Archives For 401k

Are You On Track?

September 10, 2019

Keeping up with the Jones’s is not something anyone should strive for – but in the case of saving for retirement, knowing how you compare could help you develop an awareness of the need for saving for retirement. Every situation is different due to guaranteed sources of retirement income; current and future bills; lifestyle; helping others; location of residence; expected longevity, etc. A qualified financial planner can help you determine how much you need to retire.

Here’s the latest from Investopedia on the subject.

When you contribute to a 401(k) or IRA account, you are able to deduct that contribution amount from your current year’s income. Everyone likes that because it means you’ll pay less in taxes that year. But don’t forget that one day, you or your beneficiary will have to pay taxes on the money withdrawn from the retirement account. The link below shows just how much of a retirement account actually belongs to you.

You have probably read that the sooner you begin saving, the better, because the magic of compounding can make you wealthy. But what if you don’t start early and still want to accumulate a nest egg that will carry you through your retirement years? The article below shows the amount you must save and the amount you must earn annually to reach $1,000,000. The assumption is that you contribute to a 401(k), and eventually max out your annual contributions.


While Target Date Funds in 401(k) plans have performed well since the Bull Market that began 2009, this article does a good job of exposing the risk in those funds.


The market has had a very good year – in my opinion it is partly due to the expectation that we will see tax cuts this year. But what happens to those expectations if tax cuts are not passed?

This, from Treasury Secretary Steven Mnuchin…

“There is no question that the rally in the stock market has baked into it reasonably high expectations of us getting tax cuts and tax reform done,” Mnuchin said in the interview. “To the extent we get the tax deal done, the stock market will go up higher. But there’s no question in my mind that if we don’t get it done you’re going to see a reversal of a significant amount of these gains.”

Yet another reason why having a plan for dealing with the downside of the market is so important.


This is not investment advice. You should consult a qualified investment advisor before making investment decisions. Past performance does not indicate future results.

There’s good and bad in the announcement below about the IRS relaxing the loan and hardship withdrawal rules from company-sponsored 401(k), 403(b), and 457 plans. The relief is available to those who live or work in the Hurricane Harvey disaster area, and extends to some family members. The provisions even extends to IRA’s.

That’s the good.

Here’s the bad.

Loans and hardship withdrawals must be paid back within 5 years. If not repaid, the amount borrowed or withdrawn will be considered as taxable income. If you are under 59 1/2, there is a 10% penalty for the distribution if not paid back within the 5-year window.

More details are available in the article below.


Scary Parallel

Almost everyone recognizes the worst stock market decline as the 1929 crash.  It was during that time that the Dow Jones Industrial Average declined approximately 87%.  To describe it as a devastating time would be an understatement as The Great Depression was soon ushered in.

It has been said that history repeats itself.  If that is true, then the accompanying chart which has received a great deal of publicity of late, gives reason to be concerned.  The dark gray up-and-down line on the chart is the history of the Dow Jones from 1928-1929, while the red line is the Dow’s current performance.

As explained in a post by Mark Hulbert (, there are some problems with the comparisons.  The biggest problem is the scaling of the charts and percentage of rise of the two lines, and whether or not there is actual correlation.  If the red line were to play out as merely a rhyme of the 1929 line and not an exact repeat, then we may see a significant decline in the market.

Whether market history repeats itself, or whether the market continues to climb from here is not the point of this post.  The point is that everyone should have a game plan for what they will do if the market does begin to go down.  From a mathematical point-of-view, losses are hard to make up, and the greater the loss, the more difficult the recovery.

The Syrian crisis has subsided and now as you know, the current “crisis of the moment” is the fight over a continuing resolution (CR) to fund the government which has led to a “government shutdown.”  In the coming days the battle over whether to raise the debt ceiling will become a much larger story if not solved beforehand.

While a government shutdown might sound like a rare event, it’s not. In fact, we’ve experienced a total of 17 shutdowns since 1975 and happens when politicians cannot agree.  Most previous shutdowns though, have had little impact on the market.  In the 1995-1996 shutdown, the S&P 500 Index actually rose slightly.

The consequence of not adequately addressing the debt ceiling in a timely matter is an entirely different issue.  Consider the last time Congress waited until the last minute to deal with this (July/August 2011), to look at the chaos that was caused in the stock market.  In just thirteen trading days the S&P 500 Index dropped 16.67% from July 21, 2011 to August 8, 2011.  This was then followed by almost two months of extreme volatility as the rating of the US debt quality was downgraded for the first time ever.

As always, I am watching these situations very closely and considering the negative potential they may have for my clients.  I am not extremely optimistic that our government will actually solve anything.  You may feel the same way.  At most, I believe the government might come up with another stop-gap solution and continue to “kick the can down the road.”

I have had an ongoing concern about a repeat of the 2007-2009 stock market decline, when the market declined approximately 57%.  The current overall economic picture is not much better than we saw in that period.  When you invest in the stock market, you should have a plan for what you will do if things go right, and a plan for what you will do if things go wrong.  Recovering from a 15% loss isn’t so hard.  Recovering from a 50% loss can be extremely difficult.  Do you have a plan for what you will do if things in the market go wrong from here?  If the word hope is part of the plan, remember that hope is not a strategy.

A CNN poll reveals that only 27% of American adults know what the Federal Reserve’s QE program is about.  The question used in the poll was in a multiple-choice format, which should have seemingly produced a higher correct response than simply asking respondents to explain QE.

Why is this disturbing?  Because the majority of Americans are preparing for their retirement through their 401(k), and they are making the investment decisions in the plan without knowing fundamental or current market and economic issues. Not knowing these issues could make the difference between an enjoyable retirement, or a disastrous retirement.

Here are three things that are important to know about QE.

QE was intended to keep interest rates low and produce economic growth and reduce unemployment.  To accomplish this, the Fed has been buying bonds on a regular basis which has pumped money into the economy.

Stock prices have climbed during this period as new money was introduced into the economy, and the S&P 500 is now at an all-time high.  It is questionable if the market has risen due to the availability of the additional money due to QE; or if it has risen due to the otherwise natural consequences of supply and demand – in other words, is this an artificially high market due to QE?

Interest rates have risen since Bernanke announced a few weeks ago that the Fed may begin tapering of bonds they are buying.  A fundamental aspect of bonds is that when interest rates go up, the value of bonds go down, and interest rates are expected to continue to rise once the Fed actually begins tapering.

Those who own stocks or bonds in their 401(k) in any combination may be in for a wild ride once the Fed announces their near-term QE strategy.



Inflection Points

September 3, 2013

Webster’s defines inflection as a turning or bending away from a course or position of alignment.  Take a look at the chart and note two of the previous inflection points in the chart.  The first occurred after a 106% increase in the S&P 500 and resulted in a 40% loss.  The second occurred after a 101% increase in the S&P 500 and resulted in a 57% loss.  With the latest 137% increase in the S&P 500, are we at another inflection point, or will it just keep going up and up and up?  9-3-2013 3-51-07 PM

One answer is that nothing goes up forever – to which many scoff and say, “When it does go down… it always comes back”.  The problem if you are in retirement or near retirement is that the next recovery may not be as quick as the last two, leaving you with far less retirement assets to navigate your retirement.

Here are current political, economic, and market-related situations that could influence another inflection:

  • The S&P 500 lost nearly 5% of its value in August;
  • Last Friday, one of the main market indicators reversed to a negative direction because 6% of stocks on the NYSE moved to a Sell signal;
  • Short-term indicators have turned negative;
  • The market is at an all-time high;
  • The government reports that they will hit their debt ceiling next month, and a worst-case scenario is default;
  • We are facing possible military action against Syria;
  • Gold and oil are both moving higher;
  • September is historically the worst month for the market;
  • The Federal Reserve has hinted that QEII tapering may begin soon;

Does all of the above mean that you should move out of the market completely? Probably not. Everyone has a different tolerance for risk, and some asset classes and funds will hold up better in a decline than others. However, any one or combination of these of these could produce a significant drop in the market. Since no one knows for sure, it is important to have a plan in place that will mitigate loss and work to preserve your hard-earned retirement assets. If you do not have a risk management strategy in place, you should seek an advisor who does.



This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Capital Retirement Planning, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Capital Retirement Planning, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.