401K investing for the future with higher interest

Reply Thu 27 Jan, 2005 09:45 am
I am worried about the future U.S. budget deficit in relation to my retirement in about 10 years. Given the current Federal deficit and this administration's future plans for Social Security, prescription drug plan, increased military global involvement and its insistence on no tax increases I can only realistically expect a larger deficit. Since domestic saving is extremely low the main source of capital needed for our country's future will come, increasingly, from foreign investment. These investors will demand a higher return for what looks like a riskier climate.

My question:

How should I configure my 401K? Do bond prices move counter to interest rates? How is my 401k return affected by higher interest rates or bond prices, what increases my yield in the 401k?

I know this is not an easily answered question but capital preservation at this point is extremely important but a little growth is probably called for also. Any advice would be appreciated and any references to books or web sites would be extremely helpful.

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Reply Fri 28 Jan, 2005 05:44 am
What options does your employer give you for investing in your 401K? Are you given the option of investing in mutual or exchange traded funds of foreign blue chip stocks? If the dollar continues to fall in value, you'll have some protection. Some pundits also suggest having a modest percentage of your investments in precious metals/mining stocks if you're concerned about the dollar's future.
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Reply Fri 28 Jan, 2005 08:26 am
Given your scenario, I would not look to bonds for capital preservation. Jim seems on top of it.
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