“Twice in the last decade I have watched my 401(k) lose almost one-half of its value. That doesn’t sound like a good retirement plan (Investment) to me. Am I looking at this wrong?”

Answer:  Unfortunately, in most 401(k) plans, your account balance is dependent almost solely on the overall market level. After you retire, you will be able to roll the balance into a self-directed IRA in which you can own individual stocks (Investment), especially stocks that pay dividends. In many cases the dividends a company pays are far more stable than the share price of the company’s stock.

Think of owning a rental property that pays you $1,000 per month in rents. If the market value of that property drops in half, it doesn’t mean your rent drops also. The key is the stability of the rental income , not the market value of the property (Investment). Focus your retirement income planning on creating a monthly cash flow and try to put account values in perspective.

Philip C. Benedict, CFP
Benedict Financial Advisors, Inc.
Atlanta, Georgia  30328

Are 401(k)’s Really a Good Investment? was last modified: November 19th, 2022 by Phil Sanders