Hi, Vince Oldre, certified financial planner. Thanks for watching another video. I get this question a lot as far as how much should you put in your 401K or your retirement plan through your employer. Just to give you a little bit of a story, one of the co-workers I used to work with, wasn’t putting any money into his 401K, because he was nervous about the market. I understand that you might be nervous about the stock market as well. The thing when it comes to your 401K is if your retirement plan is matching some contributions that you’re putting into your own retirement plan, that means you’re getting 100% return on whatever they’re matching at that time. The other benefit that you have by putting money into your retirement plan is that you’re buying stocks or you’re buying mutual funds at a high and low point. It doesn’t really matter where the market’s at. You’re doing what is called dollar-cost averaging.
Just because a market might be at a high point, at some point while you’re working, you might by at the low point. Then what happens is it averages out. It’s okay to money into the market even if it’s high or even if it’s low or small dollars at a time. That’s what you’re doing by contributing money to your 401K.
The say the minimum you should be doing is right around 10%, but at least do the employer contribution match. The employer I used to work with had about a 7% match, which is really good. You don’t see that with a lot of employers. It was sad for me to see that a co-worker that I work with wasn’t putting any money into his retirement plan or he was going to be matched at 7% of what he put in. 100% of whatever he put in, up to that 7% paycheck. That’s missing out on a 100% return. You’d be dying for a 100% return. I know. That’s the best return you can get, so why wouldn’t you put as much as you can into your employer retirement plan?
Make sure you’re taking advantage of that, but also understand that you’re taking advantage of what is called dollar-cost averaging. That’s a good thing. When you retire, things are going to change. You no longer have dollar-cost averaging, because you’re no longer putting in at the high or low points. You do have to be a little more careful how you’re investing when you do actually retire, especially when the market’s at high points like it can be today. You have to be careful that if the market’s going to go down, you’re not buying more stock when the market’s down. You’re going to be riding that out. If you’re getting close to retirement, you have to think the same way
If you have any questions or concerns about whether or not you should put more into your 401K or not, leave us a message or give is a call. We’re more than happy to help. Til then, I look forward to speaking to you next time.