If the dollar collapses, what the hell happens to my retirement account?
October 1, 2007 2:54 PM Subscribe
Looking for good articles, links, etc. that discuss (rationally, not all panicky-like) strategies for managing one's 401(k) in light of recent shifts in the market and (perhaps more importantly) the declining dollar. So far, everything I've found seems geared toward investors managing their stock portfolios rather than workers managing their retirement accounts.
posted by anonymous to Work & Money (7 answers total) 10 users marked this as a favorite
Part II: if anyone would care to comment (I know that You Are Not A [or My] Financial Planner), here's my particular situation (hence why the question is anonymous; it's that weird American neurosis about discussing income rearing its ugly head).
Me: late 30s, unmarried/no kids (but long-term SO and I are discussing both of those factors changing over the next couple of years). I expect to retire in 25-28 years. My employer also offers a pension on top of our retirement plan, in which I am fully vested (but don’t know how much I want to even bank on it, considering the horror stories that sometimes crop up regarding disappearing pension funds). I don't plan on relying on Social Security for anything; I figure if it still exists when I retire, that will be gravy.
Income: $53,000/year, with 4-5% raises annually. I put aside 10% of pretax income into my retirement account, with a company match of 4% of my income. I plan to increase my investment by 1 or 2% annually till I reach my contribution limit. (Other relevant financial facts: I rent my home, own my car outright, and have about $7000 in savings; my only debt is about $3000 in CC debt--at 0% till next summer--which I am on track to pay off once and for all in less than a year.)
Currently have just under $27,000 in account (I didn't really start getting serious about contributing to plan and managing it till a few years ago). My asset allocation is:
- 25% international equity
- 30% U.S. small/mid equity
- 30% U.S. large equity
- 15% "guaranteed income"
None of those funds has significant holdings in real estate, so they haven’t (so far) lost much value in the recent market gyrations at all (in fact, while some of my individual funds are down, my overall return is--for now, at least--still quite good). Beyond that, I understand that the market has its cycles anyway, and has historically always gained in value over the long run. (And since I’m not retiring for at least 25 years, the long run is what I am concerned about.)
BUT! I am very concerned about long-term dollar devaluation. Does it make any sense to shift more money into international funds (which are doing extremely well for me), even though those are normally considered the most risky? That is, if the dollar keeps declining for years to come (which I think it might), doesn't that actually mean that international funds become less risky?
Also, is there anything (besides hysteria) to the rising hubbub in the blogosphere of "Buy gold! Buy gold!"? And what to make of the analysis that I read somewhere (wish I could find it now) that the long-term historical gains in the stock market may begin to reverse once the baby-boomers begin retiring (i.e., once they start removing their funds out of the market in quantities greater than the current workforce will be putting their funds into the market)?
Sorry if some of these questions seem rudimentary. As I said, I only started paying attention to these things in the past few years. Thanks!