Is it time to get out of the market?

[Leeson 54]

17 minutes ago, Hardcore troubadour said:

Ok, question for those who know more than me. Would it help the economy,  if not necessarily the stock market, but it might, to allow people to pay off their mortgage with their 401k and other retirement vehicles, tax free? The banks get a giant infusion, people have more to spend, or invest? Clear out your 401k now and take your mortgage payment and use that to start building it up again. I know there are many moving parts to this, but the basic premise makes sense.  The banks can then take that money and lend it to those that need it at a low interest rate.  Thoughts? 

This would depend on the age and 401k balance. The one thing that everyone is bound by is time. You can never get it back. Money is limited, but a person can work two jobs, add skills to increase earning potential, or change jobs in order to obtain more money.

I wouldn't trade my retirement savings for mortgage if I was over the age of 40. Also, people can't maintain a budget, so the odds of them putting all the savings into retirement is unlikely.

Lots of experts agree the best thing you can do for retirement savings is to start early. 

 

[Hardcore troubadour 12,618]

8 minutes ago, Leeson said:

This would depend on the age and 401k balance. The one thing that everyone is bound by is time. You can never get it back. Money is limited, but a person can work two jobs, add skills to increase earning potential, or change jobs in order to obtain more money.

I wouldn't trade my retirement savings for mortgage if I was over the age of 40. Also, people can't maintain a budget, so the odds of them putting all the savings into retirement is unlikely.

Lots of experts agree the best thing you can do for retirement savings is to start early. 

 

Ok, but there are only three things one can do with their money: Save it, spend it, or invest it. Saving is not a great option when your money is only getting 1 pct interest.  That leaves spending or investing. Also, from personal experience, I know a few people who stayed working later with the goal of paying off their mortgage. Many of these people would leave the workforce if they didn’t have a mortgage anymore , or take a part time job, freeing up employment opportunities.  

[kutulu 1,545]

29 minutes ago, Hardcore troubadour said:

Yeah , I know this is way more complicated than I laid out.  But the banks may be looking at many foreclosures if people don’t get out and spend money. I’d love to have my mortgage payment at my disposal to either spend or invest.  

https://www.forbes.com/sites/advisor/2020/03/27/your-guide-to-the-federal-stimulus-package/amp/

[Leeson 54]

14 minutes ago, Hardcore troubadour said:

Ok, but there are only three things one can do with their money: Save it, spend it, or invest it. Saving is not a great option when your money is only getting 1 pct interest.  That leaves spending or investing. Also, from personal experience, I know a few people who stayed working later with the goal of paying off their mortgage. Many of these people would leave the workforce if they didn’t have a mortgage anymore , or take a part time job, freeing up employment opportunities.  

This is why people complain about the stock market and interest rates. I'm old enough to remember a mortgage that had 9% interest rate. But, I also remember savings rates in the 5-6% during the same time. (CD rates were even higher). 

As people approach retirement age, they want to move their life savings into safer (although lower yield) areas. With low interest rates, we are forced to leave our money in the market (at risk) for longer than we would like. Recessions or depressions just add years to retirement planning. 

I know people that worked longer due to the high cost of healthcare before they reach medicare age. My Mom kept her job at a small bank for three years after my Dad retired, because they needed the medical coverage. 

I did a quick spreadsheet to see where the numbers shake out. Average mortgage balance in the U.S. is $200k. If you removed $200k from a 401k  and paid it off, it would leave the $946 house payment free to invest back into the 401k at a rate of $11,352 annually. I used 4% return for both options.

A 30 year window, leaving it in the 401k = $599,741. Reinvesting = $601,273. (basically, it's a wash)

A 20 year window, leaving it in the 401k = $405,163. Reinvesting = $314,124.  

A 10 year window, leaving it in the 401k = $273,714. Reinvesting = $120,136.

This is why I think it would be different for each person depending on age, 401k balance and mortgage balance. Time is still the biggest factor when it comes to investing. It would be especially difficult for older people that don't want to have their retirement savings at risk up until the day they retire. (or after they retire)

[Hardcore troubadour 12,618]

2 minutes ago, Leeson said:

This is why people complain about the stock market and interest rates. I'm old enough to remember a mortgage that had 9% interest rate. But, I also remember savings rates in the 5-6% during the same time. (CD rates were even higher). 

As people approach retirement age, they want to move their life savings into safer (although lower yield) areas. With low interest rates, we are forced to leave our money in the market (at risk) for longer than we would like. Recessions or depressions just add years to retirement planning. 

I know people that worked longer due to the high cost of healthcare before they reach medicare age. My Mom kept her job at a small bank for three years after my Dad retired, because they needed the medical coverage. 

I did a quick spreadsheet to see where the numbers shake out. Average mortgage balance in the U.S. is $200k. If you removed $200k from a 401k  and paid it off, it would leave the $946 house payment free to invest back into the 401k at a rate of $11,352 annually. I used 4% return for both options.

A 30 year window, leaving it in the 401k = $599,741. Reinvesting = $601,273. (basically, it's a wash)

A 20 year window, leaving it in the 401k = $405,163. Reinvesting = $314,124.  

A 10 year window, leaving it in the 401k = $273,714. Reinvesting = $120,136.

This is why I think it would be different for each person depending on age, 401k balance and mortgage balance. Time is still the biggest factor when it comes to investing. It would be especially difficult for older people that don't want to have their retirement savings at risk up until the day they retire. (or after they retire)

Great work. Very interesting. Like you said, it’s not a fit for everyone.  But for some people it would be a great move. Maybe not financially for the individual,  but peace of mind has its value.  I’d be willing to cash out for the certainty that my house is paid off now instead of 15 years from now.  And that money I freed up would be either spent on things like home improvement or invested.  

[Cdub100 3,379]

1 hour ago, Hardcore troubadour said:

Ok, question for those who know more than me. Would it help the economy,  if not necessarily the stock market, but it might, to allow people to pay off their mortgage with their 401k and other retirement vehicles, tax free? The banks get a giant infusion, people have more to spend, or invest? Clear out your 401k now and take your mortgage payment and use that to start building it up again. I know there are many moving parts to this, but the basic premise makes sense.  The banks can then take that money and lend it to those that need it at a low interest rate.  Thoughts? 

No I don't think it would help the economy and I don't think enough people would take part in that program to dramatically affect the market. And if enough people did it would hurt the market and the banks.

Personally I wouldn't do it. The math doesn't make sense.

[bandrus1 413]

2 minutes ago, Hardcore troubadour said:

Great work. Very interesting. Like you said, it’s not a fit for everyone.  But for some people it would be a great move. Maybe not financially for the individual,  but peace of mind has its value.  I’d be willing to cash out for the certainty that my house is paid off now instead of 15 years from now.  And that money I freed up would be either spent on things like home improvement or invested.  

Im with you... I already make double payments on my house because I want that security over investing in retirement. 

[Hardcore troubadour 12,618]

Just now, Cdub100 said:

No I don't think it would help the economy and I don't think enough people would take part in that program to dramatically affect the market. And if enough people did it would hurt the market and the banks.

Personally I wouldn't do it. The math doesn't make sense.

So many people have their money parked right now and will be shy about getting back in. A lot easier for them to ease back in with the money they freed up than putting the chunk they pulled out back in all at once. 

[Hardcore troubadour 12,618]

1 minute ago, bandrus1 said:

Im with you... I already make double payments on my house because I want that security over investing in retirement. 

Yup. If this deal was offered I would jump on it, up my life insurance and start building another nest egg. I would have certainty and 15 years of investing ahead of me. 

[Leeson 54]

5 minutes ago, Cdub100 said:

No I don't think it would help the economy and I don't think enough people would take part in that program to dramatically affect the market. And if enough people did it would hurt the market and the banks.

Personally I wouldn't do it. The math doesn't make sense.

I agree. I'm not sure how it would help the economy if the mortgage payment is going into a 401k instead of consumer spending. But, if the money is being spent on iPhones and Nikes, then retirement takes a big hit. 

[Leeson 54]

2 minutes ago, Hardcore troubadour said:

Yup. If this deal was offered I would jump on it, up my life insurance and start building another nest egg. I would have certainty and 15 years of investing ahead of me. 

I thought I read that it's being offered, but it will only be $100k and it will be taxed. Just no early withdrawal penalty. 

[Hardcore troubadour 12,618]

2 minutes ago, Leeson said:

I agree. I'm not sure how it would help the economy if the mortgage payment is going into a 401k instead of consumer spending. But, if the money is being spent on iPhones and Nikes, then retirement takes a big hit. 

What if it’s not in the market though? Think of all the people who obviously pulled out. They may decide to leave that money parked.  That’s not very good either.  

[bandrus1 413]

4 minutes ago, Leeson said:

I thought I read that it's being offered, but it will only be $100k and it will be taxed. Just no early withdrawal penalty. 

Can you find this?

[Leeson 54]

Just now, Hardcore troubadour said:

What if it’s not in the market though? Think of all the people who obviously pulled out. They may decide to leave that money parked.  That’s not very good either.  

Everyone has to make their own decisions based on risk. 

I was just making the point of not putting the entire amount saved in mortgage payment back into the 401k. Which I think many people would be inclined to do. It would change my comparison numbers. 

There could also be an issue of max 401k contributions. (I think it's capped around $20k annually) That would be easy to hit if someone upped their paycheck contributions by $900 a month. (it would knock taxable income numbers down though)

[Leeson 54]

2 minutes ago, bandrus1 said:

Can you find this?

There are more if you google 401k + stimulus plan. 

Fortune article

[Leeson 54]

That article also states that you can get $100k out of your retirement account tax free if you pay it back within 3 years. Otherwise you have to pay the taxes on it. 

Still no penalty applied for early withdrawal.

[bandrus1 413]

The legislation requires that the money be a “coronavirus-related distribution,” but the rules are loose. People diagnosed with the virus are eligible, along with anyone who “experiences adverse financial consequences” as a result of the pandemic, including an inability to find work or child care. Retirement plan sponsors are told to rely on employees’ word that they’re eligible.

[Cdub100 3,379]

Bought JNJ $131.78  I couldn't stop myself.

[Leeson 54]

3 minutes ago, bandrus1 said:

The legislation requires that the money be a “coronavirus-related distribution,” but the rules are loose. People diagnosed with the virus are eligible, along with anyone who “experiences adverse financial consequences” as a result of the pandemic, including an inability to find work or child care. Retirement plan sponsors are told to rely on employees’ word that they’re eligible.

I would venture to say the everyone in this country has been effected by coronavirus. 

[Leeson 54]

1 minute ago, Cdub100 said:

Bought JNJ $131.78  I couldn't stop myself.

It's down due to deodorant sales. 

[nobody 2,037]

2 hours ago, vuduchile said:

Interesting day so far.  Not sure what to make of it.  

If the curve is flattening, the market will go up.

[nobody 2,037]

https://www.cnbc.com/2020/03/30/coronavirus-justice-department-investigates-lawmakers-stock-trades.html

DOJ investigating the dirty insider traders

[Cdub100 3,379]

11 minutes ago, Leeson said:

It's down due to deodorant sales. 

Lets get this pandemic over so I can go back to putting it on.

[TimmySmith 2,782]

4 minutes ago, nobody said:

https://www.cnbc.com/2020/03/30/coronavirus-justice-department-investigates-lawmakers-stock-trades.html

DOJ investigating the dirty insider traders

This will go nowhere for 5 different reasons.  The main one being they did nothing wrong.  

[nobody 2,037]

JNJ just received 450 million to work on a vaccine.  I find that odd since a bunch of companies are closer to the finish line.  JNJ says they can't even get into trials until September.

This is on top of about 150 million they got a month ago to develop anti-virals.  Gorsky is a good negotiator.  

[nobody 2,037]

Just now, TimmySmith said:

This will go nowhere for 5 different reasons.  The main one being they did nothing wrong.  

I disagree that they didn't do anything wrong.  They were privy to inside information.  Those fockers should have to disclose every damn trade they do ahead of time.

[TimmySmith 2,782]

Just now, nobody said:

I disagree that they didn't do anything wrong.  They were privy to inside information.  Those fockers should have to disclose every damn trade they do ahead of time.

Won't argue with the last sentence.  As to what they were privy to, exactly, no one has said. And the administration didn't single out any companies or even industries.  The handwriting was enough on the wall for any investor to do what they did IMO.

[Leeson 54]

6 minutes ago, TimmySmith said:

This will go nowhere for 5 different reasons.  The main one being they did nothing wrong.  

I think they probably did something wrong. Can it be proved beyond a doubt? I don't think so.

But, it's no different than any number of shady people doing things that are wrong and never getting caught/punished. 

[nobody 2,037]

4 minutes ago, TimmySmith said:

Won't argue with the last sentence.  As to what they were privy to, exactly, no one has said. And the administration didn't single out any companies or even industries.  The handwriting was enough on the wall for any investor to do what they did IMO.

Agreed.  I read the news and sold every piece of stock I owned late Feb.  I even liquidated my 401k (didn't withdraw just took it out of stocks), so I can't really take issue with the argument that he wouldn't/couldn't have traded off of public information.

 

FYI, I'm 75% back in.

[Alias Detective 1,179]

Here comes the contrarian in me.  I think the market will retest the lows of last week.  I’m considering selling off 10% to free up more cash for a lower low.

[mmmmm...beer 691]

Dead Cat Bounce.... it's that what we say now on any good market day? 

[mmmmm...beer 691]

GRPN is way down right now... zero traveling going down.. no need for deals.

Ya gotta think... this thing is over in 3 month.. or travel bans lifted.  Everyone is gonna go crazy trying to vacation before school starts.

[Cdub100 3,379]

I knew I shouldn't have looked at stocks. I've been following the market as a whole, but man some of these prices... I even bought some Carnival. 

CCL $12.83

JNJ $131.56

DIS $97.14

PEP $123.00

WELL $46.02

ETA - I still think the market is going to drop more.

[mmmmm...beer 691]

20 minutes ago, Cdub100 said:

I knew I shouldn't have looked at stocks. I've been following the market as a whole, but man some of these prices... I even bought some Carnival. 

CCL $12.83

JNJ $131.56

DIS $97.14

PEP $123.00

WELL $46.02

ETA - I still think the market is going to drop more.

Dude bigtime sales right now... the cruise lines... CCL, RCL, NHCL.... just watch them... been making some money the last few days... 

RCL for instance... it went from 30's.. to 20... to 40's in about 5 days... now back down to 20's... not a horrible thing to let it dip... ride it 15-20%.. dump... rinse and repeat.

Obviously there are a ton of long holds to be had right now... but there is some money to be made on the way up.

I'm not as super savvy as some folks on here.... but I'm learning how to do limit buys correctly...

Learning the purple chart!

[RaiderHaters Revenge 3,569]

3 hours ago, mmmmm...beer said:

GRPN is way down right now... zero traveling going down.. no need for deals.

Ya gotta think... this thing is over in 3 month.. or travel bans lifted.  Everyone is gonna go crazy trying to vacation before school starts.

yes but will anyone be able to afford a vacation after this?

and school might start in July

 

[mmmmm...beer 691]

15 minutes ago, RaiderHaters Revenge said:

yes but will anyone be able to afford a vacation after this?

and school might start in July

 

Me!  Weeeeeeeee!

[Cdub100 3,379]

22 minutes ago, RaiderHaters Revenge said:

yes but will anyone be able to afford a vacation after this?

and school might start in July

 

I just read Michigan is going to cancel the rest of the school year.

[NorthernVike 2,080]

2 hours ago, Cdub100 said:

I just read Michigan is going to cancel the rest of the school year.

Are they to stupid to figure out distance learning? 

[Cdub100 3,379]

Just now, NorthernVike said:

Are they to stupid to figure out distance learning? 

Dude I've had this argument 3 times already.  They would rather just cancel the school year than do online learning. Something about it's not fair to a few kids who don't have computers or internet at home nor is it fair to the special needs kids. So, the liberals who run my state and the liberal teachers have decided to fock 95% of the school kids and just cancel everything.

I'm looking at homeschool options now.

[Utilit99 4,099]

2 hours ago, Cdub100 said:

Dude I've had this argument 3 times already.  They would rather just cancel the school year than do online learning. Something about it's not fair to a few kids who don't have computers or internet at home nor is it fair to the special needs kids. So, the liberals who run my state and the liberal teachers have decided to fock 95% of the school kids and just cancel everything.

I'm looking at homeschool options now.

No one left behind. Except....everyone.