Category: financial guidance

Women Aren’t Planning for Retirement Early Enough

Everybody knows that women tend to outlive men, and on average by 6 to 8 years. They often act as caregivers to their ailing spouses or elderly parents. Despite this, too many women are not planning for their retirement nearly early enough.

Too often, retired women find themselves in situations where they do not have enough income to finish out their retirement years the way they started them. This can send them in search of part-time or even full-time work when they would rather be enjoying their retirement. If you are thinking ahead to retirement, or if you are a Baby Boomer who is nearing retirement age, it’s time to take a closer look at your income, your goals, and your retirement plans.

What Is the Average Retirement Age for Women?

On average, women retire at just over 62 years of age. This is two years earlier than men, who on average retire around 64 or 65 years of age. While many people retire earlier or later, depending on their goals, this is the average.

Choosing to retire early can give you time to enjoy your hobbies, take a volunteer opportunity or spend time traveling while you still have the energy and health to do so. Choosing to retire later can give you more time to enjoy corporate perks, like healthcare, and save more money to use in your retirement. While both are valid reasons, you need to make sure your retirement plans match up with your retirement goals.

What Do Most Women Do in Retirement?

The way women spend their retirement varies as much as the women themselves. You may choose to spend your retirement enjoying your hobby, such as doing crafts or reading, or you may choose to get involved in the community as a volunteer. Many retired women want to travel and see parts of the world they haven’t seen before. A recent report from Forbes found that socializing or caregiving are important tasks women take on during retirement, as well.

All of these are great options for your retirement time, but many women find that the drop in income during retirement keeps them from enjoying these activities. Income received from Social Security benefits is barely enough to live on for the rest of your life, let alone to pursue outside activities, leaving women who didn’t do much retirement planning before retirement struggling.

Women Tend To Invest Less

It should not come as a surprise that men and women typically spend money differently. Women, for some reason, tend to invest less. A recent study reported that over 70% of the money women have sits in cash. That is a shocking number. Cash not only doesn’t earn much of a return, it actually declines in value over time due to inflation. The stock market, on the other hand, has averaged over 9% per year over the past 90 years, including the Great Recession of 2007-2008.

Both men and women tend to put off things that are not urgent or that they don’t feel confident with… and learning the skill of money management takes time. For women with a husband or companion who does the planning and makes the investment decisions, it makes sense to accept the division of labor. However, in this scenario, we too often find that these women become totally removed from those decisions, and by the time those financial decisions do fall to them as the surviving spouse, they don’t even know where to begin, leaving them feeling helpless and scared.

There is another little secret that a lot of men would rather not admit: they’re often not the experts on investing and planning that they think they are. The men who lost half the value of their 401k retirement plans when the market crashed in the Great Recession may not be the ones from whom women should take investment guidance.

Our advice for women (and men who love their wives) is to find a knowledgeable financial advisor, preferably a Certified Financial Planner™ (CFP®) who specializes in retirement planning and is an independent fee-only RIA (Registered Investment Advisor).

They will provide guidance, help you create a plan, manage your investments in accordance with your goals, and be there to help you plan for retirement at any age.

What Is the Fastest Way to Save Money for Retirement?

Saving for a reasonable retirement income does not happen overnight. You are going to have to budget a reasonable amount of money from every paycheck to ensure you have the financial security you want and need during retirement. Here are some tips to make it happen.

Start Early

The best and fastest way to save for retirement is to start as early as possible. Many women think that they are too late to start planning, so they give up. We always say that the best time to start is today.  But to really get a jump on an early retirement, start saving from the moment you get your first job.

Understand the Power of Compound Interest

Compound interest makes your retirement savings grow faster. It happens when you earn interest or growth on both the money you initially save and the interest or growth that it earns. For example, if you invest $10,000 (your principal) and it grows by 10 percent over the next year (either from interest or earnings). After the end of the year, you would have $11,000 – your original principal plus 10 percent or $1,000.  If you earn 10 percent the second year, you will have $12,100.  This is because the 10 percent growth the second year is off of the $11,000 starting balance, which equates to $1,100. So every year when you get a return on your money, that return is added into the principal balance, and it also starts generating a return. With compounding interest, your savings grow substantially faster over time. 

Use Employer-Sponsored Programs

If your employer offers a 401(k) or similar retirement benefits program, take advantage of it. These plans typically offer an employer match, which is essentially free money just for participating and allows you to save even more money for your retirement.

Find Ways to Save Money

Women, especially married women, often find themselves in the position of caretaker. Older women may take care of their working spouse or an elderly parent, and younger women often have kids at home. If you are not sure whether you have enough money set aside for your next avenue of life, we have identified some ways to cut costs now so you can redirect that money towards your retirement savings.

Groceries

Save money on groceries by clipping coupons and shopping for generic brands when possible. Join a wholesale club and buy your main staple foods in bulk. Learn to shop sales and stock up when items you need are at their lowest price.

Childcare

If you need childcare while your kids are small, shop around to find the best rate. Or, if you know other parents who work alternately to your schedule, consider trading childcare with them rather than paying for daycare. Look for cooperatives that can help lessen the cost, or consider dependent care flexible spending accounts.

Travel Expenses

No one says you have to wait for retirement to travel, but look for ways to save when you do travel. For example, use apps like GasBuddy to save on gas costs, and use fuel rewards. Improve your car’s gas mileage by driving in an eco-friendlier way to further reduce your fuel costs (many owner’s manuals or a quick internet search will provide the highest MPG rating for your vehicle). Consider using a travel rewards credit card and paying it off each month to earn points for airline travel.

Beauty Routines

When it comes to beauty products, you’re probably well aware that the cost is high. Ways to save on beauty products include finding products that do double-duty, such as using hair conditioner as your shaving cream. You can also avoid excessive costs by choosing the generic version of some of your favorite products. Finally, consider home remedies for minor healthcare and beauty routines that can cost quite a bit less than expensive prescription creams or name-brand products.

Bills for the Home

Your utility bills can be a huge drain on your income. There are many ways to save on your utility bills if you know where to look. First, make sure you are using energy-efficient light bulbs. Energy.gov recommends CFL or LED bulbs. Then, change your furnace filter regularly and keep air vents open and clear. Use a programmable or smart thermostat. You can also save by unplugging electronics when you call it quits for the night, rather than just turning them off. If you leave devices plugged in, even if they are not on or in use, they will use some electricity.

Look around your home to see if there are updates or repairs that you can make to your fixtures and appliances to make them less wasteful. For example, make sure they are working properly, without leaks or drips, or install eco-friendly options, like low-flow toilets or showerheads. Then, shorten your shower or opt for the dishwasher rather than hand-washing dishes to save even more on your water bill.

If you have subscriptions, like streaming services or magazines, consider eliminating some of them, especially those you don’t use much.

Eating Out

While it would be easy to say avoid eating out, the reality is that most everyone does eat out from time to time. So how can you save on this cost?

It is common for us to see seemingly small costs nickel and dime clients into way bigger dining expenses than they realize. Take a trip to the coffee shop, for example.  People typically tell themselves that it’s only $3-$6 per trip, but add up a trip (or two) a day five (or seven) days a week, and suddenly that becomes a big cost over the course of a month. Try making your own coffee most days, and limit yourself to fewer trips to the coffee shop. Same thing with fast food and convenience items. Make a bag lunch or take in leftovers instead of dining out for lunch regularly. And if you run to the convenience store for snack items often, consider stocking up on a big box at the wholesale or grocery store, where the cost per item is certainly lower, and leave some of the items in your car or purse for when you need a snack.  

When dining out at a restaurant, especially one with large portions, eat half there and take the other half of it home. When you get two meals out of the cost of one, you stretch your money. Use coupons and discounts whenever possible, and consider going out for lunch instead of dinner, as lunch prices are typically lower. Or try skipping the appetizer and drinks and instead opting for a filling meal and water. 

If you are nearing retirement age, do not be afraid to ask about senior discounts. There may be additional savings available for older people if you simply ask.

Apply Savings Toward Retirement

Spending less money on these things is great, but that is just the first step. Once you start spending less, apply the money you’ve saved  toward your retirement, rather than just putting it in your daily budget and finding other things to spend it on.

Remember, these are just starting points. Talk to an expert in personal finance or financial planning to help you find additional ways to save, and funnel that money towards your retirement.

How Korving & Company Helps Women Save for Retirement

Women and men tend to have different savings strategies for their retirement. Working with a professional who understands retirement strategies is key. We have many decades of experience that we can put to work for you and your financial goals.

Korving & Company, LLC, offers a wide range of services to help you with your retirement planning. Our financial planning and asset management services will ensure you have the right strategies in place to help you meet your retirement goals. We are not only knowledgeable about finances, but we are also compassionate to the needs of women who want to retire safely and securely.

Don’t leave your retirement to chance. Call 757-638-5490 or complete the online contact form to speak with an experienced financial planner at Korving & Company today.

The Benefits of a Modern Retirement Plan

If you are like most people approaching retirement, you are probably wondering if you’re financially ready. You may have a pension. You plan on collecting social security. You may have put money into your employer’s 401k plan. You and your spouse may each have an IRA and some money in the bank. You may have some life insurance or an annuity or a long-term care policy.  

Does that mean you can retire when you want? The answer is: it depends.

There are lots of things that can happen in the 20 to 40 years you will be retired. Here are a few things that may cause you to ask questions.

Question #1: Is your Social Security safe? 

The Social Security trust fund is currently projected to be able to pay full benefits until 2035. How will it affect you if the funds run out? A retirement plan should answer that question.

Question #2: Is your pension safe?  

Company and public employee pensions are underfunded. What happens if your company, city, or state goes bankrupt? It could happen.

Question #3: How long will your retirement savings last?  

You may be planning on your investments continuing to grow at the rate they have in the past, but what if they don’t?  

Question #4: How risky are the investments in your portfolio?  

Many people have been lulled into believing that all they need to do is put their money into a low-cost index fund. The index lost nearly 50% in 2009 and 34% in March 2020. If you’re still investing in stock index funds as you near retirement just because they’re “cheap,” you may be taking on way more risk than you realize.

Question #5: How much will it cost if you or your spouse need to go into a nursing home?  

Long-term care insurance may pay for it, but the insurance is not free.  For some people buying a policy makes sense, while for others it might not.  A financial plan can help answer whether a long-term care policy is right for you.

Question #6: What happens if inflation comes roaring back?  

Living on a fixed income after you retire makes inflation a much bigger threat than when you were working.  

Question #7: How does living too long or dying too soon affect your retirement plan?

Critical decisions are often made during the retirement process without enough consideration of how long you will live. While a plan can’t answer how long you’ll live, it can project how your plan will be altered if you live longer or shorter than you think.  

 

In the past, retirement planning was a static process. Planners took the information supplied by their clients and provided a book of charts and graphs designed to show their financial condition for decades in the future. The technology limited what you could do.  

New computer programs allow Financial Planners to run thousands of tests to analyze a number of different scenarios. The new planning process also allows people to check, update, and re-review their plans as time passes and conditions change. These programs allow scenarios to be run in real-time and can be generated for a modest cost by Certified Financial Planners™ (CFP®s) who specialize in retirement planning.

Becoming Rich Is Not the Same Thing as Staying Rich

What does the term “rich” mean to you?  Many of us are blessed with a great family, friends, good health and a lot of the things that make life worth living.  But as a financial advisor, my job is to help people achieve financial prosperity and keep it throughout their lives.  And that often means that the strategies they used to become “rich” in the monetary sense are not the same as the ones they need to stay that way.

Why Becoming and Staying Rich Are Different

Take the case of an entrepreneur.  Starting a business is inherently risky.  You typically have to commit your own capital or borrow it to get started.  Then, as the boss, you depend on yourself for a paycheck.  Successful business owners often find that they have become monetarily “rich,” but the majority of their net worth is tied up in the business.  If the economy or a competitor hurts their business, they can lose it all.

We have met people who have had very successful careers climbing the corporate ladder.  It’s not unusual to find that the successful executive is largely rewarded with company stock.  But being part of a successful corporation doesn’t come with a guarantee that the stock will retain its value.  Some of the best-known names in American industry have lost 50%, 75%, even 100% of their value over the last 50 years.

Both the business owner and the corporate executive become “rich” by focus and discipline.  To avoid losing part – or all – of their wealth requires a change in emphasis.  It means risk reduction via diversification.  It means finding a financial advisor who can create a portfolio that is robust enough to reduce the risk that the economy, competitors or unforeseen events destroy the financial future they have worked so hard to build.   

Conclusion

Of course, this also applies to those people who have benefited from a general run-up in the stock market and have achieved a measure of financial independence but who are now concerned about holding on to what they have.  Be sure not to confuse luck with smart investing.  The last decade has been good to all investors.  It’s important to remain prudent and remember the first rule of making money is to not lose it.

Call us or use our contact page to find out how we can help you keep what you have worked so hard to get.

The Real Value of Financial Advice

Most investors who retain an elite financial advisor would agree that the value far exceeds the cost. They simply do not have the time and/or the expertise to navigate the complex financial world by themselves and see tremendous value in having a trusted, expert confidant who can answer questions and provide guidance when faced with uncertainty.

Clients often come to us with questions when they are making financial decisions. Should they take option A or option B? We frequently suggest that there may be other alternatives that they have not even considered. It’s gratifying to see a light go on when we explain that option C is better for them, they just didn’t realize it was there.

The Real Value of Financial Advice

A leading financial firm determined that “as much as 45% of the total value of an advisory relationship perceived by investors is derived from emotional elements, while the remaining 55% is derived from functional aspects of the relationship like portfolio management and financial planning.”

In other words, nearly half of the value of a financial advisor comes from services that have nothing to do with portfolio management.

Advisors have two primary tasks – helping people manage their wealth and helping people manage their emotions.

Korving & Company’s investment methodology is systematic and backed by technology that allows us to monitor hundreds of individual portfolios to keep then within their stated objectives. This allows us to spend more time with the subjective questions that our clients have. That’s where decades of experience in both finance and life help our clients to meet their own goals.

The Risks of Do-It-Yourself Retirement Plans

A report recently published by the Federal Reserve Bank on the economic well-being of U.S. households discusses what people have saved for retirement versus what they will actually need, commonly known as the “retirement gap.”  The survey found that only 47 percent of DIY investors were comfortable with handling their own 401(k)s, IRAs or other outside retirement accounts.

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Do I Need a Financial Advisor?

Investment Approach

Not everyone needs a financial advisor. But if you are not sure about how your financial assets should be invested, or if you have made major errors when you invest, you are a candidate for getting professional financial advice.

Fees are the main barrier that keeps people from getting the kind of advice that would improve their financial lives.

But just as doctors get paid for keeping us healthy and lawyers for protecting our interests, getting good financial guidance is worth every penny. Solving our financial problems has a huge impact on our lives. Making sure we don’t run out of money during a retirement that can last decades is often people’s biggest fear in life.

People who are in good shape financially may not need assistance. However, too many times people need guidance but are reluctant to pay for what they need. Instead, they search the internet, or ask friends or family who are often not knowledgeable. And even if they get good advice, friends and family are not going to create a plan and make sure that the plan is followed. That’s not their job.

That’s were a professional investment advisor comes in. They’re paid to help you create a plan, to design a portfolio that aligns with your plan, to manage that portfolio and to alert you in case the plan needs adjusting. Like a physician conducting a periodic physical, a financial professional keeps track of your progress and fixes it when things go wrong.

If you think you may need help, find an advisor in whom you have confidence, pay them a fair fee for their services and you’ll be rewarded with peace of mind knowing that your financial future is in good hands.

Saving and Retirement

The Center for Retirement Research (CRR) at Boston College, found that 52 percent of working-age U.S. households are at risk of being unable to maintain their standard of living in retirement. Many recognize the possibility of a shortfall but 19 percent do not. Contributing factors include increased life expectancy, declining Social Security income replacement, and the shift from pensions to defined contribution savings plans. Older Americans are entering retirement carrying more debt. According to a paper by the Retirement Research Center at the University of Michigan, more Americans between ages 56 to 61 are carrying more debt than any time in recent history. Another retirement problem receiving increasing attention is the social isolation of retirees, which has been deemed a risk equal to or greater than major health problems such as obesity.

Studies about retirement savings plan contributions indicate a lack of participation by many American workers. A study by the PEW Charitable Trusts found that 25 percent of millennial adults participate in employer-sponsored defined contribution retirement plans versus 40 percent of Generation X and 43 percent of baby boomers. Stated another way, a large majority of millennials have no retirement savings plan.

If you are concerned about having the money to retire, call us.

Avoiding Bad Advisors

Some good advice from SeekingAlpha:

The elephant standing in the room in all discussions of financial advice is the unethical advisor who offers bad, or not good, advice. Many commentators prefer not to dignify such people with the term “advisor.” I completely agree that the gulf is wide between these folks and those who genuinely possess advisory credentials; the trouble is that they typically call themselves advisors and they often give advice – it’s just that such advice is conflicted!

At their most extreme, bad advisors are the sharks sitting down in a Long Island boiler room pushing some pump-and-dump microcrap to widows lacking a companion to speak with. They talk about how their stock (or any other money-making device) is poised to shoot for the moon, and try to make you feel stupid for not handing over everything you’ve got.

Most people can recognize such wolves in sheep’s clothing, but seniors are not infrequently taken in, not because of their age certainly, but because of the growing problem of cognitive impairment such as Alzheimer’s and the like. A major national survey conducted two years ago by Public Policy Polling on behalf of nonprofit Investor Protection Trust found that nearly one in five Americans aged 65 and older had been victims of a financial swindle.

It is relevant to point out that a good financial advisor is often the first line of defense against such predators, as are adult children with sufficient awareness of the issue and, increasingly, doctors now trained to check for signs of financial exploitation when treating patients experiencing cognitive decline. It is also critical to note that a big source of vulnerability is the lack of awareness (of seniors and their adult children) of such decline.

Beyond the outright looting of bank accounts and the like, there are advisors who, on their own initiative or as a result of pressure from their firms, operate like used-car dealers are reputed to do; that is, they try to “put you in” a product today. And the firms we’re talking about, it is important to note, are not just large full-service brokerage firms that have been embroiled in past scandals, but also the discount brokerage firms of saintly reputation that are associated in the public mind as pro-consumer. Here’s a quote from an article by Bloomberg’s Nir Kaiser, citing a recent Wall Street Journal report:

Fidelity representatives are paid 0.04% of the assets clients invest in most types of mutual funds and exchange-traded funds,” but they earn 0.1% on investments that “generate higher annual fees for Fidelity, such as managed accounts, annuities and referrals to independent financial advisors.”

I think the above quote gets to the nub of the problem of unethical advice. Anyone who has any interest other than the client’s best interest should be automatically disqualified from offering you advice. The reason is simply that the person cannot be trusted. Maybe he is generally an upstanding citizen but the day you need his advice, he’s got a big bill to pay at home and convinces himself, first, that the product that will put the biggest jingle in his pocket is just the thing you need. Or, maybe the advisor faces no personal financial pressure whatsoever, but faces pressure to “perform” at work, and wants to keep his job. A 2015 survey from whistleblower securities law firm Labaton Sucharow found that nearly one in five financial industry respondents felt that financial services professionals must at least sometimes engage in illegal or unethical practices.

Such pressures exist in every field, but perverse incentives increase where large sums of money are involved. Many honest advisors seeking to break away from what they see as a conflicted corporate environment have undertaken fiduciary responsibilities, banded with an organization that imposes ethical standards and very often set up their practices as registered independent advisors, or RIAs. These are all good ideas, and favor good advice, but it bears mentioning that there are honest advisors outside of this framework, and that this framework doesn’t guarantee honest advice. Ultimately, it is incumbent on every individual who could benefit from professional financial advice to hone his own ability to detect integrity or the lack thereof, and to find an honest and capable advisors whose advice will help them succeed beyond the cost they are paying for the service.

Getting financial guidance is more important than ever, but be careful who you take advice from.  If you have questions, feel free to ask us.

Can You Answer These Basic Money Questions?

The NY Post published an article Most Americans can’t answer these 4 basic money questions.   They questioned “Millennials” and “Boomers” to see who were most knowledgeable about investing.
Here are the questions – see how well you do.

  1. Which of the following statements describes the main function of the stock market?
    A) The stock market brings people who want to buy stocks together with people who want to sell stocks.
    B) The stock market helps predict stock earnings
    C) The stock market results in an increase in the price of stocks
    D) None of the above
    E) Not sure
  2. If you had $100 in a savings account and the interest rate was 2 percent per year, after 5 years, how much do you think you would have in the account if you left the money to grow?
    A) Exactly $102
    B) Less than $102
    C) More than $102
    D) Not sure
  3. If the interest rate on your savings account was 1 percent per year and inflation was 2 percent per year, after 1 year, how much would you be able to buy with the money in this account?
    A) More than today
    B) Exactly the same as today
    C) Less than today
    D) Not sure
  4. Which provides a safer return, buying a single company’s stock or a mutual fund?
    A) Single company’s stock
    B) Mutual fund
    C) Not sure
    D) Not sure

The correct answers are

  1. A
  2. C
  3. C
  4. B

If you had trouble getting the right answers you could benefit from the guidance of a good RIA (Registered Investment Advisor).

Questions and answers about retirement

A couple facing retirement asks:

I will retire in the Spring of 2018 (by then I will have turned 65). My wife is a teacher and will retire in June of 2018. When we chose 2018 as our retirement date, we paid off our house. At the same time we replaced one of our older cars with a new one and paid cash. We have no debt. We will begin drawing down on our investments shortly after my wife retires. Also we both plan to wait until we are 66 to draw on Social Security. Our current nest egg is divided 50/50 in retirement accounts and regular brokerage accounts. About 60% are in equities and mutual funds. The rest is in bonds and cash. I’ve read about the 4% rule, adjusting annually up depending on inflation, expenses and market performance. As of today, based on our retirement budget, we can generate enough cash only using our dividends to live on. In our case this approach would have us taking interest and dividends from all accounts, including IRA, 457 B and 403 B before we are 70 years old. Seems that this approach would make it easier to deal with market volatility, yet it does not seem to be favored by the experts.

My answer:

There are a number of different strategies for generating retirement income. The 4% rule is based on a study by Bill Bengen in 1994. He was a young financial planner who wanted to determine – using historical data – the rate at which a retiree could withdraw money in retirement and have it last for 30 years. The rule has been widely adopted and also widely criticized. It’s a rule of thumb, not a law of nature and there are concerns that times have changed.

Based on your question you have determined that the dividends from your investments have generated the kind of income you need to live on in retirement. Like the 4% rule, there is no guarantee that the dividends your portfolio produces in the future will be the same as they have in the past. Dividends change. Prior to the market melt-down in 2008 some of the highest dividend paying stocks were banks. During the crash, the banks that survived slashed their dividends. Those that depended on this income had to put off retirement because their retirement income disappeared.

I would suggest that this is an ideal time to consult a certified financial planner who will prepare a retirement plan for you. A comprehensive plan should include your income sources, such as pensions and social security. The expense side should include your basic living expenses in addition to things you would like to do. This includes the cost of new cars, travel and entertainment, home repair and improvement, provisions for medical expenses, and all the other things you want to do in retirement. It will also show you the effects of inflation on your expenses, something that shocks many people who are not aware of the effects of inflation over a 30-year retirement span.

Most sophisticated financial planning programs forecast the chances of meeting your goals based on a “total return” assumption for your investments. Of course, the assumptions of total return are not guaranteed. Many plans include a “Monte Carlo” analysis which takes sequence of returns into consideration.

That’s why the advice of a financial advisor who specializes in retirement may be the most important decision you will make. An advisor who is a fiduciary (like an RIA) will monitor your income, expenses and your investments on a regular basis and recommend changes that give you the best chance of living well in retirement.

Finally, tax considerations enter into your decision. Most retirees prefer to leave their tax sheltered accounts alone until they are required to begin taking distributions at age 70 ½. Doing this reduces their taxable income and their tax bill.

I hope this helps.

If you have questions about retirement, give us a call.

Should I roll over my 401(k) from my previous employer?

Question from young investor to Investopedia:

I am currently 21 years old and a senior in college. I started working at a job back in December of 2016 and opened up a 401(k) with the company. I did this so I could begin saving for future expenses. This job was only meant to be temporary. Within the next month, I will be starting my new career at a different company. Should I roll over my 401(k)? Are there any other options other than this?

My answer:

There are three things you can do with an orphan 401(k).

  1. Leave it where it is.
  2. Transfer it to you new employer’s 401(k)
  3. Roll it into a Rollover IRA.

I prefer option #3 because it gives you several orders of magnitude more investment options.

The problem with #1 is that you may simply forget about it.  In addition, you may find that the account is small enough that your old employer may terminate your account and send you a check, triggering several kinds of taxes and penalties.

Option #2 is better than #1 but it still locks you into the investment options offered by your employer, many of which are poor.

You mentioned that you started your 401(k) to “save for future expenses.”  That’s not the purpose of a 401(k).  Its role, like an IRA, is to save for retirement.  I realize that a 21-year-old starting his first real job is not focused on retirement, but that’s a mistake.  The biggest advantage that you have is time.  If you give time the ability to work for you, you can overcome lots of investment mistakes and end up much richer than someone who starts later in life, even if they save more money.

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