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| Monday, June 23, 2008 |
| If you can, save more |
The WSJ article Unsteady Economy Prompts 401(k) Strategy Shifts reports some are saving more while others are saving less. Some are trimming back their 401(k) contributions as prices for daily staples like food and energy creep higher. Others are boosting savings to better prepare for what could be a costlier retirement.
Not all retirement-savings plans have seen the strategy shift. But a number of retirement-plan providers have noticed the change, which follows an uptick in the past year in the amount of money being borrowed against 401(k)s.
"You get both sides of the equation," says David Wray, president of the Profit Sharing/401(k) Council of America, a not-for-profit association of companies that sponsor plans.
Wray says many families are struggling financially, but "when people look at this kind of economic environment, some say the right thing to do is to save more, protect themselves more." I have been working hard for the last few years to reduce my spending and increase my savings. It is not easy, but I feel prepared for the current economic downturn. In a way I am fortunate that I have already experienced a few boom and bust cycles - that enabled me to keep the bust times in mind during the boom years - hence the low debt and high savings.
I just hope I can keep this up for the next 30 years until retirement...
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| posted by Boston Gal @ 10:25 AM *
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| 2 Comments: |
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My 401k company probably thinks that I have scaled back my contributions recently due to the economy. But in reality, I have a crappy 401k plan that has no match and only high-fee fund choices. Whereas my husband's plan has a 20% match on all contributions and offers low-cost index funds. What we have decided to do this year is max out his plan first and only make minimal contributions to my plan. We can't afford to max out both plans and it just makes sense to get the most benefit from his. We also max out Roths as well as contribute to our son's 529 account. Eventually we might be able to bump up my 401k contributions again, but right now it just is much smarter to get all that matching money from my husband's plan.
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Yikes, I feel bad. I am one of those people who have scaled back funding my retirement. I did this so that I can increase my emergency fund. The state of the economy and makes it apparent that I need to have a larger emergency fund. Once that's complete, I'll increase retirement contributions. For this year, my goal is to fully fund my ROTH which could even be a stretch.
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My 401k company probably thinks that I have scaled back my contributions recently due to the economy. But in reality, I have a crappy 401k plan that has no match and only high-fee fund choices. Whereas my husband's plan has a 20% match on all contributions and offers low-cost index funds. What we have decided to do this year is max out his plan first and only make minimal contributions to my plan. We can't afford to max out both plans and it just makes sense to get the most benefit from his. We also max out Roths as well as contribute to our son's 529 account. Eventually we might be able to bump up my 401k contributions again, but right now it just is much smarter to get all that matching money from my husband's plan.