During my free financial review of my investments, I was feeling pretty good about how far it had come. Back when I retired from finance in April 2012, I had about $300,000 in my 401(k). After leaving, I rolled it into an IRA and invested in index ETFs and individual stocks. Since then, it has grown to over $1.5 million.
$1.5 million in a single retirement account at age 48 is better than a poke in the eye. If I were 62 with this balance, I could withdraw $60,000 – $75,000 a year and live comfortably, especially when combined with roughly $36,000 a year in early Social Security benefits. We’ve all got permission to live it up in retirement now that the recommended safe withdrawal rate has been revised up to 5%.
Given that I haven’t contributed a single dollar to this IRA since April 2012, it’s a great case study in the power of long-term investing and compounding. But it’s also a humbling reminder that many of us retail or active investors aren’t as skilled as we like to think. We all know that most passive investors beat active investors long term. Yet, many of us still try to outperform out of delusional hope!
Because truth be told, I thought $1.58 million was an impressive sum after starting from zero in 1999 and contributing nothing for the past 13+ years. Then I crunched the numbers.
Not as Good an Investor as I Thought I Was
After running the numbers on my average return since 2012, I realized I had actually underperformed the market. My IRA’s compound annual growth rate (CAGR, since I didn't make any additional investments or withdrawals) was 14.2%, which I initially felt pretty good about. After all, the S&P 500’s historical average total return since 1926 is around 10%.
But when I asked ChatGPT to calculate the S&P 500’s actual average return during the same period (2012 – 2025, assuming a 18% return in 2025), it came out to 15.5%. In other words, if we trust ChatGPT (check section at the end of the post for a surprise), my IRA underperformed the index by roughly 1.3% per year for 13 years.
That’s a meaningful gap. A 1.3% return on a $1.5 million portfolio equals about 19,000 McDonald's double cheeseburgers!
The Potential Sources Of Underperformance
The underperformance made me wonder where I went wrong, especially since I thought I was fairly aggressive with about 50% of my portfolio in tech and communication stocks on average. Maybe that aggressiveness backfired. 2022 was brutal for growth stocks (-26% for my portfolio), and 2018 wasn’t great either.
It’s also possible I made some ill-timed trades more than two years ago, which I can’t review because Citibank’s trading platform only provides two years of transaction history for some reason. Maybe I derisked in 2022 in my IRA instead of buying the dip, like I did in my taxable account. I bought aggressively in March and April 2025 because I had just sold my house and was flush with cash.
Or perhaps I wasn’t always 99% in equities since 2012. I might have held some bonds between 2012 and 2020 or was overweight cash. After leaving my day job, it was rational to dial back risk since I no longer had steady active income. But I don’t think I did because I had a hedge with structured notes in my main taxable portfolio.
Comparing a mixed portfolio of stocks and bonds to a pure S&P 500 index isn't quite fair. Yet it’s hard not to feel a twinge of disappointment when all you see is long-term underperformance, even if the lower volatility helped me sleep better during downturns.
This inability to remember exact details is one reason it’s so valuable to have annual financial checkups and write down your findings. Alternatively, speak to a financial professional who can stay on top of everything for you. Over time, we humans have a habit of practicing revisionist history, convincing ourselves that things were better than they actually were.
Poor 401(k) Returns From 1999 – 2012
Then I wondered something else: given that I started working in July 1999 and retired from finance in April 2012, how much in total 401(k) contributions had I actually made? I’ve always believed in maxing out your 401(k) for as long as you’re employed. After I got my first full year's paycheck, that’s exactly what I did from 2000 through 2011.
I don’t remember how much I contributed in 1999, my first partial year of work, but let’s assume $3,000. Then, let’s say I contributed $5,000 in 2012 before my three months of WARN Act pay ended in July as part of my severance.
For those negotiating a severance package, it’s important to understand that many employees confuse severance pay with WARN Act pay. WARN Act pay is legally required compensation for employees at companies with over 100 workers, while severance is discretionary and paid on top of WARN Act pay.
Total Employee 401(k) Contributions from 1999 – 2012
Here's my estimated total 401(k) contributions during my 13-year finance career.
| Year | 401(k) Limit | Your Contribution |
|---|---|---|
| 1999 | $10,000 | $3,000 |
| 2000 | $10,500 | $10,500 |
| 2001 | $10,500 | $10,500 |
| 2002 | $11,000 | $11,000 |
| 2003 | $12,000 | $12,000 |
| 2004 | $13,000 | $13,000 |
| 2005 | $14,000 | $14,000 |
| 2006 | $15,000 | $15,000 |
| 2007 | $15,500 | $15,500 |
| 2008 | $15,500 | $15,500 |
| 2009 | $16,500 | $16,500 |
| 2010 | $16,500 | $16,500 |
| 2011 | $16,500 | $16,500 |
| 2012 | $17,000 | $5,000 |
In total, I contributed $184,000 to my 401(k) during my 13-year work history, which means about $116,000 came from returns. I thought this wasn't bad given the dotcom bubble burst in March 2000 and then we had the global financial crisis from 2008-2009, leading to a lost decade for stocks.
My internal rate of return (IRR, since I contributed each year) was about 6% given the contributions were spread out over 13 years.
The Returns Are Actually Worse
But then I remembered another element of my 401(k)'s growth, which was Goldman Sachs and Credit Suisee's 401(k) matching policy.
Let's say my firms matched/contributed $5,000 a year to my 401(k) from 2000 through 2011 on average. That would equal $60,000 in contributions for a combined total 401(k) contribution of $244,000 ($184,000 by me and $60,000 by my firm). If so, I only had about $56,000 in equity gains from my 401(k) during my time working for an IRR of only 3.3%!
Could my returns really be that bad? Maybe I'm overestimating my average 401(k) match, and it was closer to $3,000 a year. If so, my 401(k)'s IRR is more like 4%. Still, the returns are quite abysmal even with the 2000 dotcom bust and 2008 global financial crisis.
The final explanation may be that I left my finance career in 2012 with more than $300,000 in my 401(k). Maybe it was closer to $350,000, which would boost my 401(k)'s CAGR from 1999 – 2012, but lower my IRA's IRR from 2012 to today. However, without regular financial checkups and record keeping, it's hard to know for sure.
Investment Contributions Matter Most Early On
In the first 10 to 15 years of investing, your contributions matter far more than your returns. This is the grind phase, where every dollar you save builds the foundation for future wealth. Don’t mess this period up!
As I wrote in my USA TODAY bestseller, Millionaire Milestones, your goal early on is to save and invest like crazy until you reach the $250,000 investment threshold. Make those sacrifices while you're young! Once you do, your annual investment returns often start surpassing your maximum employee contribution. That’s when the compounding flywheel really kicks in, and becoming a millionaire becomes almost inevitable.
When you reach your Minimum Investment Threshold, you earn the right to relax a little at work. Spend some time calculating yours, it’s one of the most empowering numbers in personal finance.
For example, if a $1.3 million 401(k) closes up 10% one year, that’s $130,000, or $106,500 more than an employee can contribute in 2025.
Learning From The Investing Mistakes I Made As A Young Man
On one hand, you could argue I’m not a good active investor when it comes to my 401(k) and IRA. In the early years, I made the classic mistake of investing in high-fee, actively managed mutual funds that consistently underperformed their benchmarks. But to be fair, those were the limited options available in my employer’s 401(k) plan.
I also know I traded in and out of stocks far too often in my 20s and early 30s. It got so bad that the Managing Director of the International department in New York flew out to San Francisco to sit me down for an intervention. He told me to focus or risk my career.
On the other hand, maybe I am a good active investor, just in a different way. I actively contributed the maximum to my 401(k) as soon as I earned a full year’s paycheck. Then I periodically rebalanced my IRA to keep my risk exposure aligned with my stage in life. Instead of buying luxury cars and fancy watches, I invested 30-80% of my after-tax income for 26 years.
I wouldn’t have been 99% in equities since 2020, at least, if I didn’t have other investments and build enough passive income to live comfortably. In that sense, I was investing based on my unique situation, not blindly chasing returns.
Try Maxing Out Your 401(k) Every Year
What matters most is that I consistently controlled what I could control – maxing out my 401(k), capturing every employer match, rolling my funds into a low-cost investments in an IRA, and later contributing to a Solo 401(k) and SEP-IRA once I left traditional work. Please try to max out your 401(k) every year as well. You'll be amazed at how much it will grow to after 10 years.
As a personal finance writer, I’m also pleased that I now have 26 years of 401(k) contribution experience to back up my recommended 401(k) by age guide below. I'm confident most people who contribute at least $10,000 a year to their 401(k) for 30 years will have over $1 million.
The Urge to Keep Analyzing Other Retirement Portfolios
After my free Empower financial consultation for my IRA, I immediately felt the urge to get another review for my Solo 401(k) and SEP-IRA. So I dove into my Solo 401(k), because I stubbornly refuse to believe I underperformed the S&P 500 across the board all those years.
Here’s the Solo 401(k) I opened in 2014, once I started consulting part-time for Empower and a couple other startups, and driving for Uber. I figured why not save more for traditional retirement and shield some consulting and side hustle income from taxes. Over the past 10 years, I’ve contributed $166,570 and earned $322,639 in gains.
That works out to an IRR of 22.5% – closer to the performance I had imagined. But whoah, look at that 32% hammering in 2022 thanks to my highly concentrated position in growth stocks. Sadly, if I had this type of performance for my IRA since 1999, it would be over $4 million today.
The main difference in performance comes down to my even more aggressive positions in the Solo 401(k), largely because of its smaller size. Since I treated all the income from consulting as “bonus retirement money,” I decided to go even heavier than 70% in tech.
So for any retirees or workers who think doing a side hustle is beneath them, stop thinking that way! Ignore the people who make fun of you for trying to reach FIRE or doing what's necessary to take care of your family. Every bit of extra income adds up, especially if you consistently invest the proceeds.
ChatGPT / AI Was Wrong About Return Assumptions!
After reviewing my Solo 401(k) and SEP-IRA performance – both of which have similar holdings – I went back and recalculated the S&P 500’s compound annual growth rate (CAGR) from the beginning of 2012 through 2024, assuming an 18% return for 2025. I just didn’t believe ChatGPT’s original answer that the S&P 500 CAGR was 15.5%. That felt too high.
From the beginning of 2012 to the end of 2024, the S&P 500 total return (with dividends reinvested) is +367.2%, or a 4.67x multiplier. That corresponds to a 12.6% CAGR over 13 years (2012–2024).
If 2025 ends up +18%, the cumulative multiplier becomes 4.672 × 1.18 = 5.515. Therefore, the 14-year average annual total return from 2012 through 2025 would be about 12.5% per year, not 15.5%!
Then I asked Anthropic’s Claude the same question—what’s the S&P 500 CAGR from January 1, 2012 through 2025, assuming an 18% up year for 2025? It came back with 14%.
When I pressed it to double-check its work and explain the discrepancy versus ChatGPT’s 12.5% figure, Claude responded:
“My error was using only the price index returns instead of total returns (which include reinvested dividends), and I may have also made calculation errors.”
The first part of the answer doesn't make sense, because using total returns would make the CAGR higher, not lower. So when I pressed Claude again, it agreed with the 12.5% CAGR figure and simply said it was wrong in the previous answer!
Annual S&P 500 Total Returns (With Dividends Reinvested)
| Year | Return | Year | Return | |
|---|---|---|---|---|
| 2012 | +16.00% | 2019 | +31.49% | |
| 2013 | +32.39% | 2020 | +18.40% | |
| 2014 | +13.69% | 2021 | +28.71% | |
| 2015 | +1.38% | 2022 | -18.11% | |
| 2016 | +11.96% | 2023 | +26.29% | |
| 2017 | +21.83% | 2024 | +25.02% | |
| 2018 | -4.38% | 2025 | +18.00% (assumed) |
Calculating the CAGR Properly
Therefore, my ~14.2% CAGR in my rollover IRA from 2012 through 2025 actually outperformed the S&P 500 by 1.7% a year for 14 years.
That may not sound like much, but over 14 years, a 1.7% annual outperformance results in about 25% more total wealth, a strong compounding edge for an individual investor managing his own portfolio.
Please Stay on Top of Your Finances
This exercise reminded me that while large language models like ChatGPT and Claude can save time, they shouldn’t be blindly trusted for quantitative analysis. Always verify calculations manually or with a spreadsheet, especially when assessing long-term performance.
After all, the difference between a 12.5% and 15.5% annual return over 14 years is enormous – roughly a 60% difference in ending wealth.
And funny enough, I started calculating the returns on my real estate investments as well. It turns out I actually made more from one house than 26 years 401(k) investing! Buy a primary residence and invest in stocks.
My IRA will go a long way toward supporting a comfortable retirement lifestyle after age 60. None of it would have been possible without the simple, unglamorous habit of saving and investing consistently year after year.
You can’t always control your returns or your investment options, but you can control your effort and discipline. Over time, that’s exactly what leads to financial freedom.
Readers, how have your investment portfolios performed over the past 10 years? When was the last time you did a deep-dive review of your portfolio’s performance? And how did your actual results compare to what you thought they would be? Do you think you are a good investor?
Stay On Top Of Your Finances Like A Hawk
Sign up for Empower’s free financial tools to help track and manage your net worth. I’ve been using their dashboard since leaving my day job in 2012, and it’s still part of my regular financial routine. My favorite feature is the portfolio fee analyzer, which revealed I was paying about $1,200 a year in hidden investment fees I didn’t even realize existed.
If you haven’t done a deep-dive review of your investment portfolio(s) in the last 6-12 months, now is the time. You can tackle the analysis yourself or get a free financial analysis with Empower. You’ll uncover insights about your portfolio and your investing habits that you didn’t realize. Getting some help now could compound into much greater financial gains down the road.
The statement is provided to you by Financial Samurai (“Promoter”) who has entered into a written referral agreement with Empower Advisory Group, LLC (“EAG”). Click here to learn more.
Diversify Your Wealth Beyond Stocks and Bonds
Once you know where your finances stand, the next step is building a resilient portfolio. Stocks and bonds are foundational, but they’re not the whole story – especially if you’re aiming to grow your net worth efficiently.
That’s why I also invest heavily in real estate, an asset class that blends the income stability of bonds with the growth potential of equities.
Consider Fundrise, a platform that lets you passively invest in both residential and industrial real estate. With over $3 billion in private assets under management, Fundrise focuses on properties in the Sunbelt region, where valuations are lower and rental yields tend to be higher.
For those interested in long-term innovation, Fundrise Venture also provides access to private AI companies like OpenAI, Anthropic, Anduril, and Databricks. AI is reshaping productivity and employment at a massive scale, and I want to ensure my family’s portfolio has sufficient exposure to this transformation.
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I would consider myself a basic investor. I got late in the game, after I paid off home mortgage in my mid-50’s and after an accident which landed me in bed and on medical disability from work for several months. At the time, it was partially sheer luck that I did already have a modest amount of different company stocks but back then I was pretty passive while obsessively paying down mortgage. I also missed the 2008 crash since at the time, I didn’t participate much in the market since I became unemployed shortly after a contract job ended.
We’ll see about 2026…
I have every penny I’ve invested tracked in Quicken, going back to when I started working in 1997. I’m just now sure what type of analysis to run.
I have one 40-year IRA account (+9.4%/year) which has beaten the S&P 500 (+8.8%/year), but long-story, short beating the market is mainly a result of skewed returns the last three years rather than the first 37 years.
Here’s the story: From 1983-1985, I invested $6K total ($2K/year) into an IRA and then stopped as I was no longer allowed to contribute due to 1986 tax-law changes for those also having 401K access. This IRA provides a clean analysis as it was invested 100% in stock mutual funds for all 40 years, had dividends reinvested, was never traded and never included any bonds. The account was initiated with Principal Financial Group because their minimum investment was $2K unlike the $3K min at other firms, and switched to Fidelity sometime in the 1990’s.
Keep in mind half of this 40-year period was before ETFs, before Index fund investing became a thing, and when mutual fund fees were typically 1 percent or higher. Through 34 years, the account was neck-and-neck with the S&P 500 despite the past mutual fund fees. Six years ago, I switched the investment to Fidelity’s Large Cap Growth Fund (FSPGX) to get more growth and cheap fees. FSPGX basically matched the S&P for the first three years but crushed the S&P by nearly 50% for the last three years.
The $6K investment has luckily turned into $255K. Keep in mind that this $255K IRA retains a 24% or $61K tax obligation to Uncle Sam. Still, just the last three years of FSPGX are the real cause of lifetime, incremental market-beating returns, but otherwise, it is tough (and potentially risky) to soundly beat the market over decades of investing.
Sam – occasional commenter, long-time reader. Very relevant post.
A month ago, I was surprised by how well one of my wife’s 401k Target Date Funds was performing vs. my own 401k Target Date Funds. My advice for everyone, especially those early in your careers: read the allocation breakdowns, not all Target Date funds are the same…even if they have the same year!
I’ve got a 401k at about $770k (and pension at $260k present value) – but when I look at amounts contributed, the performance is blah for 20 years of work. In hindsight, if I would have put it all in an S&P 500 Index over the years, I might have 25% more. My wife’s 401ks were in farther out target dates with more U.S. stock exposure – she’s done much better on a relative basis!
Luckily, my wife and I also built up our own personal post-tax accounts with heavy tech / S&P 500 exposure over the years – those accounts are close to $1.5M and have allowed us to sell stock to move into our forever home and improve out lifestyle.
(I’m 43, working full-time for 20 years, shake my head on why I was so conservative in my 401k allocations!!).
Yes, good warning. If you’re first starting out in your 20s and 30s, invest more aggressively.
I made this mistake with my son’s 529 plan after super funding it and investing in a target date fund for when he would attend at age 18. It was way too conservative, and not the way I would invest my own money if I had an 18-22-year time horizon!
See: The Problem With Target Date Funds
Hitting one ten bagger can make a huge difference. I was blessed enough to buy 100 shares in NVDA in 2022 after using Stable Diffusion (pre-ChatGPT). Keeping an eye out for generational stocks can make things interesting. I figure that it’s grown from 1~2% of the portfolio to around 20%.
Nice! I hope you have much more than 100 shares now? I forget if the stock split or not since 2022. I think yes.
Imagine having someone set up your 401(k) 25 years ago and dumping everything into VOO. Not only for the performance, but the complete lack of effort needed. I have come close to that performance, but on the 10 year, VOO always beats me by a couple of percent. I have always felt better keeping 10-15% in treasuries. It allowed me to sleep better, so I am not too concerned. There have been many down times when if felt like my contributions were doing into the dumpster, but you keep going, delayed gratification it is.
It would be a dream. And it can very well happen with financially informed parents who are helping their children build wealth.
Can you share how much you were able to amass?
Thanks for the post. It’s a good one. You set the bar quite high so many of your readers may feel badly about their relative underperformance. I know I do.
I’ve attempted this calculation for myself several times over the years. I’ve had a 401k since 2007. My employer has always contributed a very large amount pegged to my salary. I didn’t contribute much of my own during the lean years when my salary was very low. I boosted up to half contributions for a few years, but when we had kids the lean years continued. It wasn’t till the pandemic that I was able to max retirement contributions for both spouse and me. Also between 2007 and 2015 I made many bad investment decisions based on the fear that had been passed along to me generationally, and the fear I had experienced first hand during the dot com crash and the Great Recession (having had investment accounts during both). Basically I was under invested and would trade too much locking in small short term gains and trying to buy back lower—which doesn’t work in raging bull markets very well.
As far as my own calculations go, it’s very hard for me to get accurate numbers of my own contributions (my accounts don’t have record keeping that goes back far enough which I find shocking) so I estimate those, but I can calculate the employer contributions with more accuracy due to the fixed percentage rate.
Long story short, I believe I have tripled my and my employer’s total contributions over 18 years. Like others, I find this pretty depressing at first blush. I wasn’t using an optimal investing strategy for the first 8 years. I have since made other investing mistakes like too much small cap exposure that underperformed massively the past 5 or so years. These errors combined with the contribution amounts being under max for a long time leave me thinking about what could have been.
That said, I am still ahead of your chart maximums for a person who has worked for 18 or even 23 years. So the total dollar amount is meaningful, but I estimate I could be easily 50-75% higher if I had been dialed in since day 1 back in 2007. The good news is we have built home equity and are debt free outside primary mortgage (of course), 529s are on track, and while I started too late, I did the best I could with a taxable brokerage account. FIRE is within reach. FatFire if we push for 5-10 more years.
Thanks for sharing and great job. You are above my suggested 401K targets for your age.
I don’t think anybody should be jealous about my 3.3% to 4% compound annual return between 1999 and 2012 in my 401(k). That’s pretty pathetic,despite the.com bomb and the global financial crisis. But the point is that I still ended up with a little over $300,000 after 13 years mainly due to regular maximum contributions. So I highly encourage as many employees as possible to max out their 401(k) for as long as possible.
After a bad decade in stocks, things turned around, as they usually do. And then things will also turn back down usually for one or two years again.
If you use AI to help you run the calculations, what kind of CAGR did you come up with?
Hopefully, many of my free newsletter readers over the past 10 years, have followed some of my advice. I regularly comment on real time markets. But of course, I can’t get it right all the time.
I ran it twice but I had to feed it some pretty rough cut estimates of my contributions since I don’t actually know them (dreadful software on the 401k provider side). Since I started with nothing in 2007 and invested poorly for many years the CAGR it spit out of about 15% seems too high. My own estimate is closer to 10-12%. Thank the old gods and the new for 2015-2025 cumulative returns!
Wow, this post hit me hard, Sam. I finally sat down after reading it and crunched my own numbers. Surprise! It turns out I’m not the investing genius I thought I was either!
I’ve been investing since 2012 and thought my returns were solid because my account grew from around $100K to $310K today. But when I ran the math, my CAGR was only about 8%. Meanwhile, the S&P 500 total return was roughly 12.5% over the same period. I left more than $120K on the table just by tinkering too much and holding too much cash “waiting for a correction.”
Your point about ego really resonated. I used to feel smart when I picked individual stocks that doubled, but I conveniently ignored the duds that went nowhere. Looking at the portfolio as a whole was a real reality check.
For folks here who’ve run their own numbers, what did your actual annualized return turn out to be compared to the S&P 500 or your benchmark? Did anyone manage to outperform consistently?
Thanks for the wake-up call, Sam. This post might be one of your most useful ones yet, not because it makes us feel good, but because it forces us to face the truth about our real performance.
I have an account, that like yours, I have not contributed to since 2002! In 2012 it was worth $99k. Today it is worth $320k. You, my friend, have done WAY better.
A 3.2X return, or 9.44% annualized return is pretty good! What did you invest in? Was it also an old 401(k) after you left an employer and rolled it into an IRA?
Actually it was an Australian Superannuation account from the days when I worked there. After leaving Australia I left it there growing without further contributions. Invested 40% balanced fund, 30% International Equities, and 30% Australian Equities. Yes, it is still a good annualized return – which comes to the point – we can create lots of unnecessary stress by comparing – a 9.44% annualized return puts you in a position that is an order-of-magnitude better than someone who never invested, which, unfortunately applies to far too many people.
Gotcha. Thanks for explaining.
Hopefully, your other portfolios have done OK too. International equities has been a tough slog since then, so all the more impressive to get a 9.44% annualized return actually.
I’m a soso investor. What I’m good at is leaving it alone to focus on the long game, investing new cash a few times a year, and not just owning stocks. What I’m not good at is being more deeply diversified, and regularly analyzing my risk and rebalancing. But overall I’m satisfied with how I’m doing. I don’t like paying for a money manager as I’m very DIY by nature. I may hire someone once I get into my 70s but I may be so used to doing things myself I may still find it unnecessary and too hard to mentally pay extra fees. Anyway, we’re all continually learning new things as investors and as people.
I have contributed about 300k since 2002 through today. The balance is 890k. Very depressing. Basically had it in one of those blended retirement things so in the last 5 years or so it shifted heavily to 60/40 stocks/bonds. Im 61. What a waste. And fees are higher than ETFs. I advise my kids not to do 401k unless they do not have the discipline to invest each month in taxable or roth on their own. Neither have a major company match.
My CAGR is about 5% a year, barely kept up with inflation and at least 60%+ in stocks the whole time.
Thanks for sharing! A potentially humbling exercise, isn’t it? We look at our final number and we might feel good about it. But when it comes to investing, everything is relative, and we also must take into consideration our risk adjusted returns, depending on where we are in life.
I would still say absolutely invest in your 401(k) to Shild your income from taxes while working and also taking advantage of full company, matching and profit-sharing.
The key is to then make it automatic and focus like mad on building your taxable portfolio account to as large as possible so that you have the option to retire early if you want.
401(k) penalty, free and you have $890,000 more than if you didn’t invest at all. That’s a win!
True – better than a kick in the nuts :). Looking more closely the 2020-2022 bond collapse and failure to rebound really hurt me. By then I was about 35% of my retirement date fund in bonds and that part has not recovered. Maybe it will over next 5 years and I will see some boost in overall returns.
Hah, yes. I feel your pain on the bond market collapse in 2020 – 2022 b/c I foolishly invested most of my kids’ two 529 plans in a target date fund with about 20% in bond funds, not individual bonds. So they got smoked.
I was LAZY, and didn’t invest in their 529s like I would invest, 100% in equities given a 18+-year time horizon. Damn.
I’ve never cared for those target date funds. I don’t think they perform as well as non target date funds. The concept sounds good, but I don’t think the reality pans out. Of course, I have no facts on which to base my opinion on – since I’m too lazy to do any research on it. LOL
I’ve always told my two sons to contribute to their 401k at least up to the company match. That’s free money! ;)
I had the benefit of watching target date finds of all stripes get hammered during the Great Recession and vowed to stay away. I got caught with my pants down though, like Sam did, with my kids’ 529s and the bond fund exposure in 2022 that has yet to catch up (and probably never will). I made some adjustments but locking in those losses was painful. Bonds that aren’t treasuries scare me. I’ve watched them for a long time and don’t understand them well enough. I should read the books probably.