I'm 39 and would like to retire at 55 using the rule of 55 which allows for penalty free 401k withdrawals at that age. I have $550k saved in my 401k, it's entirely invested in FXAIX. I've been tempted at times to try and time the market and or change investments. I keep trying to tell myself that would be stupid and to just stay the course. However, as the balance grows more at this point the drops are also more noticeable when they do happen which may be freaking me out a bit.
Would you stay the course for 15 more with a 401K invested 100% into an index fund? My wife is 40 and has $170k saved in her 401k. She's putting 15% away as well, just started a bit later, and is in a target date plan (and doesn't want me to move it into an index fund lol).
We also have about $100k saved in another investment account that we plan to use to cover health insurance costs between the ages of 55 – Medicare age.
39, leave 401k 100% in an index fund for 15 more years?
byu/sys_admin321 inpersonalfinance
Posted by sys_admin321
19 Comments
> However, as the balance grows more at this point the drops are also more noticeable when they do happen which may be freaking me out a bit.
If you cannot handle the volatility inherent with 100% stocks, add some bonds.
Similar situation numbers, except I’m retiring earlier, and I’m 100% fxiax in my 401k. Yes I plan on not touching until I do 72t at a similar age.
I would, but it sounds like your risk tolerance is not as high as mine. Don’t forget, retiring at age 55 doesn’t mean your investments are just done compounding and sit in a savings account. You’ll hopefully have 30 years of retirement and you still want that money growing during that time. I’d probably be thinking more along the lines of *how long after retiring at 55* do I shift to a more bond portfolio
I would, but it sounds like your risk tolerance is not as high as mine. Don’t forget, retiring at age 55 doesn’t mean your investments are just done compounding and sit in a savings account. You’ll hopefully have 30 years of retirement and you still want that money growing during that time. I’d probably be thinking more along the lines of *how long after retiring at 55* do I shift to a more bond portfolio
I wouldn’t try to time the market, but that doesn’t mean you couldn’t change your strategy. For example you could distribute your investments to reduce your risk, for example. right now there’s a lot of AI related investment in the SNP to the tune of 20%, or so I’ve been told. Maybe it’s just fear mongering or maybe it’s an actual bubble, who knows. You could diversify by distributing *some* of your investment in other funds like a international broad market fund or a broad market value fund. Something that insulates you from political wackiness and AI crazyness, maybe.
Just an idea, I’m not licensed to do this kinda shit.
You have a good chunk of cash! Twice as much as I have at 43. If you are worried about risk then you have to diversify your portfolio. I do a combo of mid cap, high cap, and a little international stocks. I follow the Bonds = your age in percentage, but am usually running at -10% of that, so right now I have 30% in bonds.
Ultimately losses are realized until you cash out, unless you retire early you can ride out the volatility and increase bond percentages in maybe the 10 years before you retire.
15 years is long enough that any crashes should be smoothed over by the eventual recovery (hopefully history continues to repeat itself…).
I’d personally feel good staying fully in stocks for another 10 years or so and then start thinking about shifting into some bonds.
Depends how much risk you are willing to take. I would just stick it in an index fund. Returns are a bit better than my individual tech stock picks in my rollover. If you want to play around with stock picks, open a taxed brokerage account with smaller investments.
You and I are roughly the same, plans to retire at 55 and I still plan to keep in VFIAX or VTSAX. Lots of time to smooth out and statistically there are more bull markets than bear.
You will lose money if you try to time the market. Maybe once you succeed, but you will certainly screw up more then you succeed (something like 80-90% of active fund managers fail to beat the market and it’s their entire job)
If you are nervous think you might try to make moves stick it in a target date fund also and forget about it completely
As tempting as it is, keep it your index fund. You miss the timing a little bit early getting out or late getting back in, you are going to hurt your returns. Worse case is like those that panicked in April and got out expecting an even worse scenario, and missed the quick recovery.
As for pre medicare health care costs, make sure you are constantly checking the estimates for ACA plans, if that is what you are looking at. I am in the middle of that now, and I keep getting surprises on the high end. There are subsidies that were increased coming out of the Covid and supply-chain inflation era that are set to expire in 2026. My premiums estimates are doubling.
As long as the index fund invests in high quality companies you’re good. I’ve had Vanguard’s 500 index FXAIX equivalent in my portfolio for more than 30 years. About 5 years before retiring I did add a bond index fund. That slowed the account’s growth but added a little more stability to the declines.
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I’m fully team 100% equities (in index form fund) forever. RR + my small pension take the would be place of bonds.
You will 100% lose if you try to time your sales. Stay in the index funds for 90% or more or use a target date fund.
Leave all of it in the index fund and start purchasing bonds. Maybe not 100% bonds but 50% will allow you to purchase bonds that will hedge against future volatility.
If you have that much insight into the future, I would just bet on football. Same vibes based research, less risk.
Stop looking at drops. There’s no strategy yet, just shovel money in.
Good for you having over $500k accumulated in retirement plan at this age. Personally Having all of that in just one fund, and a single index is not what I would do. With roughly 15 years to go I’d diversify – Small Cap, Large Cap, international, Growth + Income and Emerging Markets or Contrarian Investments (the dogs of the Dow, etc.) a simple 20% across the board and re-allocate annually. But that is just me.
Edit – And NEVER attempt timing the Market. That approach is littered with failure.
Just leave it, trying to time the market is not worth the headache. Assuming the track record of the market stays the same your money will double two times.
If you’re really worried you could change allocations to be more in bonds, eg target fund, but you’ll miss out on a lot of gains.