Friday, September 17, 2010

401(k) Resources for Friday.

It's Friday, and I thought I'd share some articles I've been reading about 401(k)s. Why 401(k)s? Well, it's a topic I've been seeing an uptick in recently, and it's a topic I've been pondering for a while since I need to figure out what to do with my own 401(k) left over from a previous job. Do I keep it? Roll it over to an IRA? or a Roth IRA? Roll it over to my current employer's 401(k) plan? Cash it out?

Well, I'm pretty much resigned to not cashing it out, since that's a waste of money after taxes and penalties. But I'm also not rolling it over to my current employer's plan since they funds they offer are mediocre performers with fees on the high end.

So, I'll probably roll over to an IRA for now. But in the meantime, while I figure that out, here are some articles you may find of interest on the topic of 401(k)s.


JLP at AllFinancialMatters asks Would You Borrow from Your 401(k) to Pay for Your Kid’s College? I'd take a pass on this one for the simple reason that junior can get a student loan for college, while I can't get a loan to pay for my retirement.


Kyle at Amateur Asset Allocator shares a collection of 401(k) Calculators – Insight into Your Financial Future. This is a short and sweet primer to 401(k) calculators you can find online. They can be a good resource for basic 401(k) planning.

Frugal Dad asks What Will Retirement Look Like for Younger Generations? It's a musing filled with personal experience of the ever-changing job landscape of America that touches on the importance of having a 401(k) for today's younger workers as they navigate multiple employer careers,with no pension.


Meg at The World of  Wealth shares her Lopsided Asset Allocation. In short, she's got boat loads of assets in various categories and isn't quite sure how to track them. (I wish I had her problem!)


Joe Plemon at Personal Finance By The Book reminds us to Automate our investing. It's the point of books like Automatic Millionaire, and it's just good practice. Set it and forget, as Ron Popiel might say. It works in cooking, and it works in saving.

Finally, Joe Morgan at Simple Debt-Free Finance shares some thoughts on whether a 401(k) loan is a good idea?. He and I agree that it isn't a good idea for most people, most of the time, but he offers some interesting analysis on why and when it might be.

Thursday, September 9, 2010

Should Management Age Be A Factor In Buying A Mutual Fund?

It's not nice to discriminate and it can be an outright bad move when it comes to managing your money, but I've been seeing some articles that got me thinking. The first is from Fidelity by way of Yahoo! Finance and it's titled Do Financial Decisions Get Better With Age?.

Basically what it says is that, financially speaking, it's all over after 53. That's the pinnacle of financial decision making according to a study called "The Age of Reason: Financial Decisions Over the Life-Cycle with Implications for Regulation."

Here's an excerpt:

"...our ability to make sound financial decisions increases sharply in our 20s and 30s, levels off and peaks in our 50s, then begins to fall sharply in our 70s and 80s — the so called "inverted U". The learning curve associated with gaining financial knowledge is believed to be the reason for the rise in our early years, while declining cognitive function is believed to be the reason for the drop in our later years."

OK, so we make poor decisions when we get older. So much for wisdom coming with age, but it does explain why seniors are so heavily targeted in financial and investment scams.

But then I saw this article form Morningstar that touts the record of the Dodge & Cox fund family. The article praises the fund family for it's wealth of management wisdom, focus on the team and willingness to go against the grain, but what stood out to me is in the 2nd paragraph:

"John Gunn, 66, who replaced the retiring Harry Hagey as chairman in 2007, will become chairman emeritus March 31, 2011. Ken Olivier, 58, who has been with the firm for more than three decades and was named CEO in March 2010, will succeed Gunn. At that time, fixed-income director and executive vice president Dana M. Emery, 48, and CIO and senior vice president Charles F. Pohl, 52, will become co-presidents."

Only 2 in that list are under the supposedly critical age highlighted in "The Age of Reason: Financial Decisions Over the Life-Cycle with Implications for Regulation" - and one of them (Charles F. Pohl) is only a year away!

Now, I don't mean to imply that investors should avoid Dodge & Cox funds because the company's management is well seasoned, but it does make me wonder if age should be a factor in determining whether to invest in a mutual fund.

Sunday, September 5, 2010

Beware Investor Overconfidence (video)!

Here's an interview from Harvard Kennedy School's Investment Decisions and Behavioral Finance conference that highlights how overconfidence can impact your portfolio performance.

Specifically, it gets at why passive portfolios (index funds) tend to beat actively managed funds. It's short and interesting, so why not take the minute and a half and possibly learn something?