In case you missed it, here is the HD version of our presentation at Fall Finovate 2014! They did a great job of making us look so good with so little makeup!
We at blooom are occasionally asked why the recommended allocation from our proprietary glide-path includes (what seems to be) a rather heavy mix of stock funds over bond funds. Their question often stems from what I call the “Good Morning America” or “one-size-fits-all” allocation advice which carelessly recommends that you allocate the same percentage to bonds vs stocks as your current age. For example, if you are 33 years old – taking that advice for your 401k would mean you would allocate 33% to bonds within your portfolio. I am sorry, but when it comes to your 401k retirement savings – we think it is ludicrous for a 33 year-old (with possibly 25+ more years before retirement) to allocate 1/3 of their portfolio to an asset class that will most likely provide ZERO real return over the remainder of their working years.
Herm and Hermie, our three boys’ cleverly named hermit crabs, never stood a chance.
After months of being lobbied, cajoled, bribed, and begged to allow two hermit crabs in our household with untold promises of how they would care for them, play with them, watch after them and help them grow, I acquiesced and folded. After all, I was schooled that a hermit crab takes very little time and attention. And in fact they can survive four days without food and water. At face value, this was the perfect pet.
Herms and Hermie moved in December 25th of 2013. By April 14th, they were dead.
Most of blooom’s clients will admit that they don’t often look at the value of their 401k. But if you have been watching the stock market lately you would have seen that it has dropped a fair amount just in the past few weeks – which in turn will lead your 401k to zig and zag in value.
This is nothing new – it’s just been a while since you’ve seen this happen.
Over the past 3 years, basically since August of 2011 when the US Debt was down-graded, we haven’t seen much of a pullback (market decline). In fact, we have now gone 3+ years without even so much as a 10% pullback in the market. That is very unusual. Not nearly as unusual as our hometown team the Kansas City Royals making the playoffs for the first time in 29 years, but unusual nonetheless! Market pullbacks are not only normal….they are NECESSARY. If it was always a straight ride upward, then everyone would be a stock market investor and there would only be a fraction of the return premium afforded to investors.
If your employer offers a pre-tax retirement savings plan like a 401k, 403b, 457, or similar and they offer a matching contribution you may be the lucky benefactor of a 120% rate of return on your contributions.
Let me explain. Lets assume the following:
$50,000 annual salary
Your employer matches 100% of the first 3% of your contribution. So if you contribute 3% of your salary to your 401k, your employer will also contribute 3% of your salary to your 401k.