Today’s Smart Money Question:
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Here Are Just A Handful Of Things You’ll Learn:
We came across an interesting article in The Wall Street Journal that said participants inside 401k plans, 403b plans, etc. are getting hit harder this time from the recent market decline and market volatility downward.
Why is this happening? According to the article, target-date funds, a popular retirement-savings option, are more heavily invested in stocks than investors might think.
We are not fans of target-date funds. They came out of the crash in 2008 and 2009. It was a way for Wall Street to create an idea of a set-it-and-forget-it approach for investors who wanted to become more conservative as they approached retirement.
Since 2009, the stock funds have been climbing and have outperformed bonds, as expected. But if you have a target-date fund, you need to understand what the underlying investments look like. Some people are very surprised how much stock exposure is there.
About 90% of the time, there are usually only three asset classes that the fund is invested in – domestic U.S. large cap stocks, international stocks and intermediate-term bonds. That’s not getting as much diversification as you can do by creating a diversified portfolio that a 401k allows you to have.
If you don’t choose where you want your contributions to go, the default is usually a target-date fund based on your date of birth. When you are participating in 401k plans, understanding what you are investing in and the risk you’re taking is extremely important.
On today’s show, we’re also talking about cars and whether you should lease a car or buy a new or used one, especially in this escalating automotive market. Listen to the full episode or use the timestamps below to jump to a specific section.
3:20 – Wall Street Journal
9:38 – Investment options
12:14 – Leasing vs. buying cars
13:32 – Coming to the end of a lease
16:32 – Buying a car
“I’ve talked about this many times in the past – when you are participating in 401k plans, understanding what you are investing in and the risk you’re taking is extremely important.“
-Matt Hausman
Additional Podcast Episodes:
- Retirement Statistics – How Do You Measure Up?
- Should You Pay Off Debt With a 401(k) Loan?
- Murky Areas of Retirement Planning
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The host: Matt Hausman – Contact – Resources – Call: 610-719-3003
