Transcript
Ryan Reynolds (0:00)
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Mint Mobile Representative (0:15)
Here for Mint Mobile. Now I was looking for fun ways to tell you that Mint's offer of unlimited Premium Wireless for $15 a month is back. So I thought it would be fun if we made $15 bills but it turns out that's very illegal so there goes idea for the commercial. Give it a try@mintmobile.com Switch upfront payment.
Mint Mobile Terms Representative (0:36)
Of $45 for three month plan equivalent to $15 per month required new customer offer for first three months only. Speed slow after 35 gigabytes of networks busy taxes and fees extra see mint mobile.com.
Clark Howard (0:49)
It'S great to have you here on the Clark Howard Show. You know, our mission is to serve you with advice and information that empowers you so you make better financial decisions in your life. And one way that Team Clark is here to serve you is with our websites clark.com and clarkdeals.com hope you'll check them out. And also, hey, I'd like something free that's actually incredible. Our free newsletters you can sign up for at clark.com newsletters in today's episode, I want to talk about some trends. One that's not your friend, the other that can be going on with retirement accounts. And then later I'm I mean to call it an obsession is accurate. I am obsessed with people who become entrepreneurs, people who have the courage to start their own businesses. I want to tell you why that is so important to me right now. There's two crazy things going on at the same time. Data shows that the percent people are contributing to retirement plans through work average amount is a percent of their pay higher than it's ever been. At the same time, there's a significant number of people who are reducing the amount they're putting into their 401ks, reacting to current economic uncertainty and all the news that comes out every day that can overwhelm you. I think back to what happened earlier this year when the stock market went through a rapid and large decline. And unfortunately a lot of people through that period said, oh, this is too tough for me. They sold out their positions and their 401ks and they didn't take the money out, but they just put it into the cash equivalent in their 401k and they stopped contributing to their 401ks. So what happened? They reacted to a big drop in the stock markets that happened again in a very short period of time. And then what did they miss? A rebound that came quicker than normal. The decline was quicker than normal. The rebound was quicker than normal. The money round trip, basically. But people panic, sold into the down and missed the recovery. And you got to play to win, like they say in the lottery. But investing's not a lottery. It's not a stack deck against you, it's a stack deck for you. Because time is your friend. The best way to use a 401k is diversified in it. Steady as you go. You put in money every pay period, spread out among investing choices in it. Or if that stuff is all too confusing to you, just put all your Money in your 401k in the Target retirement fund, set it and forget it and continue to contribute, knowing that two out of three years the market climbs, there will be like earth shattering declines from time to time. There will be bear markets, which is where the market declines by 20% or more. And very, very rarely, there will be catastrophic drops in the market that take years to recover. For a static investor, Static investor is somebody who's got money in and they just sit there with it, they don't add anything to it. But when you're in a 401k or if you're automatically contributing to a Roth IRA, you are $ cost averaging, which takes out some of that fear risk out of you contributing to a plan with ups and downs happening. Because let's say the market goes through a big decline and it takes a while for it to recover, but you're continuing to contribute each and every pay period. You then, during the time that things are bad, are buying the shares in the target retirement fund or whatever you're doing on sale, you're buying more shares with the same money, which means when the market ultimately recovers, you have continued to put money in at lower prices and you benefit fully from the recovery. Steady as you go, core and key. Now I said there was one other thing that was potentially good or bad. Federal law now allows when you approach retirement if your employer plan provides the option of converting some or all of your 401k money into an annuity. Now, you know, I've said annuities are cuss words. The reason is that a lot of annuities are trash. A lot of annuities have way too many complications. A lot of them have ginormous fees. These annuities that are done right inside an employer plan or that category of annuities I say is okay, where you turn your money into a straight lifetime stream of income. And so these are neither good nor bad. What makes one good? What makes one bad? If your employer is providing one that is really low cost, so you are getting a known, predictable, clear, guaranteed income through the remainder of your lifetime. And if you have a spouse, you can buy an option where it continues for their lifetime so you get a lower amount then when it's clear, simple, low cost, commission free. That's when these 401k plan options of annuitizing your money, like making it like an additional Social Security type check. Good idea. But these are not something that automatically is good or bad because the insurance industry has a way of getting its nose under the tent and messing up what could be a good thing and making it a bad, bad thing. Krista.