abcInvesting Blogs

September 2008

September 19, 2008

Financial Crisis and Your 401k

What a week! Lots of people worried over the headlines, and I don't blame them, but the folks who sat still did better than those who panicked. Look at the week's stock market:

Anyone who sold after the crisis had hit lost money this week. Those who sat still ended with a higher portfolio valuation for the week. I can't guarantee this will happen every time, but I am absolutely convinced of this: when you hear about a crisis in the news, holding on to your investments will do better, on average, than panic selling.

OK, that's easier said than done. Being calm doesn't come naturally to many people. Try deep breathing, prayer, or a little gin, whichever works best for you.

September 12, 2008

Chuck Jones and Sarah Palin

abcInvesting.com's co-founder Chuck Jones discussed energy investments with Sarah Palin this summer.

September 3, 2008

Regular or Roth 401k?

The National Center for Policy Analysis has published a paper suggesting that Roth 401k plans are better than regular plans if tax rates are headed up.

Background: in some cases, an employee can choose either a Regular 401k or a Roth 401k. In a regular plan, the money going in is not taxed, but all the money coming out of the plan is taxed. A Roth is just the opposite: you have to pay taxes on the money you contribute, but all the money you take out is tax free.

The two plans are pretty much the same except for two elements. First, if your future tax rate will be higher than it is now, the Roth is better. The new study makes this point clearly.

Second, if you want to put the maximum amount allowed by law into your account, the Roth is better. Otherwise, the two plans are the same.

Read the new study here. Read the lesson from The ABCs of Your 401k here.

Disclosure: I'm a Senior Fellow at the NCPA, though I did not have a hand in the report on 401ks.

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