On a day when the Dow Jones industrial average closed down 400 points, you may be asking yourself, 'What can I do to make myself feel better about this?' Charles Schwab Corp. (NASDAQ: SCHW) has an idea for you: Invest more for your retirement.
Here's how the logic goes, and I agree with it (even though, of course, it is good marketing for Schwab to promulgate such ideas).
The discount broker has found in surveys that most people (63%) say they sleep better at night when they are saving for retirement, yet many people save very little for retirement each year. They also found that people save for vacation or household items before they max out their retirement plans. And most people are positively drowning in credit card debt, probably because they made those purchases and took those vacations before they'd actually saved the money (that's my sophisticated analysis there, not survey results).
Take this all one step further and it's clear, if more people saved more for retirement -- and spent less on household and vacation splurges that rack up credit card debt -- they would sleep better at night.
Schwab today put out a list of savings goals and No. 1 on the list was to contribute enough to earn the maximum match on your company's retirement plan. That came ahead of creating an emergency fund to cover three months of living expenses (No. 3) and paying off credit cards (No. 2).
Now, it is dumb not to get the full freight from your company if you are lucky enough to have a 401(k) that allows company matching. But should that be prioritized over creating an emergency fund? In these times of rising unemployment, I'm not sure I agree.
But I do know that in times of shrinking retirement savings and lost portfolio values, it does make me feel better to know that I'm currently buying stocks for my retirement plan. I figure I'm getting them cheap and I don't plan on using the money for another 20 years or so. The total dollar value of my portfolio may be shrinking, but the amount of stock I own is still going up. Hopefully, some day that will count for something.
Another benefit to continuing to add money -- when I opened my 401(k) statement recently, the losses on my portfolio don't look as horrible as the overall market since I've been adding money all along. I know that's sort of like pulling the wool over my own eyes, but hey, it is a side benefit to continuing to invest in a down market.
So, having trouble sleeping at night with the market down so much? Some serious long-term investing could be a real -- if counter intuitive -- source of some comfort.
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Reader Comments (Page 1 of 1)
11-12-2008 @ 7:14PM
Isabella Coldivar said...
It's never too early to start planning for retirement. Saving, too. The current state of the economy has really thrown a wrench into things, it seems.
However, do keep in mind that when it's time to start putting away for and planning your retirement, one company will be there to help you out every step of the way...
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Isabella Coldivar
AARP Ambassador
isabellaAARP@gmail.com
11-14-2008 @ 5:21AM
Sarah Jones said...
It is wise to start thinking about what to do with your money when you retire. My mother was so careful throughout her life and put money away safely, so she's now been able to buy a beautiful house in Provence. Check out http://www.whichwaytopay.com to get some really good comparisons on foreign exchange specialists. Much wiser move than going with a high street bank because you get more for your money - they don't charge commission and avoid Interbank rates.
11-15-2008 @ 10:41AM
Aaron said...
Why put money into a 401k now? It keeps losing value. I guess the other way of looking at things is there's a "sale" now in the stock market, so perhaps now is the best time to invest in your 401k.
Personally, I'm not. I've been identifying ways I can save money each month. I have a HELOC and there are several really simple and creative, yet effecive, ways to reduce payments dramatically that most people never learn about. More here:
http://thepayground.com/heloc_home.html
Aaron