Sounds like something Troy McClure might be selling.
The catalyst for this post is an article from the WSJ yesterday about 401ks. No shock, many people are down a lot of money in their 401ks. Being down a lot can cause disillusionment, again no shock.
It has been a while since I have had a 401k (1099 means picking some sort of self employed retirement vehicle) but from what I read, employers still match a portion of what employees contribute (save for a couple of companies that are not matching for 2008).
This might whip a few people up but I am pretty sure I have mentioned this idea before.
If you get a 50% match on your first, say, $8000 or $10,000 or whatever then why put that $8000 or $10,000 or whatever into anything but the money market choice? You are already getting 50%, why mess with that? There is even an argument for getting a 50% match on the first $8000 but putting in more than the amount needed to max out the match and still just putting it into the money market. If you put in $12,000 into a 401k and get $4000 from your employer then you have a 33% return with no investment risk.
If you have a career of normal duration getting 50% a year on your 401K in the manner described above you’d probably be in good shape when retirement comes.
Investing in riskier assets then would come into play with excess savings (maybe not the best term) beyond where you get the maximum benefit from your employer match. If you put $8000 into the 401k (get a $4000 match) and can squeeze out another $8000 into something (max out an IRA of some sort that would be compatible, or even a taxable account if that is the only choice that can work for you) with more choice than a 401k and average 8% per year there over the long term you’d be in even better shape.
At the very least this might get you think before you go hog wild with risk in the 401k. Let me say I do not think it will take anywhere close to ten years for the US stock market to get back to the 2007 high but if that is wrong then people who are 55 today, down a lot and hoping to retire at 65 may have a big problem. If you are younger than 55 you may confront a similar problem when your time does come. If you can get a 50% return (via the match) on a big chunk of your savings for another 20 years how much risk do you need to take?