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Is Your 401K Making a Comeback

by Ryan Yates

2009 is almost over

Have you taken a look at your 401K statements lately? The advice from the main stream media a year ago was to file your statements away. They suggested that we don’t look at them because they’ve lost too much value. Yes, they did lose value but there is a comeback underway.

The chart at the top is the DOW’s trend for the last 2 years. You can really see the crash that happened, but you can also see a slow and steady upward trend.

A Review of my 401K

I decided to review all my statements and put a couple graphs together to see if my 401K is on a similar glide path. One graph shows the trend of my 401K since April of 2008. I just entered the ending balances from my statements into excel and plotted the graph. The second graph shows the same time frame, but I’ve removed the contributions from the equation. It only shows the effects of the market on my starting balance as of April 2008.

The Graphs

graph1allin

graph2noaddition

My Take

Why split out the graphs? I wanted to see how my contributions have helped or hurt my cause. I’ve have not added any pre-tax money to the account in since the crash. I’ve been following the Dave Ramsey method of not contributing and paying down my debt. It was an easy choice since my company removed our 401K match at the same time.

The money that was added to the 401K was from dividends and 401K loan repayments. Yes, I have two 401K loans that I’m currently repaying. The total additions to the account for 2009 have been $13,563. That amount has only increased the 401K value by $7,317. Not a great ROI, but it will get better.

My company has now reinstated the match and I’ve begun to contribute again. It just doesn’t make since to me to sit on the sidelines anymore. I believe the market will come back over the next 2 years and I don’t want to miss out. I’m only adding enough to get the match. By doing so, I’ll get $3,900 from the company. Turning down $3,900 is just not an option. That means with my part and the company’s part I’ll be adding $7,800 to my 401K this year. I’m excited to be able to contribute again.

I can see the future, and I love it

Having a solid plan for my money helped make this decision easy. I’m still going full steam with my Debt Snow Ball so don’t worry. I was able to move some budget items around to free up the extra money to contribute. I believe this plan with help with my overall worth building endeavors. I know the debt will be gone soon so I’m starting to plan even further down the road. I love what the future looks look 🙂

{ 9 comments… read them below or add one }

BudgetsaretheNewBlack December 14, 2009 at

We also stopped our retirement contributions while we work on our snowball. My husband is military, however, so there is no match we’re missing out on.

I wish I knew how to do cool graphs! You must be a Nerd of the Highest Order. I’m adding you to my linky-list of bloggers who are also on their debt-free journeys. Keep up the good work!
.-= BudgetsaretheNewBlack´s last blog ..Come Visit Me Over at My New Digs! =-.

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Jeffrey Kosola December 14, 2009 at

I guess I am a nerd, but there are MANY other nerds much more nerdy than me. It must be my Engineering background.

Thanks for adding me, you’ll be in my blog roll later 🙂

You need to start following more Tweeps, there is a ton information out there to help with our endeavors.

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Financial Samurai December 19, 2009 at

Lucky dog! My 401K is still in the sheeter b/c down 50%, and then up 50% is still down down 25%! A contribution doesn’t help move the needle too much, which is sad… but i guess good given the amount, but still.

Congrats!
.-= Financial Samurai´s last blog ..Federal Government Employees Raking It In =-.

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Jeffrey Kosola December 19, 2009 at

I’m not overly excited about any of this now, just a little surprized it’s not as bad as I’d though. Contributing and getting a match will help. I’m just trying to look farther ahead these days. Yeah, I still have a pile of debt, just look at my sidebars 🙂 But I know that will be gone soon and then I can really try to save and invest.

Sorry you haven’t bounced back yet, I’m sure you have a master plan Shogun

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Financial Samurai December 19, 2009 at

No worries. It’s simple math really.

Let’s say you have $50000, and you lose 50% to $25,000. You recover 50% to $38,000, but because one also contributes $16,500, you get $54,000, so many people think sweet! All is good!

But let’s say you have $300,000, and you lose 50% to $150,000. You recover 50% to $225,000 and you contribute $16,500. You still only have $242,500, or some 20% less than you have original.

Down 50% means you need to be up 100%. But down 80% means ya gotta be up 400%! It’s tough!

Better than a poke in the eye!
.-= Financial Samurai´s last blog ..How Would You Spend $500 On Kids This Holiday Season? =-.

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Jeffrey Kosola December 19, 2009 at

That was written PERFECTLY.

Thanks Samurai

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Doctor S December 30, 2009 at

My 401K kicked some serious ass this year. Made up of Vanguard mutual funds (80% VWIGX) I made a annual return this year of 45% as of yesterday. The big comeback was helpful because the year before I was down 39%. You win some and you lose some, being that I am 26 years old, I have a ton of time left before I need to even think about withdrawing.
.-= Doctor S´s last blog ..7 Days Left in 2009 or 372 Days Left in 2010? =-.

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Jeffrey Kosola December 30, 2009 at

Yes, you win some and you lose some. I just checked my 401k YTD change. It’s at plus 39%. Not a bad recovery. Although not having a ton of money in my 401k yet helps the recovery effort. Looking at Financial Samurai’s comment, I’m glad I didn’t have half a million in play at the time of the down turn.

Congrads on kicking ass this year, I hope you can double it for next year.

Thanks for the comment Doctor S, Jeff

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Sarah @ 401k rollover March 18, 2012 at

I feel like everything is going to crash very soon. So when we start investing this year i’ll be looking at Maxing out a Roth IRA, and then maxing out the 401k at my work..

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