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401k TrainingWhy is participation in a 401k important?See retirement calculator and how fast money accumulates for retirement.Why is active management of your 401k important?Returns from the Stock market in the last 13 years have been only about break-even. (see graph)My returns since 2005, when I began actively managing my investments, is about 25% a year meaning I have increased my 401k value by over 4 times.Actively manage means being aggressive in the economic growth periods and conservative in the economic down periods.Up periods historically last 12 to 18 months and up periods last 4 to 9 years.Diversification will not save you in a down period due to the current volatility in the stock markets shown in the past two downturns of 2001 and 2008.Should you have a Roth 401k or a traditional 401k?Roth means you pay tax now on your 401k contributions at your current tax rate while working.Traditional means you pay no tax now on your contributions but you pay tax after you retire when you take money out at your retirement tax rate.The choice of traditional versus Roth depends on whether you think you will have higher income later in your career and after you are 59.5 years old – meaning a higher tax rate in retirement than during your career or whether you will have a small income after retirement and thus a lower tax rate.Most people have a lower tax rate after retirement in which case chose the traditional 401k. This means you will be deferring taxes while you work at a higher tax rate than when you retire. Thus, when you retire and are taking money from your 401k, you will pay tax on it at retirement tax rates which should be lower than working tax rates.What do we expect in the economy and thus the stock market in the future?The economy will continue to cycle as described above and the stock market will do the same.The stock market goes up and down ultimately based in increasing or decreasing corporate profits not the day to day news stories.To the extent world and national issues affect corporate profits over time then such news is relevant to the moves of the stock market.The stock market generally leads the generally economy by about six months. In other words, the market anticipates changes in corporate profits.The Institute for Trend Research (ITR) says a continued rise at the current time in the stock market is unlikely because the growth in corporate profits is starting to slow and the money supply is starting to decline and the market historically can’t continue to go up when these two factors are present.ITR also is predicting a mild recession starting in late 2013 and into 2014.This recession will be short lived and the economy will grow then for about three years.Investing in the stock market in 2014 when the economy is expected to grow again will be good for several years.Active management of your 401k during the growth period is key to getting the good returns.Why is the US economy going to be good 2015-2017?The US economy is till be far the largest and most vibrant in the world and more than twice the size of the Chinese economy.Economies are healthy when there is free enterprise and when population is growing.The US population is growing at a healthy clip when combining birthrate and immigration. Other economies in the Far East and Europe are not. Brazil has a healthy economy.How do you manage your 401k actively?Set up your on-line access at Take a conservative approach when a downturn is imminent. Move out of stock mutual funds to a Money Market Fund or the GNMA Fund.When we are in a grow cycle, look at your investment performance about every 60 days and move the money to the mutual funds performing the best over the prior 90 days. ................
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