If you’re planning to retire this year or in the near future, it must be a distressing time if you’re counting on your 401(k) to fund your retirement.
The stock market is down more than 4,300 points and nearly 12%. That means that an average 401(k) with a value of $500,000 lost $60,000 in value in just four months. Watching that nest egg, you had worked 35 years to build just deteriorate in front of your eyes must be nerve-wracking.
As bad as 2022 for stocks has been, it could get worse. Hopefully, it will not be as bad as in 2008 during the Financial Crisis when the stock market shed 50% of its value. Many who were counting on their 401(k)’s for their retirement were forced to keep working because they wouldn’t have enough funds to get them through retirement.
How much worse could the current market get?
“It’s only going to get worse from here” 30-year market vet Michael Pento warns that an “extremely hawkish” Fed will wreak havoc on stocks over the next five months – and says the market could fall as much as 50%.” William Edwards, Business Insider (May 7, 2022).
Michael Pento’s not the only warning about more pain in the stock market:
Michael Pento’s not the only warning about more pain in the stock market:
“Michael Burry, Jeremy Grantham, and other top investors predict an epic market crash.” –Business Insider.
“Harry Dent: Market Crash Has Begun; ‘Fireworks’ to Blow by June.”
The Cambridge Dictionary defines helplessness as “the feeling or state of being unable to do anything to help yourself.” When it comes to stocks and your 401(k), there is nothing that anyone can do to force the value of your 401(k) value upward. Everyone is powerless and subject to the forces of economic resets and geopolitical turmoil entirely out of their control.
Faced with having their retirements sliced in half, potential retirees typically take one of two paths:
One, they cash out their 401(k)’s and sideline their cash. This is not an ideal alternative because of the potential tax penalties to consider and the destructive effect of inflation on cash as buying power is relentlessly diminished.
The other path is to ride out the crash, but how long before the market makes a recovery. After the Financial Crisis in 2008, it took the market four years to recover its losses.
Neither of the above prospects is ideal, but there is a third alternative that some investors take, and that’s to take matters into their own hands by rolling over their 401(k)’s into a self-directed IRA so they can eliminate the feeling of helplessness and take over the direction of their investments.
Where do they allocate to once investors take over their investment decisions with a self-directed IRA?
Cash flowing hard assets like productive businesses (private equity) and real estate.
Why? For the cash flow, growth, insulation from Wall Street volatility, and significant tax benefits and in the right industries and real estate segments, investors can also benefit from a hedge against inflation.
Don’t let the volatility of the public markets leave you powerless.
You can take control of the direction of your portfolio instead of leaving it to the whims of the market and external factors.
Kyle Jones is a co-founder and Key Principal of TruePoint Capital, LLC. Kyle is responsible for the company’s strategic planning, investment decisions, asset management, and overseeing all aspects of the company’s financial activities, operations, and investor relations.
Kyle obtained a Bachelor of Science degree from Texas State University – San Marcos, where he also played Division 1 Baseball.
