Contribute To 401(k)?

2008-06-02 Word Count: 297 Category: Investments

With all of the news of the poor performance of the stock market lately, I field many questions regarding contributions to 401(k) and other retirement accounts. Should we invest in something that appears to be heading down at an alarming rate?

In case you have not heard (because the media has not mentioned it) the broad US stock market has actually returned over 6% over the past 13-weeks. While it has been down this year overall, isn’t the aim of every investor to buy low and sell high?

Why is it then that when the market drops so many ‘investors’ talk about pulling their money out of investments? Right now is the prime time to be buying into the stock market through well diversified mutual funds. The stock market is actually on sale, so to sell now to not buy now is to make an incredible mistake in your investment platform.

Remember, if most people do the wrong thing with their finances, then all a wise person has to do is the exact opposite of what the majority happens to be doing.

The first step is to make sure that you invest in your 401(k) just up to the company match. Assuming you are debt-free and have a fully-funded emergency fund of 3-6 months, the objection of your investments should be to put 15% of your income into retirement each month.

Once you have invested up to the match the best investment for most people is into Roth IRAs where your money can grow completely tax-free. The income phases out as you begin to make more money, but if you have Roth IRAs available to you and your spouse, do be sure to take full advantage of them.

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Justin Lukasavige is a Personal & Business Coach and owner of Lukas Coaching. Visit www.lukascoaching.com/resources.htm for a ton of free tools to help you improve your health, finances, business, career & life! For more free columns and articles, visit www.lukascoaching.com/articles.htm