, if you pay the same contributions right now, your buying power is so much higher with the low priced stocks and it'll pay off when the market improves.

Otherwise as ppl said, to do otherwise is to buy only when prices are high and also pay more in taxes because of the income you didn't deduct towards your 401K, doubly stupid.
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Old 10-15-2008, 11:38 PM   #14
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http://asktheexpert.blogs.money.cnn....ack-on-a-401k/

I agree 100% with the article BTW, I've actually upped my purchasing in select sectors as I have the safety net in place and no other obligations.
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Old 10-16-2008, 12:13 AM   #15
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Two economic theory's you might want to look up.
Dollar cost averaging, and 'buy low, sell high'.

AO
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Old 10-16-2008, 01:02 AM   #16
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Quote:
Originally Posted by m750 View Post
Two economic theory's you might want to look up.
Dollar cost averaging, and 'buy low, sell high'.

AO
Agree with the first: Dollar Cost Averaging, Diversification and the power of Compound Interest are the very best friends a novice investor has. Placing your trust in them gives you the best chances for success. Thinking you know when to get in or get out means you're relying on timing the market, which doesn't work.
The second, not so much: I think "buy low, sell high" leads a lot of investors to become speculators. They end up trying to learn how to time the market. Investors buy a stock because they believe in the fundamental value of the company. Speculators buy a stock because they think it's a bargain. Investors sell because they're re-balancing their portfolio. Speculators sell because they think a stock has "peaked", or because they're afraid it's going to tank. In either case, if the stock was worth buying, they'll probably be poorer in the long run than they would have been if they'd held on to it.
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