[M_Six]

Like a lot of folks out there, my 403B is tanking badly. Really badly. I'm down $10k just in December. That may not sound like a lot to folks who have million dollar retirement accounts, but it represents a tidy percentage of my existing account. Wifey's account is down even more because she's further away from retirement and hence has a slightly riskier account. She also had a better return last year than I did.

This is a state employee supplemental account, so I don't have a whole lot of control over it. I might be able to move it into a low-risk/low-return account just to stop the bleeding for a bit and then I'd stop or reduce contributions and just bank those funds. But of course that means I'm not going to be buying more shares at the lower rates, so it may end up hurting me later. Still, the outlook for the next year or two is not rosy.

I've seen bad times with this account before and survived. Summer of 2015 and of course the 2008 nightmare come to mind. But now I'm within 7 years of retirement, so I'm getting a little bit nervous about seeing these losses.

Thoughts? Do I stick my head in the sand and pray or move to secure what I have and at least stop the losses?

[c1pher]

No, you just need to start thinking more about principle preservation instead of growth. Most funds have retirement targets that do the mixing for you if you are more of a novice or you can start looking more into more stable/consistent dividend returns.

[Run Silent]

Originally Posted by MGM135is

No, you just need to start thinking more about principle preservation instead of growth. Most funds have retirement targets that do the mixing for you if you are more of a novice or you can start looking more into more stable/consistent dividend returns.

^ This.

Please don't withdrawal investments when they are on the down swing. This is literally the worst thing you can do.

[OkieSnuffBox]

Originally Posted by usshelena725

^ This.

Please don't withdrawal investments when they are on the down swing. This is literally the worst thing you can do.

/thread

[The Choosey begger]

Bail, sell high, buy low

[Run Silent]

Originally Posted by anglo

Bail, sell high, buy low

uh.....

[M_Six]

I wasn't planning on withdrawing anything. I was just thinking about having the existing funds moved to something even less risky than the current account, even if that means I miss out on a good day/week here or there. And I was thinking of curtailing contributions for a bit. I'm just gutted seeing a 5 figure loss of my contributions so far this year. And if I thought this was just a temporary market correction, I'd be fine with it. But much of what I've been reading points to a recession in the next year or two.

I always hear that a sudden market crash really only hurts those who are just about to retire. Everyone else with 10 years or more can ride it out. At what point do I fall into the former category? This year sucked. If the next two also suck, I may not have enough earning years left to recoup.

[Joekerr]

Originally Posted by usshelena725

^ This.

Please don't withdrawal investments when they are on the down swing. This is literally the worst thing you can do.

Pfft - we are all experts who can time the market perfectly. All he has to do is get out now, and buy at the low dip and sink every dollar in there as well that he saved.

/thread.


If you are going to stick it out, keep up the contributions - the next worse thing you could do would be to stop those.

[M_Six]

Originally Posted by MGM135is

No, you just need to start thinking more about principle preservation instead of growth. Most funds have retirement targets that do the mixing for you if you are more of a novice or you can start looking more into more stable/consistent dividend returns.

This what I'm saying. My current target account seems to be pretty damn risky. That's why I was thinking about principle preservation by moving to a less risky fund. I was not planning of withdrawing or leaving the investment firm. Just looking at something safer and maybe cutting back contributions.

[M_Six]

Originally Posted by Joekerr

If you are going to stick it out, keep up the contributions - the next worse thing you could do would be to stop those.

This is where my investment knowledge sucks. Why is it bad that I stop contributions when most of what I've contributed this year has gone up in smoke? I'm not being a wise ass here. I just really don't have a good understanding of why stopping contributions is a bad thing.

[The Choosey begger]

Originally Posted by usshelena725

uh.....

When all the indicators started pointing to a recession in 2007, i sold everything! Came back in 2008 and bought Sirius XM and Apple dirt cheap!
I made a killing!

Everything is overpriced now, a correction is due!

[Joekerr]

Originally Posted by M_Six

This is where my investment knowledge sucks. Why is it bad that I stop contributions when most of what I've contributed this year has gone up in smoke? I'm not being a wise ass here. I just really don't have a good understanding of why stopping contributions is a bad thing.

Depends on the fundamentals - I am presuming given your age, what you are investing in is blue chip equity stocks, not the higher risk things like cannabis, crypto, tech, etc.

If the stuff underpinning your portfolio are solid companies with good history, your investments haven't really gone up in smoke. Yes, the value has temporarily eroded, but you still own the same number of shares. If you get out now, you are crystallizing or cementing your loss. If you stay in, and ride this out, the companies values will increase via share prices again, and your value rides up along with it.

The reason why you want to continue contributing in the downturns is because you are effectively buying more stock for the same dollars as before because it is cheaper. So when that stock bounces back, your investments grow even more.

Now, if we had a crystal ball, we would ideally only buy on the downswings, stop contributing at the peaks and plateaus (and in fact sell at that point) and then re-invest it all plus the contributions you didn't put in on the downturn.

But none of us has said crystal ball, so we keep contributions steady and rely on averaging. As hard as it is to do, contributing when you are losing money is the best thing you can do, PROVIDED what you are investing in has a solid history and not risky.

[Our03z4]

I bailed right before this little down turn so I kept my profits. Holding in cash currently and waiting to get back in. These are mutual funds. I have 30+ years before I retire so I have time on my side. If I were in your shoes I would just tow the line, I agree with MGM. It's pretty difficult to time the market right, I enjoy trying and I'm sure it will bite me at some point.

My stock/ETF account is up 153.33% for the year thanks to this little downturn blip. What scares me right now are those who are retired being worried, that makes my business's suffer.

[M_Six]

Originally Posted by Joekerr

Depends on the fundamentals - I am presuming given your age, what you are investing in is blue chip equity stocks, not the higher risk things like cannabis, crypto, tech, etc.

If the stuff underpinning your portfolio are solid companies with good history, your investments haven't really gone up in smoke. Yes, the value has temporarily eroded, but you still own the same number of shares. If you get out now, you are crystallizing or cementing your loss. If you stay in, and ride this out, the companies values will increase via share prices again, and your value rides up along with it.

The reason why you want to continue contributing in the downturns is because you are effectively buying more stock for the same dollars as before because it is cheaper. So when that stock bounces back, your investments grow even more.

Now, if we had a crystal ball, we would ideally only buy on the downswings, stop contributing at the peaks and plateaus (and in fact sell at that point) and then re-invest it all plus the contributions you didn't put in on the downturn.

But none of us has said crystal ball, so we keep contributions steady and rely on averaging. As hard as it is to do, contributing when you are losing money is the best thing you can do, PROVIDED what you are investing in has a solid history and not risky.

I do understand this part and it's good to have some reinforcement on it. This account pretty much follows the S&P 500 and the DOW. I can usually predict the day-to-day losses/gains based on what I see when the markets close. But overall it's sort of a middle of the pack performer. This year is really going to hurt its lifetime return numbers.

[Run Silent]

Originally Posted by M_Six

Serious (hypothetical) question here. If I had just started my retirement investment this year (Jan 2018) and say I was at max contribution of $18.5k, at this point in the year I would have hit that limit but my principle would be maybe $5k and still liable to drop more before the end of the year. What would be my motivation to keep up the contributions?

There are several reasons for this, one of which is that every dollar you put into the market has a basis of the market for that day. So if you bought 1 share for $10 yesterday and today it is worth $5, then the smart thing would be to buy two more shares today for the same $10. Now your basis in the stock is $6.67 per share rather than $10.

The other thing to note is that too many people stress out when they are about to retire about the market. You aren't going to withdraw 100% of your capital from the market the day you retire. Odds are that you have enough in there where you are planning on only withdrawing capital gains and not principle anyway. So even if there is a huge recession and the market drops 50%, assuming you have been investing all your life, way more of the money in that account is going to be interest and not principle - far more than the 50% drop would impact.

Further, as you draw down the money in the account, the market will eventually rebound (it always does) and the money remaining will continue to grow. Just leave the money in good growth stock mutual funds with a long history of good track records. It will all work out.

Don't try and time the market. The market is already responding to events and circumstances that you aren't aware of. Because of this, the chance you will time the market correctly is nearly nil.

[Our03z4]

Originally Posted by M_Six

Serious (hypothetical) question here. If I had just started my retirement investment this year (Jan 2018) and say I was at max contribution of $18.5k, at this point in the year I would have hit that limit but my principle would be maybe $5k and still liable to drop more before the end of the year. What would be my motivation to keep up the contributions?

Because you are buying shares. This chart is 9 years...you have 7, this is why.

[Our03z4]

This chart gives a better view long term, every gray area is a down turn.

[BimmerBoomer]

I intend to buy back in at 20,000 or so.

[DETRoadster]

Originally Posted by usshelena725

There are several reasons for this, one of which is that every dollar you put into the market has a basis of the market for that day. So if you bought 1 share for $10 yesterday and today it is worth $5, then the smart thing would be to buy two more shares today for the same $10. Now your basis in the stock is $6.67 per share rather than $10.

The other thing to note is that too many people stress out when they are about to retire about the market. You aren't going to withdraw 100% of your capital from the market the day you retire. Odds are that you have enough in there where you are planning on only withdrawing capital gains and not principle anyway. So even if there is a huge recession and the market drops 50%, assuming you have been investing all your life, way more of the money in that account is going to be interest and not principle - far more than the 50% drop would impact.

Further, as you draw down the money in the account, the market will eventually rebound (it always does) and the money remaining will continue to grow. Just leave the money in good growth stock mutual funds with a long history of good track records. It will all work out.

Don't try and time the market. The market is already responding to events and circumstances that you aren't aware of. Because of this, the chance you will time the market correctly is nearly nil.

This is a really excellent point. We do tend to get hyper focused on maximizing what we have in savings for that one point in time. As if the day we retire we are forced to cash out and put it all under the mattress and live off whatever is there. In fact, if done well, one should be able to live off the interest generated by the account and not dip into the balance. Just because we stop working does not mean we stop investing.

[Our03z4]

Originally Posted by DETRoadster

This is a really excellent point. We do tend to get hyper focused on maximizing what we have in savings for that one point in time. As if the day we retire we are forced to cash out and put it all under the mattress and live off whatever is there. In fact, if done well, one should be able to live off the interest generated by the account and not dip into the balance. Just because we stop working does not mean we stop investing.

Exactly.

[M_Six]

Some good points here. Much appreciated. And my account does have a fair amount of interest already, and most of that has been generated in the last 5 years or so. The more you have, the more you make, as they say. So I guess as long as we don't see a repeat of 1929, in which case we're all screwed, maybe things will work out.

Wifey warned me when I started watching the markets daily on my desktop ticker that I'd be sorry I did. Maybe she knows a thing or two.

[Run Silent]

Originally Posted by M_Six

Some good points here. Much appreciated. And my account does have a fair amount of interest already, and most of that has been generated in the last 5 years or so. The more you have, the more you make, as they say. So I guess as long as we don't see a repeat of 1929, in which case we're all screwed, maybe things will work out.

Wifey warned me when I started watching the markets daily on my desktop ticker that I'd be sorry I did. Maybe she knows a thing or two.

You should never be watching the markets for retirement accounts. Pick some good funds, then review them once a year or so. Anymore than that, and you are just asking for trouble because your heart is going to try and outvote your brain.