@Mike M. No, what you are saying is not correct. Example: my employer contributes 2k while matching me on 1k every month. Also these contributions are tax free. There should be a correction of 50% when I will start to loose my contribution. Mutual funds and compound interest is safe and works well. When I say safe I mean safe in a long run.
@Mike M. No, what you are saying is not correct. Example: my employer contributes 2k while matching me on 1k every month. Also these contributions are tax free. There should be a correction of 50% when I will start to loose my contribution. Mutual funds and compound interest is safe and works well. When I say safe I mean safe in a long run.
You are focused on the wrong numbers, no offense. The important point is that you aren't saving enough, fast enough to retire comfortably in the future and any correction only makes things worse. You need $1,000,000 of assets that you can draw down at a 4% rate to have $40,000 a year to live on. And people just aren't saving enough. Click the chart below. If you are saving at the average pace, you will have about $200,000 at retirement and can draw down $8,000 a year at 4% or about $667 a month. Can you live on that? The solution is to dump Stocks and buy an investment that gives cash flow and grows. You can buy real estate in some 401(k) plans. Ask your administrator.
@Chris Mason Generally... you are correct. BUT in this case there is concern that the problem could be structural which could lead to a decoupling or even worse a reversal of the effect you mentioned.
The fed is likely to keep rates at this level or higher. That will not allow mortgage rates to drop.
In short... this is what happens when the economy is artificially stimulated for longer than is should be. A trade war was probably the worst thing to do at this point.
Foreign investment in the US is dropping like a brick. The next shoe might be long term US debt. We should be watching Xinhua and NHK for hints on what direction China and Japan are planning on going.
The unofficial channels do not seem to be heard in Washington. Believe me Jack Ma would not be screaming the 20+ year trade war message without talking to the top leadership in the Chinese government.
Unless you have timed your entry and exit of the workforce perfectly with the markets, your 401k alone wont be enough to support you through retirement. This small drop in the Dow doesnt change that.
@Mike M. Do I really have to ask my adminitrator? I am 34 and I have 330k in my retirement account. The projected amount I will have after I retire is 5.5 mil. Of course this includes taking average over the market. But I will not be cashing it out right away, in case the market drops I will wait for recovery. I think you are confusing many people here. I do invest in RE, but this is just to diversify. And yes, I can retire now, but I love my job and it pay well. What you are saying applies only to people who would enter and leave the market sponteneousely, who have no investment education. Then yes, the simplier methods you use the better.
@Mike M. I think the main flow in your argument is that you belive that when you drop in money to RE, these money will stay there. Cashflow is good, but it's only an analog of dividents. The value of RE can drop even deeper than the value of the market. If you leverage, then you will loose even more money.
Unless you have timed your entry and exit of the workforce perfectly with the markets, your 401k alone wont be enough to support you through retirement. This small drop in the Dow doesnt change that.
It's true for many Americans - in fact, the man who created the 401(k) in the 70s regrets it, because it created a false sense of security and many will indeed find their retirement savings woefully inadequate. But, I still think you're making a blanket statement. It is possible to retire on a 401(k) alone, if the employee contributed enough to it over the years. They started getting popular in the late 70s and early 80s, I believe, and there has been an incredible bull market since that time, so people who entered the workforce at that time and contributed diligently all these years (and just left it alone) are finding they have a nice nest egg, as long as their home is paid off and children are on their own by now.
We have no idea what the stock market is going to do over the next 30 years, and we also don't know what life expenses will look like so far in the future, so I suppose you are right that we don't know if younger people can rely on a 401(k) alone. But I am contributing enough to mine that if the market continues to average 8-10% over the long term, then I will be OK. My real estate investments are a supplement. One of them should work out!
@Account Closed I'm maxing out on the pre-tax contribution amount every year, my employer matches 5% of my pay contribution, the markets would have to have an average loss of -15% every year for the next 25 years for me to end up with a balance that consist of just my payroll contributions.
I think those numbers on the charts you're listing are for people working low wage jobs and probably contributing a few hundred dollars a month to their 401K plans, in that scenario putting 200-300 dollars a month away is something that will help but probably not going to be enough to live on in retirement.
Like many have mentioned on here you have to be diversified with Real Estate and various aspects of the financial markets, If you're heavily positioned in one market or the other with no diversification you'll end up in the average pool of investors. The sign of a great investor is one who has the vision to be able to see opportunity in up and down markets.
Name a market where you can sell something you don't own and buy it back later at a lower price.
It's called the stock market. Make money going up, going down, and yes, even when it's going sideways. Just like in real estate, the stock market offers many different ways to make money. One is NOT better than the other.
@Mike M.
Both re and the stock market go through cycles. Does anyone remember the crash of 2008 or is your head so far up your a** with Re that your rose colored glasses cannot see. In my experience the market has given my family bounds of money which has enabled me to purchase RE which in turn has appreciated and allowed me to buy more RE. So for the stock market to come down 800 points from an all time high is normal. The idiots who sell off their shares because of fear will never gain wealth. Buy buy.
I max out my 401k every year, and have for a while. And a dip in the market isn't changing my retirement date, but it doesn't mean I'm enjoying losing $15k+ in paper profits this week. But, I'd also be ok if real estate prices dipped and people wanted to sell off some of their portfolio. In Ankeny, Iowa. A 8-16 plex would be ok. Right now.
@Account Closed I'm sure Bezos, Zuckerberg, Buffet and Bill Gates are crying... Only if they'd bought some single family homes/multifamily (FYI: I'm a multifamily syndicator) cash-flowing properties! Will anyone think of their poor children? Only a measly quarter of a trillion $$$ between them :(
Just check the list of richest people in the world. Very few made their money in real estate.
Think you're missing the point of how markets work.
To each his own ;)
P.S. Glad to see so many folks chiming in and saying the same thing (albeit more eloquently).
Just so everyone is clear here: markets average one (14%) annual decline. Daily dips of 2%+ occur 5 times annually. Every 5 years on average, the market dips 30%+. Markets rise 3/4 years. Selling low and buying high never works, same goes with real estate. Never make important decisions based on emotion, this also goes for real estate as well as life in general. Market (stock & RE) dIps offer good buyIng opportInItIes, if you’re prepared...
That's right. And if you are on a long enough timeline you should be fine. Here is the time it takes the DJIA to recover after a crash: CLICK on image to enlarge.
What it shows me is that going back to 1970 (48 years) the longest recovery period is 6 years. Guess what the longest housing recovery was since 1970? Just a tad longer (nationally). So should everyone abandon RE?
Markets (stock and RE) go up and down. They are difficult to time and most people who try to time them do worst than if they had just left their investments alone. Micro fluctuations happen all the time. As a percentage of market, this is a little decline.
My money invested in stocks is not going anywhere unless I find an another RE to purchase.. My money invested in RE is not going anywhere.
If this does end up with a significant stock decline I will consider purchasing more stocks. I would consider doing the same if RE had a significant decline. I view declines similar to being on sale; it allows the purchaser to purchase at a reduced price. Nothing to fear.
For any long term investor this is a blip in the grand scheme of things... Those who DCA - dollar cost average (and most do into their 401k mutual funds) won't get clobbered as they have been averaging in and over time this will smooth out all the volatility.
Most people nearing retirement should be gradually shifting out of equities into something more of a fixed income flavor.
Listen, I prefer RE over the stock market, however I have constructed over many years a fantastic stock portfolio of great companies that throws off income (dividends and distributions that grow annually) on a monthly, and quarterly basis that I will utilize to supplement my passive income in retirement...
Days like yesterday (and today) are more like buy days, as if you look around you can find great value in these sell off days.
Account Closed No, what you are saying is not correct. Example: my employer contributes 2k while matching me on 1k every month. Also these contributions are tax free. There should be a correction of 50% when I will start to loose my contribution. Mutual funds and compound interest is safe and works well. When I say safe I mean safe in a long run.
You are focused on the wrong numbers, no offense. The important point is that you aren't saving enough, fast enough to retire comfortably in the future and any correction only makes things worse. You need $1,000,000 of assets that you can draw down at a 4% rate to have $40,000 a year to live on. And people just aren't saving enough. Click the chart below. If you are saving at the average pace, you will have about $200,000 at retirement and can draw down $8,000 a year at 4% or about $667 a month. Can you live on that? The solution is to dump Stocks and buy an investment that gives cash flow and grows. You can buy real estate in some 401(k) plans. Ask your administrator.
I agree, but the vast majority of 401k plans don't allow direct investment into real estate. A self-directed IRA or better yet, a Solo 401k is usually needed.
@Account Closed I'm sure Bezos, Zuckerberg, Buffet and Bill Gates are crying... Only if they'd bought some single family homes/multifamily (FYI: I'm a multifamily syndicator) cash-flowing properties! Will anyone think of their poor children? Only a measly quarter of a trillion $$$ between them :(
Just check the list of richest people in the world. Very few made their money in real estate.
Think you're missing the point of how markets work.
To each his own ;)
P.S. Glad to see so many folks chiming in and saying the same thing (albeit more eloquently).
>Just check the list of richest people in the world. Very few made their money in real estate.
I do not know your source but Forbes in 2016 indicated 184 Billionaires were property rich. This is just over 10% of all billionaires in 2016. 44 of those billionaires were Property rich Americans. President was #36 richest American with significant real estate holdings ($4.5B). Of the 5 new American billionaires in 2016, 2 made their fortune via real estate. I have not seen similar stats for 2017.
So the billionaire list is full of people that have used real estate to acquire a significant portion of their wealth. I suspect RE is only behind entrepreneur as wealth generator for the billionaires but that is only speculation as I have not seen a source.