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Average 401k Balance Down OVER $28,714 (BIGGEST mistakes to avoid) - YouTube
Channel: Wealth Hacker - Jeff Rose
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what's going on you all look like the
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channel wealth hacker Labs I'm your host
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Jeff Rose got another edition of one
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take market didn't really have a lot of
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craziness today so I really want to
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spend some time focusing on a question
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that I get a lot a concern that I get a
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lot and chances are you have this
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concern you have a family member a
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co-worker that is concerned and that has
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to do with their 401 K the common
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question I get is Jeff do I need to cash
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out of my 401 K do I need to stop
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contributing to my 401 K and chances are
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you are asking this question or you are
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concerned about this is because your 401
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K feels like it's done this it's
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probably cut in half and I get it and
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many of you have not been here before
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for many of you this is your first
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experience with a bear market with a
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financial crisis and it ain't fun like I
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know it ain't fun it's not fun going
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through this is a third one I've been
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through they're not fun but there is a
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light at the end of tunnel and I just
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wanted to reassure you of that but I
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want to spend some time just to give you
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some real-life numbers just to show you
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why that I'm saying stay the course and
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not cash out why everyone else hopefully
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is giving you that exact same type of
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information so let's go ahead and go to
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the computer real quick and take a look
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first off if you need any any
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information on a 401 K complete plug
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though this is my blog good fighters com
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we've got anything and everything you
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need to know about your 401 K but right
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now if you go into google and type in
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401 k like these were just some of the
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headlines that I saw pop up just today
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so this is on market watch that's saying
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don't look at your 401 K you know like
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no and if you know that if you if you
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suffer from anxiety then okay maybe
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don't look at your 401 K but you don't
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want to put your you don't be like a
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turtle and put your head in the shelling
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I mean I want you to know what's going
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on like this is one of those times like
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I want you to feel it I want you to
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experience it and embrace it because
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this is going to be such a awesome
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learning experience when
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it has happens again and you can tell
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other people that are wanting to cash
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out like no don't cash out and this is
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why because this will this is what is
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going on you remember the crooner virus
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right remember back in the day and this
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is what happened to my 401k and here's
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what it was here's what it dropped to
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and here's where I'm at today so don't
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like this advice of not looking at your
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401k and here's just another article
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talking about 401k take a hit don't
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panic and don't touch your account
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economic I don't know who this
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economists economists is but I totally
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agree with this economists don't touch
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it don't panic and let me give you some
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numbers why but chances are though if I
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don't care if you know this already you
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still can't help but cry a little bit
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you know we got the mean there so I know
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it's sad I get it I get it but I promise
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you it's going to come around alright
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we're going to go to this sites this
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site is called portfolio visualizer
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someone else recommended this site to me
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I used to have access to all these
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different investment tools back when I
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was a practicing adviser unfortunately
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don't have access to all those now so
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this was the best I could find this is a
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free site so feel free to plug and play
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if you want so what I'm doing here we
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are doing a back test on a portfolio and
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I'll tell you what we're using here at
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one sec so here's what we are assuming
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we are going back to 2008 the beginning
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of 2008 which was the last financial
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crisis we are going to put in $1,000 in
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the beginning of the year so this is
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like right before all everything just
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goes crazy back then we're gonna write
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it out until the end of 2019 $1000 and
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we are putting this into ticker symbol
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esthe excuse me SP y which is the
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Spyders SP 500 ETF so this just
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represents the SP 500 if you don't know
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what that is that is the top 500 US
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corporations that exist so we're getting
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a good broad representation of the
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markets all right so that's what we are
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buying this is the ETF that you can
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purchase anywhere everywhere and that is
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what we were doing so we put $1,000 in
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beginning of 2008 wrote it out to
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19 and then what happens so our one
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thousand dollars is worth at the end of
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that period two thousand eight hundred
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and seventeen dollars we almost tripled
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our money in that time frame our braids
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return there is just over nine percent
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which it's like okay awesome great but
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like that still doesn't really help me
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in what you're talking about you know
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with the market tanking what that
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actually means so what I want to show is
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do you see annual returns alright here
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we go
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so check this out so imagine you're
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putting a thousand dollars in at the
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beginning of 2008 by the end of the year
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you have six hundred and thirty two
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dollars six hundred and thirty two
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dollars you lost almost four hundred
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bucks in a year not very exciting 2009
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was an awesome turnaround we were up 26%
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like that's a huge year obviously you
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lost thirty six percent the year before
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nonetheless though let's focus on the
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positive you're still up twenty six
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percent awesome are you now even back to
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where you started you start off with a
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thousand you drop down to 632 now you're
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at 799 that's not all that exciting by
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the end of the third year 2010 now we're
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up to nine hundred nineteen so we're
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still not there yet you're five nine
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hundred thirty six after making fifteen
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percent and then a modest one point
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eight nine and then finally by the end
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of 2012 we're back to one thousand
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eighty six were above where we started
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so one two three four at the end of the
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fifth year is when we finally get back
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there now for many like that's that's
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not exciting like here it is I mean it's
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2020 so Jeff where you tell me by 2025
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is what I'm going to be made whole ah
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well it depends on where you're at like
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if you are no longer adding to your 401k
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adding to your investments then like
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this is what it looks like but if you
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are able to add more to it well we'll
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get to that here in a second now here
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you can see and this is where
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compounding interest takes place so
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1086 and by the end of this 12-year
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period you're up to 28 2817 dollars
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almost tripled our money but as you can
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see a lot of that happened in the last
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three years and typically when you're
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looking at compounding interest all that
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really doesn't happen until later on but
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many people don't make it to there
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because it's it's here it's right now is
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when people get freaked out and that's
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what I'm trying to prevent you from
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doing so this is looking at we're just
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putting in a one-time investment we're
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not adding to it and this is what it
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looks like all right so what happens if
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we are adding to it which most of you if
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you are working if you have some income
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you've got your 401 K you can do a Roth
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IRA maybe your company has a match so
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they're adding money on top of it so
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we're here we're using a similar example
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still beginning of 2008 going till 2019
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we're starting off with the same amount
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one thousand dollars and we're making
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one small change and that change is that
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we are adding one hundred dollars and
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then we are doing that on a monthly
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basis so one hundred dollars added every
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month if you want to do the math that's
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1,200 dollars a year that we are adding
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for that 12 year period so what happens
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then we'll check this out so our one
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thousand dollar starting balance is now
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worth thirteen nine thousand two hundred
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and seventy nine dollars so you put
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$1,000 $1,000 in you're adding 12
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hundred bucks a year for 12 years so
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you've added a 14 thousand plus of your
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own money so about 15,000 cluding you're
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starting so this is a call it fifteen
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thousand you've more than doubled your
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money like so this is what this is what
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we're talking about right here like this
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is what that looks like and that's if
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you are adding a hundred bucks a month
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so imagine if you're doing 150 a month
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two hundred a month three hundred a
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month five hundred a month like that's
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where it starts getting really exciting
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and once again let's just show you some
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of the breakdown
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Oh ray returns same thing they're
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looking at nine percent let's look at
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the annual returns so you start with a
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thousand you're putting in the twelve
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hundred like okay well you you're still
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down from what you put in down that
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thirty six percent but once again that's
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where you can see the money start
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growing fifteen hundred thirty four
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hundred fifty four hundred so it doesn't
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hurt as much when you're adding more to
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it but if you just stop investing if you
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just stop putting in like that's just it
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just gets that much harder now I'm using
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smaller amounts here we're starting off
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with a thousand dollars in each scenario
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I went online and looked at the average
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401k balance by age this is provided to
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us by a bank rate and most of the people
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are watching my channel right now are
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between the ages of twenty and thirty
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nine so we've got a average 401k balance
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here of thirteen thousand two hundred or
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little bigger forty six thousand so I'm
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just gonna go ahead and let's do this
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together
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so I use nineteen thousand dollars
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so here imagine like you start you've
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got night and I guess you have to
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imagine this because you've probably
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already experienced this let's say you
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had nineteen thousand dollars in your
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401k before all of this happen or going
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back to two thousand eight before all of
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that happen by the end of the year your
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balance you would have twelve thousand
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dollars left so you're down seven and
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grand chances are you're watching this
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you've already experienced this and if
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you're one of my Gen X maybe baby-baby
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viewers watching this then you've
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experienced this and and then some so
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now let's just go and change this up so
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let's go ahead and do the cash flow so
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we're gonna contribute a fixed amount
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we're going to do a hundred dollars a
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month just like before but obviously
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we're starting with a bigger amount and
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let's analyze that and that didn't do
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anything because I didn't change the
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year so let's go ahead change the year
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to two end year 2019 and analyze that
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this should be hopefully a much bigger
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number otherwise it's just this video is
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complete Bom ah there we go
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alright so now 19,000 so
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19,000 it grew to 89 thousand almost
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$90,000 just by adding a hundred dollars
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a month and that's what it looks like
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but it's just you can't even see like
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this dip right here I'm gonna like
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enlarge this but like this right here
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like you know when you put this out
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twelve years like that looks like it's
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nothing it looks like a speed bump you
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know or maybe maybe a larger POW but
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nonetheless but when you start seeing
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the increase here like it's just it's an
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afterthought but I'm telling you right
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now like when you are in the middle of
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the noise which that's where we are
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right now like this is where we are
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right now that is where we are right now
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like that's what it feels like and it's
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a scary place it's a lonely place and
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this is where many people just can't
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take it they just they can't stand to
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see another negative they just want to
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cash out and be done with it it's the
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biggest mistake you will make and this
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is why it will literally cost you I'm
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talking this is over a 12-year period
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you know if you are in your 30s I've
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added an extra ten years here they blow
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your mind if I accident add a note 20
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years here your mind continues to be
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blown but that doesn't happen if if you
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cash out if you quit don't quit stay the
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course
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any more questions on this I'm happy to
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help if you found any value out of this
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if you know somebody that just is on
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that verge of cashing out they just
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can't take it anymore please share this
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video with them please share this so
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that they can learn I want to make sure
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that I continue to help people build and
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grow wealth but you can't grow wealth if
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you're sitting on cash sitting on the
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sidelines this is how you get rich is by
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who just staying in when the time gets
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rough arch off this is jeff rose from
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with hacker labs reminding you that it's
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your money your life and only you can
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make it awesome until tomorrow peace
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