Retirement Account Rollover in the Setting of a Looming Market Correction

[dhansen]

Hi Everyone,

I am changing jobs here shortly and will have a decent sized 403b to roll over into a new account. That said, I know they say you can't time the market but given that it seems the market is due for a significant correction in the near future what do people think about leaving this in a money market account until we start to see that correction and doing some dollar cost averaging on the way down? Or would you just put it into something in line with your own investing strategy and just ride out whatever corrections to the market take place? Of note, I'm 32 and quite a ways off from retiring so I mostly put my money into index funds with a small portion in bonds. I am shooting for growth at this time so hoping to be more aggressive but just thinking that if I wait a bit I can get more for my money. And I won't necessarily be hurt by waiting since my time horizon is quite long...

Are there other things I should be thinking about? Where are other people putting their money these days?

Thanks!

[Dusn]

I’ve only timed the market once. In February 2020 I saw covid coming, heard the tales of devastation from the doctors in Italy and pulled all my retirement account money out of stocks.

unfortunately you have to time the market right twice to win. I had no idea when to put my money back in. And although I lowered my risk temporarily, I missed the dip and probably would be doing a little better if I had just left my investments alone

market timing doesn’t work. Just put it all in stocks. Diversify into international index funds if you think US stocks are overvalued

[Brains428]

Depends on the dollar and interest rates.

But you have a long horizon. Even if it dips the day after you're invested, it's likely not going to matter in the grand scheme of things since you're a ways from retirement.

Pick an asset allocation you can stick with. Some funds will underperform, some will overperform, but in the end will you have a risk profile to sleep at night and enough at the end to retire when you want.

30 year horizon- probably good to be overweight international and emerging markets given the relative US dominance the past decade.

If it makes you feel better, you can dollar cost average in.

[SpacemanSpiff12]

If you’re rolling over funds directly from one account to another, a market correction during the transfer process would be a *good* thing for you.

You transfer cash between the accounts, not shares. So if your money is withdrawn from the old 403b on Monday, the market takes a dive on Wednesday, and the funds appear in your new 403b on Friday, then you end up with more shares between Monday and Friday.

Of course the market could also skyrocket during your rollover. Ultimately since you’re young I’d say just get the funds into the account you want them in, and be done with it.

[Zaphod]

I’ve only timed the market once. In February 2020 I saw covid coming, heard the tales of devastation from the doctors in Italy and pulled all my retirement account money out of stocks.

unfortunately you have to time the market right twice to win. I had no idea when to put my money back in. And although I lowered my risk temporarily, I missed the dip and probably would be doing a little better if I had just left my investments alone

market timing doesn’t work. Just put it all in stocks. Diversify into international index funds if you think US stocks are overvalued

Did you really miss the whole thing?

You dont really have to be right twice, you just have to be right>wrong. The market was down 35%, you shouldnt need a personal invitation and you have to have rules if you do it, or at least a broad outline. Mine is down 20% start looking to get in, 30% you better have a very good reason not to be getting in, and you should consider doing it leveraged even. At least for covid it was somewhat easier to time with powell/cares act. Doesnt get much cleaner than that.

"The market is due" is one of the dumbest and costliest arguments for market timing ever. Im not sure why or when, yes it may crash starting right now, but besides post hoc, there is no obvious reason. This coming from someone who is an admitted timer and doesnt ever plan to watch my savings go down in a bear market. You only ever get a couple fat pitches, covid being one of them. You're also super young, it doesnt really matter for you, just keep stuffing the the savings vehicles.

[CordMcNally]

I know they say you can't time the market

but given that it seems the market is due for a significant correction in the near future

You answered your own question. Technically, there's always a market correction in the near future. The definition of near future is always up for interpretation. Just roll it over and be done with it. You're 32...you should be hoping for a big correction.

[zlandar]

There is an infamous post in the Bogleheads forum where a poster pulled out of equities in 2015-2016 because the market was "due" for a correction. That poor guy is probably still waiting.

Instead of trying to guess the market top consider what happens if you keep waiting.

[pierre]

Can you Just leave the 403b as it is? Just because you’re leaving doesn’t mean you have to close the account

[Eye3md]

So, we’ve had the internet bubble, the housing market crash, and now the devastation of COVID. These are devastating hits but the market has recovered each time. With each of these, and especially the COVID issue, I saw a big $ drop in my portfolios but I never touched the money. Yeah it’s scary checking your accounts and seeing a $500k loss but I’ve more than made up for it since March 2020. Truthfully, the last 6 months of 2020, and the first 6 months of 2021, have been very good to me (market wise). To the OP, I would not be timing any “looming market correction” but would invest and feel comfortable doing so

[Random1]

If you are worried about a crash and are happy with the current plan. Keep it there. There is no reason you can’t keep money in and “old” 403b. I still have one in from my residency 25 years ago at Fidelity. If you must transfer, sell the funds and buy an equivalent in the new fund the same day. It will be a lateral transfer, it will just ok different

[jfoxcpacfp]

The only thing better than not touching your money in a correction is having spare cash to invest during the correction. Also works well for Roth conversions if you have a no-basis TIRA or orphan 401k/403b to convert. I converted $100k after the drop and couldn’t be happier. We sent out a general email with same thoughts to all clients; those who asked took our advice to convert/invest. Easy to pay for several years of financial planning fees when you act on appropriate advice.

To the OP - a correction of ~14% occurs, on average, once a year. A bear (sustained drop of 20%+) happens q5.5 yrs. Adjust your mentality accordingly and it will go a long way toward calming your nerves - and being able to control your emotions is THE most important part of being a successful investor, once you have a well-diversified equity fund portfolio in place.

The highest purpose of financial planning is to help clients make good decisions, not to design and tinker with portfolios.

PS - welcome to the forum! Don’t be a stranger!

[JBME]

You are 32. Really how much could it actually be. I rolled over a 401k to another because I switched jobs in June of 2020. Talk about volatility. No clue whether I made or lost money given it was out of the market for two weeks but I know the balance today, and I’m content with it. Just roll it over and don’t look back. I assume the new plan is just as good, if not better than the old plan

[TheTodd]

OP im at a similar stage as you (33 years old). From a financial standpoint I would love a big correction right now. I’m not wishing for it because of the human cost involved, but I’ve got a long time to retirement and am entering peak savings years and pumping money into the market so would love a discount.

[VagabondMD]

A very wise and successful forum member, one whom I admire quite a bit, timed the front-end of the COVID crash perfectly. As a late career doc, I remember being somewhat envious, myself trimming too little and too late. I do not know if his timing to redeploy his assets into the stock market were equally prescient, but I suspect not.

To the OP, you are young in your career. Ignore the noise and stay invested over the long haul. Keep a notebook or diary for every time you think it is a good time to "take some off the table". Look back on it it every couple years, and I predict that you will be glad that you stayed invested.

[jfoxcpacfp]

Keep a notebook or diary for every time you think it is a good time to "take some off the table". Look back on it it every couple years, and I predict that you will be glad that you stayed invested.

I think this is a fantastic idea.