Average 401k

Frequently Asked Questions

1. QUESTION:
   What is the average 401K balance for the average American.?
   I hear 2 different things. One survey tells you we have a negative savings rate while another says the average 40 year old have over 100k in their 401K or IRA. How much does the average 40 year old in America really have saved in cash?

   • ANSWER:
     You can find such figures with a search.

     Your question is hard to answer because it depends on how they figure the number. Your number sounds rather high to me. I think it is like half that.

     Many people don’t even have retirement savings so it depends if they are reporting the average 401(k) for a 40 year old or if they average it over all 40 year workers’ retirement accounts.

     And it is very age dependent.

     And the “savings rate” is also a difficult number because they don’t count “investments” as savings. Sometimes, some places, they will include the 401(k)s but that is not the Fed number. The Fed in the past only counted bank deposits as “savings”, didn’t even count money market.

     401(k)s are not considered “cash”.

     So you not only have to look at the headline number but have to look at what they are counting.

     Good Luck.

2. QUESTION:
   about how much would an average 401k plan collect over 18 years?
   just wondering how much an average 401k plan would collect over 18 years or whats the average amount taken out of your check each month for this?

   • ANSWER:

3. QUESTION:
   Is there a website that shows average 401K balances for your age?
   If you are X years old, and have sacked away $Y, you are in the Z percentile.

   Best answer if you can also show your percentile for overall savings (401K + taxable).

   I’d really like to know where my wife and I stand as compared to others in the US, as well as our income range.

   Thanks!

   • ANSWER:
     Here’s the data for the last tax year:

     http://www.ebri.org/pdf/briefspdf/EBRI_IB_08-20073.pdf

4. QUESTION:
   How much in %, has the average 401k dropped the last two years?

   • ANSWER:
     This question is way to general to answer. It would depend on the investment mix, if someone is contributing, taking income, did they trade or change any investments?

     As a basis for example: The S&P 500 which is an index of the 500 largest companies in the US is higher now than 2 years ago, the S&P 600 Small Cap (smaller companies) is down 1% from 2 years ago.

     In looking through data available to attempt to answer this question intelligently, I would say in the past two years – given a responsible asset allocation, and no contribution or distribution, values in 401k accounts on average are basically unchanged.

5. QUESTION:
   Is it ok to assume 8% average 401k growth?
   I am 27 and trying to figure out this whole retirement thing in the likely absence of ss. I have a target date 401k retirement plan from fidelity. When I use a calculator with my current level of contribution and company match it tells me there will be A LOT in the account when I retire at 65. How realistic is it to assume an 8% average groth in such a broad diversified account over a 38 year period?

   • ANSWER:
     It’s what’s been used in the past. If you want to be more conservative, why not try 6%?

     To diversify even further, look into something outside of financial assets – part ownership in a business, rental property.

6. QUESTION:
   How much of your 401K have you lost this year? I am wondering if this is any data pertaining to average loss?
   The stock market has gone up and down more than has been seen in recent history. How much has the average person lost of their 401K or other investment value due to this?

   • ANSWER:
     Today I am down 41.5% for the year

7. QUESTION:
   what is the average interest rate earned over the life of a 401k?
   I was just wondering what the average annual interest rate for a 401k account is over 30 years. maybe a high for someone who invested very wisely. and a low for someone who didn’t do as good.

   • ANSWER:

8. QUESTION:
   Are 401K plans bad for the average hourly worker giving the fact wages over the years have been stagnant ?
   Considering most people spend most of their money just to survive day to day leaving little to invest in a retirement plan, are 401K plans bad for the average hourly employees.

   • ANSWER:
     Despite what people say about 401k’s being a tax shelter, there are for those who can afford to sock money into them. For most average workers who make less than ,000 a year, they cannot afford to put any money into a retirement simply because the cost of living has risen so much that most people are now using money that would have been earmarked is being used just to survive day to day.

     Above all else, there’s no guarantee that money put into a 401k plan will be there in 30 or so years when they get ready to retire. To boot, most companies now are doing away with company matches.

     More than anything else, companies do not in most cases do not adequately educate their employees about the do’s and don’ts of investing so they in the dark from the get go.

9. QUESTION:
   what does an average 401k earn in interest in an average year?

   • ANSWER:
     An average 401k is invested and earns dividends, not interest.

     Average earnings depend entirely on the investment vehicles and amounts invested. Between 6.5% and 9% growth.

10. QUESTION:
    What is the average 401K balance for a 35-year-old?

    • ANSWER:
      Here are the pitiful statistics:

      The nationwide average was 2,014 in August 2006.

      The typical American household, headed by a 43-year-old, has retirement savings of ,750

      The average American in his/her 30s that participates in a 401(k) has a balance of ,930.

      How are you doing? Better than average, I hope!

      Good luck…

11. QUESTION:
    Anyone know the average % people contribute to their 401k?
    I contribute 12% and just curious how that ranks to what the average worker contributes.

    • ANSWER:
      You can contribute up to ,500 in 2007
      Plus a catch-up contribution of an additional ,000/year if you are age 50 or older.

      My business is to travel to locations and help people with their 401(k)s and my experience would say the average worker contributes about 6%.

      Most of the employees of companies will defer the % that is matched by the employer.

      For example:
      Company XYZ contributes 50 cents on the dollar up to 5% of your salary. What you find is people contribute 5% the vast majority of the time at this fictional company.

      Most experts agree that you will need to contribute 11-13% of your salary in a 401(k) your entire working career to get to the number you will need to in order to retire comfortably.

      In short, save as much as you can afford, but 12% is well above the national average.

12. QUESTION:
    what is average return on 401k investment for the average person for the average amount of time.?
    average contribution,average amount contributed,average time left in 401?

    • ANSWER:
      During my years of working in 401k industry I’d say average is 5% of income. Average balance is about 10k. And average time in the 401k is 3-4 years.

      Now, those numbers are skewed and seem small because many many many people don’t participate at all. Average participation rate is about 80%. So that means 20% of people are putting in zero. Those that do participate tend to still take cash distributions when they leave their jobs.

      Take a look around your workplace…how many people have been there longer than 5 years…not many. Someone making 40k and putting in 5% will have about 10k in it when they leave.

      Average participant in a 401k doesn’t beat the market and they shouldn’t. There are some that “chase the returns” and they should be beaten with a stick. Past performance doesn’t dictate future returns!!! But in reality, if your 401k is your only retirement vehicle then you should be properly balanced between stocks and bonds. This will actually serve to lower your return in comparison to the market…but it prevents the big precipitous drop that will kill you. Everyone says invest in the S&P and it will serve you well. But, the market does well over time…not every year. So if you just happen to turn 67 during a depression you’re screwed because you won’t have time to recover. THAT’S why it’s important to diversify!

      Best question you didn’t ask is how many roll over vs take cash distributions. In my experience it’s 4 out of 10 taking rollovers and that number is growing. Which is a good thing.

13. QUESTION:
    What is the average rate of return on a 401K?
    Overall I know it depends on your investments but I cant seem to find an average its gotta be better then keeping your money in a savings account thats gathering .0002% intrest.

    • ANSWER:
      A 401K won’t be returned to you until you retire. A lot depends on how much you contribute, whether you have it invested in an aggressive growth plan, and the amount of time you have invested.

      On average, most mutuals (what a 401k is) will return between 6% and 9% when they mature. Funds that are more aggressive might return 12% – 18%.

      Compounding interest is what you’re after. The money keeps building on itself over and over again, which is why you want to start planning for your future at a younger age.

      In conclusion, a 401K is a lot more risky than a bank savings account, but typically the rate of return is going to be a lot more as with risk comes reward.

14. QUESTION:
    what is the average 401K balance for a person in their 40′s?

    • ANSWER:
      It is a very rough estimate, but if you are in your 40′s (hopefully early 40′s), your 401K should have at least twice the gross annual salary of your income. The reason for that is you still have 15+ years to accumulate your assets and your 401K base will give a solid ground to increase your wealth in a much faster pace as you are heading toward your retirement.

      Check out CNN.com for more info http://money.cnn.com/pf/retirement/index.html

15. QUESTION:
    Average 401K balance?
    My wife and I are both 37 and have a combined total of 0k in our 401k’s. Would this be considered an average amount for a couple our age? We also have k in savings and K in investments. Would you say we are doing above, below or at the average for our age??

    • ANSWER:
      I would say you are doing above average. However average is unfortunately inadequate for the retirement that many would like to live. Especially with Social Security being on such a shaky foundation.

      However it seems that you guys are doing pretty well. Try using a savings calculator on ChooseToSave to make sure you are on the right track.

16. QUESTION:
    Why do companies intentionally set their 401k vestation time above their average employee turnover time?

    Thank you, corporate robots.

    • ANSWER:
      Companies implement a 401k plan for several reasons, the primary of which is to match competitors’ benefits and attract employees. As there is a huge cost to retrain employees, most companies set the 401k vesting period for company matches to around five years to promote long-term employment and to recoup the costs (via returned matching funds) of retraining people.

      I hope this helps.

17. QUESTION:
    Where can I find the average amount that people lost from their 401k due to the economic crisis?
    I want to asses my risk for investing.
    I meant assess. Not asses.
    Should I pick the most Diversified 401K option?

    Or should I go balls out?

    • ANSWER:
      most was equity and if you just dug in your money was returend back.
      mine is fine was low and not a concern or issue any longer.

18. QUESTION:
    401k – I am 28, what is the “average” i should have in my 401k now?
    I have about ,000 in my 401k and feel thats low for my age. What do you see a 28 year old should have by now to live well when i retire? I know everyones perception is different but trying to get an idea – please include low/medium/high estimates – thanks in advance

    • ANSWER:
      There is no ‘correct’ answer for your question. I deal with 401k plans everyday at work, and you’re doing well just saving anything at all. I’ve seen 60 year olds who have hardly a few hundred dollars in their accounts when they retire (even without any outside accounts)! Don’t lose hope, you’re still young.

      The general theory is that you should have 70% of your gross income today (I would estimate your salary that you think you’ll have before you retire) for each year that you are in retirement. So if you’re making ,000 right now, you plan on retiring at age 60 and have a life expectancy of 80 years, you would need to have saved about 0,000 by the time you retire. That’s ,000 a year over 20 years (80 minus 60). That’s not even taking into account that the 0,000 should actually be obtaining interest even during retirement (i.e. if you have it in a money market fund).

      Don’t be discouraged by that dollar figure though. You should be getting raises as you advance your career, and that will allow you more discretionary income to put into your 401k. Also, don’t discredit the advantages of tax deferred growth and investments in the stock market. Yes, the market has been quite volatile lately, but a lot of people have figures of long term stock market averages around 8-10% per year. Over the amount of time you have left to save, you should have plenty of time to obtain the amount you need for retirement.

      One hint of advice though: save as much as you can now. because the earlier you save the better (it gives you more years of compound growth).

      A few notes:

      -The aformentioned 70% of your annual income is an estimated figure (from theory). Some people could definitely live off of less in retirement; some people need to live off of more. That is ultimately up to your own spending habits and what you plan on doing in retirement. You’ll need to estimate that percentage yourself.

      -If your company is matching any of your 401k contributions, definitely put in AT LEAST the maximum percentage that they match.

      -Keep in mind that you may also have a pension plan and possibly Social Security (if that is still around) that would be paying you yearly sums of money each year in retirement.

      -Here is a link to a calculator that might quickly help you determine the track you are on:

      http://www.401k.org/401kcalculator/401kcalculator.html

      Good luck!

      -Sean

19. QUESTION:
    WHAT IS THE AVERAGE RETURN ON A 401K PER YEAR?
    I THINK IS 7%. WHAT ABOUT YOU?

    • ANSWER:
      Well the market returns 8 – 12% a year. But not everyone has 100% in stocks. Most have some fixed income. And that cuts the return. So 7% is probably not too far off.

20. QUESTION:
    What is the average charge for rolling over your 401k to an IRA?

    • ANSWER:

21. QUESTION:
    Should I dollar cost average my 401K Rollover?
    I am 29, just switched jobs and have 15K in my 401K which I am planning on rolling over into an IRA. I am considering allocating all of the money at once into about 80% stock index and 20% bond index funds, but someone suggested I should dollar cost average my investment. i.e. keep it in a money market and invest it over a year.

    Since I am not planning on touching the money for 35 years and likely will not redistribute too often, I am leaning toward investing it all at once.

    What do you think- put it all in at once or invest it over time?

    • ANSWER:
      Dollar cost averaging makes sense when you do it as part of your regular contributions. If you are “rolling over” -then you just rollover the entire amount – besides, get in while stocks are on “sale!”

22. QUESTION:
    what is the average annual interest rate for a 401K investment?

    • ANSWER:
      If it helps, the point here is that “401(k)” describes a type of account, not a type of investment. It’s like the shopping cart, and the groceries are the investment you choose to put inside.

      Other shopping carts you might use to invest in are IRAs or Roth IRAs, college savings plans, or just a regular taxable account with a bank or a broker. The 401(k) gives you tax benefits and it’s easy to set up because you do it through your employer. But the actual rate of return depends on what fund you choose to put your 401(k) money into.

23. QUESTION:
    how much money does the average person have in their 401k when they retire?

    • ANSWER:
      excellent question…that I do not know the answer to. I do know that most americans do not put nearly enough into their 401k –as they should.. (I am included) I put in 5% and my company matches me–so it is 10% but still–I should be putting in more, but I got billzzzzzz

24. QUESTION:
    What is the average amount that a 43 year old should have in their 401K?

    • ANSWER:
      Average? That really isn’t a fair comparison.

      Are you good with simple spreadsheets?

      Do you have your most recent statement from the social security administration?

      Then, here’s how to figure out if you have been a good saver (for retirement)

      Open a new spreadsheet. Label column A “Year”, B=”Contribution”, C=”Running Total”

      For every year the you worked (from the SSA statement), enter the year in column A and enter 10% of the income earned in column B.

      Format column C for $.

      In C2, put in the following formula: =+B2+(B2*0.05)

      In C3, put in this formula: =+C2+B3+((C2+B3)*0.05)

      Copy the formula in C3 into all the other cells in column C for which you have an income entered in column B.

      The last dollar amount in column C should be a reasonable guesstimate of the minimum you should have saved to date for retirement.

25. QUESTION:
    How many loans ,on average can one get on thier 401k. already had one and its paid,.?

    • ANSWER:
      hi

26. QUESTION:
    What is the average balance of a 401K by age 30?
    I just turned 28 and I have ,206.18 in my 401K. I make k(ish)/yr and am at 20% contribution. I think I am on a solid track with some good aggressive funds. I have been searching the web as I wanted to see where I stood compared to others just to have a better idea. I know its all based on what I would be comfortable living on when I am older, but I am still curious to see how good/bad I am compared to the national average.

    • ANSWER:
      The national median is probably zero as a good portion of this country doesn’t save a dime for retirement and relies strictly on social security.

      For a comfortable retirement I guess about a year’s salary by the time you hit 30 would be a good goal. Sounds like you are a few years ahead of the game.

27. QUESTION:
    what is the average balance in 401k plans,workers 55 and over?

    • ANSWER:
      in http://www.ebri.org/surveys/rcs/2006/ (click on “saving for retirement” and go to page 2). There is a table is for all savings by age and amount for 2006. It is probably a more valid chart because people often roll over their 401k’s to IRA’s and also contribute to ROTH IRA’s .

      I believe the following figures are 2005 figures

      the following is important because it shows that the average 401k amount does not represent an accurate look at individuals balances.

      “The bottom line is that most people do not have the ability to contribute significant amounts of their income to a 401k plan. The IRS allows people to contribute about ,000 /year into a 401k plan but only a small number of workers, professionals generally making over 0,000/year, can do so. Most everyone else contributes far less. A telling statistic is that the average 401k plan has about ,000 in it. If you retire at 65 and have a life expectancy of 20 more years, ,000 will not take you very far. But the problem with this statistic is that it is an average; the more revealing statistic is that the median amount (ie the middle point)of 401k plan balances is ,000. When you have this large discrepancy between the average and the median, you do not get a nice bell-shaped statistical graph but something more like an inverted bell-shape as the values skewed higher at the exterminies of the values. In plain language, there are many people with high balances and many with very low balances and not too many in between.”

      The above is from http://brianleon.com/notes/?p=567

28. QUESTION:
    Are 401k plans bad for average employees ?

    • ANSWER:
      Yes they are ! For most average hourly workers they don’t earn enough to adequately save the max amount and most workers ARE NOT financially savvy enough to understand just what they are investing in. Most can’t afford to hire a financial advisor either !

      The problem I have with 401k plans is that they are investing on autopilot. Almost everyone with a job contributes to them, but they have absolutely no idea what they are doing.

      At every company I’ve worked at, it has always been the same story. The employee is presented with a big smorgasbord of mutual funds. One of them is a conservative money market fund that invests in safe short term government securities. Almost all the other funds are equity funds (that would be stock market funds, for those unfamiliar with the word (“equity”).

      No company I’ve worked at ever held employee investing classes and most people get this stuff thrown at them and for some leafing through all the pamphlets is like trying to understand a foreign language.

      Mutual funds are thought to be the best form of 401k investing but the bottom line is most people have no idea how to select a mutual fund to invest in. He/She is completely and utterly clueless. Faced with a bewildering array of funds, he often follows one of the following strategies: (1) invest a little bit into each fund; (2) invest in the fund with the biggest returns; (3) invest in a couple of funds with the biggest returns (a combination strategy).

      I typically shy away from investing in stocks in my 401k mostly sticking to mutual funds. In the long run it’s a safer bet !

29. QUESTION:
    what is the average return on 401k plans so far this year? mine is down 2.7 % ytd?

    • ANSWER:
      It sounds as if you are in bad funds and need to sell the ones you have and buy some better ones.

30. QUESTION:
    I have a natural resources fund in my 401k. Should change it or average down?

    • ANSWER:
      There is a very good article on morningstar regarding mutual fund portfolio construction based on the concept of core funds and additional funds that you would add for additional diversification – a natural resource fund or any sector fund would be a fund such as that.

      http://news.morningstar.com/article/article.asp?id=124450&_QSBPA=Y&asection=archive&pgid=wwhome3b

      I don’t know what your fund is, but presuming that it is a relatively small % of your portfolio, and its fall is also in line with the rest of the funds in the group – I wouldn’t dump the fund simply because it is down AND I wouldn’t make a decision based on the price of oil today on a fund that I would own for ‘many’ more years.

      I add money to my retirement plan each month, and invest based on dollar cost averaging – so the times when a fund that I own that I have no issues about continuing to own is down – that is a time I would buy more shares.

31. QUESTION:
    What is the average retirement nest egg?
    How much does the average retiree have saved with there 401k, investments, and other savings.

    • ANSWER:
      The median (meaning the middle household) savings of persons nearing retirement age (age 55-65) in the U.S. appears to be around 8,000 and consists of ,000 in home equity, ,000 in pension accounts, and 4,000 in other financial assets. Is this enough to fund a decent retirement? I seriously doubt it. It is usually recommended that you spend no more than 5% of your financial asset balances per year. So (91000 + 134000) x .05 gives you an annual before tax income of 250 or less than a 00 a month. I don’t count the home equity because I am assuming that you want to keep living there.

32. QUESTION:
    Which has higher return on investment (on average) IRA’s or 401K’s?
    I have a 401K currently with my employer and since inception it has returned 15% overall and in the last 3 months 8.65%.

    I have a high interest savings account that pays 5.50% but I was wondering would I do better with an IRA? I currently put in a week into the savings account.

    • ANSWER:
      There are tax implications that will dictate how much you can put into these types of accounts (so check that out before you put any more money into the IRA).

      However, in most 401(k) plans, the employer is matching some of what you put in, so right away you are ahead of any IRA because you are getting 100% interest on the amount they match.

      On the other hand, you need to learn from the fiascos at Worldcomm and Enron (just to name two) where people put all their 401(k) into their employer’s stock. Don’t put it all there!!!

      You are doing good to diversify, but you can probably do better than just a savings account. If you are looking at using the IRA for 20-30 years down the road, you can afford to take a little more risk.

      You should also know that basically you can invest your IRA funds in just about the same things as you can with a 401(k), so there may not be much difference in their returns except for the pretax benefits from the 401(k).

      WARNING: Be aware that there are HUGE tax liabilities and penalties if you withdraw your money from either the IRA or the 401(k) before you are 59 1/2 (check the age requirements).

33. QUESTION:
    15% of the US Stock Market is Energy Companies Like Exxon. Do You Have Obama Takes that Money from Your 401k?
    … by raising corporate taxes, dividend taxes, capital gains taxes, and windfall taxes on the oil profits exxon made for you?

    Yes, Obama wants to nail that 15% of the average America’s 401k’s stock holdings. Is that good?

    • ANSWER:
      I’m still having trouble with how we repair the economy and become energy independent.

34. QUESTION:
    With inflation at 3% on the average, why did congress not force managers of 401K to guarantee that in growth?
    401K and pensions funds are for retirement so folks do not become a burden on the society. But fund managers have proven to be very greedy and corrupt- see Greenspan’s comment.

    If they are forced to guarantee a yearly minimum 3% increase on the managed fund, only the honest and hardworking professionals will remain (most likely no more Madoffs and Stanfords), and the whole nation will be better off.

    After all, when we borrow from the bank, most of us pay way more than 3% as interest. I took an MBA finance course and the typical 8% growth rate over many years – used as example in long term investment- is unrealistic. Then you have to pay taxes on your gains. If you calculate future value of your money, you will discover that: Inflation + taxes on gains + risk= loss to the average investor =gains to money managers.

    401 is then no more than government sanctioned gambling with the house (Wall Street) winning 100% of the time. This has to stop.

    • ANSWER:
      There are ways to get a guaranteed return. An annuity, backed by an insurance company, is the usual way. The tradeoff is that you would only get the 3%.

      Let’s say you get a five-year annuity with a guaranteed 3% return each year and invest ,000. You would get 15.93% return total so that you would have ,592.74 at the end of five years. (By the way, in current dollars, you would still have ,000.)

      Let’s put that same ,000 into a basket of stocks that will track the overall market.

      Annual returns
      Yr 1 10% loss
      Yr 2 8% gain
      Yr 3 8% gain
      Yr 4 8% gain
      Yr 5 8% gain

      At the end you would have ,244.40. That is conservative because it is still less than an 8% average return.

      Go ahead and put your money into an annuity. I’ll bet on the long-term performance of the financial markets.

      GD

35. QUESTION:
    Value of a house compared to a mutual fund/401k?
    How much does a house increase in value compared to the average mutual fund or 401k?
    P.S. notice I put “average”. Does anybody have any figures, to support what they say.

    • ANSWER:
      Unfortunately the question presupposes that a house and an investment such as a mutual fund inside a 401(k) always increase and are relative.

      Both assumption would not be accurate.

      There is no correlation of a 401(k) to a mutual fund or to a home value.

      There really is no “average ” mutual funds. There are some 10,000+ funds.

      Depending on where the house is located can increase or decrease in value given location location location and the current market.

      a 401(k) is a structure, as opposed to an investment.

      http://en.wikipedia.org/wiki/401(k)

36. QUESTION:
    I’m 25. I made about 70k this year. How do I find out average salaries of people my age? In my occupation?
    I’m a EE. 70k is including my bonus, but not including the perks like health care and dental and 401k matching. But the average starting salaries listed by school don’t really help me much – I’m 3 years out of college and curious if statistics are tracked for this stuff by age, not by occupation (EEs average salary doesn’t do much for me).. Anyone have a good resource for this kind of information?

    • ANSWER:
      That’s hard because salaries vary from place to place.

      For example a job in Dallas TX that pays pays an hour in Virginia. Of course homes cost more in Virginia.

      I think that would be an impossible to really find out.

      I mean k in Dallas = k in Virginia = k in Wyoming.

37. QUESTION:
    How much $ per week should i invest in 401k?
    I am currently putting 6% of my gross pay in to my 401k. I was just wondering if it is enough or more than average?

    • ANSWER:
      You should contribute enough into your 401(k) to maximize the company’s matching contribution. You should then normally look into other options for your retirement savings, particularly tax-free savings options such as a Roth IRA or municipal securities.

      6% would be about average. In fact, many companies base their matching contributions on a 6% withholding.

38. QUESTION:
    Is the return on my 401k good so far?
    I just started working in January and started my 401k at that time also. The year to date rate of return is 35.7%. Is this good/average/bad? Does it really even matter right now since I won’t be retiring for 43 years?

    • ANSWER:
      That is a very good rate of return, likely due to the fact that you have been investing inline with your time horizon, and have taken on more risk which has been rewarded handsomely year to date. To give you some perspective, as of yesterday’s close the YTD returns of the most common indices were:

      Dow Jones Industrial Average 11.25%
      S&P 500 15.75%
      Russell 1000 (Large Cap Stocks) 17.16%
      Russell Mid Cap (Mid Cap Stocks) 26.28%
      Russell 2000 (Small Cap Stocks) 17.28%
      MSCI EAFE (Developed International Stocks) 21.14%
      MSCI Emerging Markets 51.36%
      Merrill Lynch US High Yield Master II (High Yield Bonds) 39.97%
      BarCap Global Aggregate Bond 5.07%
      BarCap Intermediate Treasury Bond -1.69%
      ML 3m T-Bill (Cash) 0.14%

      So as you can see with the exception of investing just in emerging markets or high yield you’ve outperformed the major indices by a significant margin. You are on the right track. Its important to keep a level head though, these returns are very good, and are typical coming off a market bottom, but they are not what you should expect all the time. Given your time horizon you should expect to have your returns be in the +18% to -30% range because you are likely taking on more risk in line with your long term goals. Anything above that is gravy. Keep up the good work.

39. QUESTION:
    do 401k plans gain interest? and if so what is the average percent of interest?

    • ANSWER:
      It all depends. A 401K plan is handled by a management company and usually has multiple options for you to invest in. Some more risky than others; usually a fixed income, company stock, and various mutual funds, including growth, value, international, and small cap; each with various degrees of risk.

      If you’re young and have 20+ years to invest before retirement, go with the higher risk funds. If you’re nearing retirement, you may want to consider putting a higher percentage of your money in less risky funds, like fixed income and bonds.

      ///

40. QUESTION:
    The Dow Industrial Average is down 3,583.07 since 10/08/2007, how’s your 401K after a year of going downward?
    How has your 401k faired over the past year?

    Dow Jones industrial closed at 14,093.08 on 10/8/2007…as I write this the DJIA (INDU) is at 10,510.01.

    • ANSWER:
      I’m actually up quite a bit for the year. Not huge, but not bad.

      Helen Keller could have heard and seen this whole mess coming years ago, and I was no different. In the third quarter of 2007, I reconfigured my entire portfolio. I rolled my higher risk investments into funds and stocks with more stability, but lower growth. I also did fairly well on energy related stocks over that period of time, some of which I rolled out of early this year, in favor of preservation vs. growth.

      I have lost some money on certain investments, but I am up overall. Not huge, but I’m up. It could be much worse.

41. QUESTION:
    How many Americans save with either a 401K or an IRA?
    Since IRA’s and 401k’s aren’t included in the Commerce Department ‘s personal savings rate statistic, I’m looking for the number of people that actually use IRA’s or 401k’s for their savings. And, also, it would be nice to have an average amount in those accounts.

    • ANSWER:
      As pension plans becoming extinct, more and more companies are choosing 401(k) as a way for employees to save for retirement. In 2003, only 33% of American companies has a pension plan. It’s only a matter of time when more than 80% of the working class will have a 401(k). There is no real number on how many people actually own a IRA, but the government knows that the IRA is becoming highly profitable as more and more people put away their money in it. Most young adults or college graduates don’t even know what an IRA is until they read it somewhere or heard someone talking about it.

      Base on a recent survey, 68% of Americans believe they have enough money saved for retirement. When ask how much they have saved for retirement, 55% said they have less ,000 saved (management-issues.com April 5 2006).

      I think this scary because when you retire, you going to need this money to last for at least another 20 to 30 years. If you are age 40 and you only have 000 saved, you are in deep trouble. In 20 years, it might grow to 0,000 or more. If you want to comfortably live your retirement, you need to accumulate at least million. While that may sound alot of money in today’s dollars, 20 years from now, the cost of living is definetly going to be way higher than today.

42. QUESTION:
    Sell our home to have smaller mortgage (23% more than average!) and contribute more $ to retirement?
    We are currently paying 23% more than national average for our mortgage and our equity loan. Sell home to downsize mortgage? We really want to build up our 401K, IRARoth, emergency funds, etc. We were laid off 4 times in 7 years and used 401 and equity to pay for home, etc. We love our area but need to think of our future. Any advice or your stories would help! Thanks!

    • ANSWER:
      Don’t compare your mortgage to the national average.
      You need to compare your mortgage to your own income to see if it’s too much.
      A general rule of thumb is that your mortgage shouldn’t be more than 25% of your take-home pay (33% if you want to stretch)

      If you’ve had to tap into a 401K, then I think you have too much in retirement and not enough of an emergency fund (cash in the bank)

      I suggest the Dave Ramsey approach, here’s his plan in detail:

      Step 1: Get a ,000 baby emergency fund.
      Step 2: Pay off all the debts.
      Step 3: Finish the emergency fund (6 months expenses)
      Step 4: 15% to retirement
      Step 5: College fund
      Step 6: Pay off the house
      Step 7: Enjoy being rich.

43. QUESTION:
    The DOW is at -689 does, the average american know how this will effect them?
    I think that most people don’t understand the bail out, so they are not for it because they don’t trust Bush. He has cried wolf too many times and that is understandable. HOWEVER, would you gamble someone else’s 401K? Would you gamble your own job? Who here actually can figure out what could happen to the average american?
    So far Pete R has came the closest.
    You win Ruby, sorry to say.

    • ANSWER:
      The financial system is collapsing, with or without the bailouts. The government and mainstream media have been hiding the severity of the situation. People who get their information from independent news sites have seen this coming for quite some time.

      All the bailout was designed to do was give the banksters and the power elite an opportunity to cushion their landing and make some profit while the rest of us fall with the house of cards. Without the bailout, some of the bankers will be falling with us.

      The conspiracy nuts saw this coming a long time ago and moved their investments into precious metals and assets that generally recover after a crash. The rest of the people, having been deceived by the media and the government, stand to lose.

      The blame for your loses is not owed to the bailout failure. It is owed to the criminals who orchestrated the entire situation that is now unfolding. This is the second time in a century this crime has been committed on the American people.

      If you want to know what will happen to the average American, look the 1930′s, but expect the problem to resolve itself far more quickly than was the case then.

44. QUESTION:
    Is it worth /year to have your 401k options increased from 26 to over 3,000?
    The 26 offer normal diversity; small, medium and large cap, bonds, international, governmental, etc. I like managing my own 401k and have averaged 14% in the past. I’m starting fresh with a new employer now and have those options: AIG for free with 26 mutual funds or Schwab for annually with over 3,000. Your opinions?
    Thanks in advance!

    • ANSWER:
      I doubt you will need a choice of over 3,000 funds. In all likelihood, the 26 choices will offer you as much diversity as you need.

      Also, compare any applicable fees between the two choices of AIG or Schwab. If there is a significant difference in the fees charged, you could save more by switching to Schwab, especially if your fees are based on the amount in your 401K.

45. QUESTION:
    If you ever borrowed from your 401K account, how long, on average, did it take for the loan to process?
    Meaning, how long did it take you to receive the check? Do they do it right there at the bank? Do they have to mail it to you? How many days did it take total? Just curious what timeline to expect. I’m dealing with Wells Fargo, in case that helps.
    Thanks for answers so far.

    Jerry, 2 weeks? Damn lol. I needed it sooner. It’s actually my mom who would be borrowing from her 401K for my tuition balance. We just applied for a student loan, but if 401K get processed immediately, I was thinking we could cancel the student loan and just do the 401K loan. But at this rate, I think the student loan will process before the 401K loan. Oh well.

    Jds, thanks! Will check it out.

    • ANSWER:
      Took me two weeks I was even able to do emergency loan from mine. I was even able to check when The check was sent out by calling

46. QUESTION:
    Can lost value in a 401K be recouped by dollar cost averaging with markets down now..or is value lost forever?
    my 401K was worth about 00 more than what I’ve put in it last year..now it’s worth about 00 less than I’ve put in it..if my contributions buy more shares at a cheaper price now, if and when markets rebound..will i get a big rebound back to value or is what I lost in value up until now lost forever?

    • ANSWER:
      We are all hoping that the lost value in our retirement accounts will not be lost forever. That is the hope. Some of us may not realize that hope. Certainly, if you have chosen relatively conservative type investments, dollar cost averaging will give you a better chance of recouping your losses than not. Nothing however is for sure in the investment universe. There are those who were investing their 401k money into tech stocks back in 1999-2000 that may never recoup their losses, never being a very long time.

47. QUESTION:
    with 16 years b4 retirement should i continue my 401k at 85% stock indexes and rely on dollar cost average?

    • ANSWER:
      Sure, that’s a fine idea.

      With 16 years to go, 85% doesn’t sound too stock-oriented to me. (I was 100% up until quite recently.) Some rules-of-thumb are around that would have you a little bit more in bonds and less in stocks, but I don’t believe them, I think you’re fine.

      If your 401K choices offer you a chance to diversify in that 85% of stocks — say, a chunk in global/international/foreign stocks, you will want to at least contemplate that choice as well.

      And almost all of us end up dollar-cost averaging in 401ks, since the money is usually rolling in on a periodic (payday) basis.

      Just continue thinking long-term, and don’t panic when any market downturns hit, and you’ll be fine in 16 years. Although as the years progress, when you get quite a bit closer to retirement, it’ll be time to think about paring that 85% back a little bit.

48. QUESTION:
    What is a good yardstick to measure my 401k against?
    I want to compare my annualized return over the past 5 years to the average market return, but I can’t seem to find the market numbers.

    • ANSWER:
      Morningstar or Ibbotson. Bloomberg or factset, compustat if you’re lucky enough to have access.

      the annual/quarterly statements as well as prospectuses should have this info already.

      for example, say you have stock funds in your 401K. and say they’re all growth funds. the statement should have a little section where it does a benchmark comparison showing your returns versus the market overall (liek the S&P 500, or Dow 30), but also it should show your returns versus all other growth funds.

      so if we’re talking funds, morningstar is your best bet. for sure.

49. QUESTION:
    How much should you have in your 401K?
    Assuming that by the time one retires their house will be paid for and debt will be eliminated. And also assume an average person who isn’t living an extravagant lifestyle. Does anyone have some general guidelines? For example – At age 30 you should have ___, at age 35 you should have ___ in your 401K, at age 40….etc.

    • ANSWER:
      I am sorry, but there is no such answer. That is a very individualistic situation. There are two basic approaches to making an educated guess. One uses somewhat advanced math to guess what you need based upon current standard of living to be maintained, the expected lifespan of the individual, and the expected inflation of money. The other is to put away as much as you can and hope for the best.
      I suggest a combination of the two. Talk with a financial adviser to help you plan. Then put back a bit more than that. Some suggest putting back 15 percent of your income. That is not always possible. Just know that anything you save now is that much more that you don’t have to worry about tomorrow.

50. QUESTION:
    Why do some 401K mutual funds take a loss of 6-15% on a single day in December? How is this legal?
    Check out ticker ARTIX on Dec 19, 2007. Why the huge drop? The markets certainly didn’t take that kind of hit. It seems like money managers are juggling numbers around at the expense of the average retirement investor.

    • ANSWER:
      December is typically the time of year when mutual funds make dividend and capital gains payouts to their shareholders. If the shareholder is reinvesting those dividends then there is zero difference in the overall account balance for the shareholder as the NAV will drop exactly the amount of the dividend but the shares will increase proportionately. Here’s an example:

      Let’s say mutual fund company A has 1000 shares outstanding and each share is worth 0. That means the overall assets of the fund are 0,000. For tax purposes the fund is required (not by choice but by law) to pay out ,000 in capital gains to it’s shareholders. So they declare a capital gain distribution. They pay that out in cash. The new overall assets of the fund drops to 90,000. Since they paid it out in cash and no one liquidated any shares there are the same number of shares outstanding and the NAV is now /share (,000/1000). Seems like a 10% drop doesn’t it? But you’ve got cash that you’re not considering!!! You’ve got ,000 in mutual funds and ,000 in cash…the exact same value! So, those that reinvest now put that ,000 back in at the price of /share and buy 111.111 shares. So they’ve now got 1,111.1111 shares at or ,999.9999999 (rounding back up to the original 0,000).

      So, if you only looked at the price drop you would think that the fund lost money…but in reality it didn’t. They just paid some of the $$ out to the owners. Most repurchase….and their account is made whole. Those in after-tax accounts have to declare that dividend on their taxes as income….those in retirement funds do not. What you need to do to determine the REAL gain/loss for that day is add back the dividend rate to the NAV and then calculate the rate of return.