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77 Comments
- brbeaird, on 05/21/2009, -2/+42I wish people would stop feeling like they're automatically entitled to a constant 10% return on their 401k every year just because they're putting money into it. Yes, the market goes up and down. That's how it works. You're losing money for the same reason you gain money when times are good - RISK! You're taking a risk by investing in mutual funds. Your reward for this risk is usually a nice return. On the other hand, the payment for this risk is that some years your return won't be so great. The key is that this account is intended to be long-term, not quick cash.
Don't take your money out just because it drops. Just wait it out another 5 years, and it will be fine. If you're within 5-10 years of retirement, pull out of mutual funds and stick to treasuries and bonds. And for the love of everything that is holy, do NOT put more than 5-10% of your whole portfolio into just your company's stock. I don't care how loyal you are, that's just plan irresponsible. - scentaroom, on 05/21/2009, -3/+15I still have a $1.00 in mine...not bad
- Waiting2awake, on 05/22/2009, -0/+9 So true everyone know intellectually that you sell when high, and buy when low. Yet what actually happens is that people see the markets up they buy in, and when the market drops they get scared and sell. Thus guarantee the losses.
As long as you aren't retiring in the next 5 years or so you are still more than fine. - jbmcb, on 05/22/2009, -1/+9You don't invest in a 401(k) for a five year return, you are looking forward to 20/30 years. If you look at the historical performance of the stock market, a good return is very likely, even if the current recession lasts another few years.
Heck, 401(k)s are even more efficient during a recession, as investment instruments are cheaper, you are getting more for your money - your long term return will be much greater. - DeucesWild, on 05/22/2009, -1/+7I cashed mine out and left the country.
- shredswithpiks, on 05/22/2009, -0/+5Traditional pension plans are terrible since they rely on one company to exist for the duration of your retirement years. Then all you have left is the horrible joke that is Social Security.
- davdev, on 05/22/2009, -0/+5The money is only gone if you sell. At this time last year, my 401k was roughly 90K, by December it was about 40K. Did I panic and sell? No, in fact last September I jacked up my contribution to as I high as I was allowed. Though I did reign in the percentages on some of my riskier allocations
I am now back up to about 60K, and I figure the market should be back to pre-crash levels in a couple of years (it only took a few months in 1928 to get back to precrash levels). In the meantime, I am buying some bargins. I am only 33, so I have plenty of time before I retire. - JohnnyDIGGme, on 05/22/2009, -0/+5Very! I'm Canadian.
- NoLibertarians, on 05/22/2009, -7/+11Most people live under the delusion that 401k's consist solely of stocks. The 401k's I have been involved in were fluid and you could move money into a variety of financial vehicles. Interestingly enough my wife's employer just went from contributing 50% to now matching 100% Given the fact that much of this money has been contributed by the employer and not just the employee, negates the fact that everyone has lost all "their" money. A well planned 401k is still a great investment
- ByteMeAHole, on 05/22/2009, -1/+5Pelosi, Reid, and Frank have been floating the idea of killing the tax exempt status of 401Ks since they smell big money. Of course they want to replace it with taking that 10% and putting it into government IOU's - like they've been doing with the supposed Social Security trust fund for years.Just a way of raising taxes without saying they are raising taxes...
The simple fact is a 401K has a number of investment options, I haven't lost more than a pittance since I switched from 100% stocks to 100% bonds - it doesn't get me much, but it hasn't crashed and burned. I've been selectively switching back to stocks now that most of the chaff is out of the market.
As with all things, if you invest stupidly, you lose... If you manage your money, you'll win every time... Unlike anything the government gets involved in - if they take your money, kiss it good-bye... - piper999, on 05/22/2009, -0/+4Paying into a 401k lowers your taxable income.
Some employers will match some or all of your contribution (free money!).
If you think this is 'worthless' then you are very much not understanding the concepts of saving and investing. - reddikilowatt, on 05/22/2009, -0/+4I was really surprised by how well my 401(k) has been doing over the past few months. I went mostly conservative and spread the risky/growth (less than 20%) over 4 different funds. Even back in December I was still up slightly, and now I'm seeing a better return having bought more for my money at the bottom.
I'll never understand the people who are retiring and were wiped out when the market fell off. They should have been in bonds or stable value funds (which usually aren't stock funds) at least 5 years ago. And why were they depending entirely on the 401(k)? The tax savings really aren't that great, you're severely limited in what you can invest in, and of course there's the huge penalty for early withdrawals. It should be part of your overall retirement plan, but it shouldn't be the only thing you do to save for retirement. - gizram84, on 05/30/2009, -0/+4"US investments are going nowhere."
that makes no sense.. The DOW alone has gone up 30% since March of this year. I made a ***** load of money investing in ONLY American companies. Your self loathing altitude is disgusting.
So much for your pathetic 10%.. You invested very poorly if that's all you got recently. - StripeyMagee, on 05/22/2009, -2/+6Just think, Bush wanted SS to be 'invested' like 401k's.....................
- hawksfan03, on 05/22/2009, -0/+4i agree. 401ks are basically buying everything on sale right now. keep investing
- roodammy44, on 05/22/2009, -0/+4Bonds still have time to go through the floor, if the US keeps printing money. China stopped buying US bonds about a month or two ago.
- TexasKoz, on 05/22/2009, -1/+4I am pretty upset at mine. My (former) company stock went from $72 per share last year to as low as $3 per share this year. It dropped so low that Fidelity sent out a letter stating that if the value of the 401K package drops below $5000 in value, they will liquidate everything and send me a check.. Fortunately the stock has rebounded enough so I don't need to worry.. In general, my 401K has lost 66% of it's value....the company has eliminated matching contributions and decreased their dividend 97%....The new company that I work for has done the same except they eliminated the dividend altogether and rewarded our hard work with a 10% pay reduction. Everything is looking GREAT!
- GeorgeStone2, on 05/22/2009, -0/+3That. Is. Savage...
- Firstdaughter, on 05/22/2009, -6/+9So many people got ***** and Bush & Cheney didn't even take them to dinner first...
- piper999, on 05/22/2009, -0/+3Considering you can't even add up properly I sincerely doubt you have found a way of making hundreds of thousands of dollars in the next 12 months without robbing a bank or selling drugs.
- SparkyMaGee, on 05/22/2009, -2/+4What is are SS money in now? ;) Its just an IOU in a filing cabnet. I'm not sure how that's much better.
- whiskeythief, on 05/22/2009, -0/+2"The tax savings really aren't that great"
What? I'm guessing your income is south of the 35% marginal tax bracket? - davdev, on 05/22/2009, -0/+2I would say don't put ANY money in company stock. If you do you are becoming too dependent on 1 company for your financial well being.
- faskippy, on 05/22/2009, -1/+3Don't agree with everything you posted, but dugg up for not putting all of your money in your companies stock. Enron anyone? But I wouldn't be jumping at govt. bonds either.
- pathouston22, on 05/22/2009, -1/+3I've done 30% on my Asia fund in the past month. China is where the money is at for the next few decades.
- pathouston22, on 05/22/2009, -0/+2I've continued to invest with the market down, and my mutual funds are ALL now in the green with the recent mild comeback. In fact, my Asia fund is up 30%.
Recessions are the best time to buy. - dshPls, on 05/22/2009, -1/+3I've made more than that in US companies in the last 2 months. It'd be hard not to, take CCE for example, a very conservative pick, that's up 40% for me.
- gizram84, on 05/30/2009, -0/+2if you believe that, you're a dumbass. first of all, if you continued contributing while the stocks were low, by the time everything evens back out, you'll be in better shape than before everything tanked. Unless you sold everything while it was at it's lowest point (the worst possible move you could have made), you'll be absolutely fine in 3-5 years..
- roodammy44, on 05/22/2009, -0/+2Unless you count the hill you're walking up as inflation.......
Without inflation it's pretty much flat. - davdev, on 05/22/2009, -0/+2There are plenty of plans that don't invest in those sorts of industries and many of them do pretty well. The fund prospectus should give you an idea of what they will and will not invest in, so if it is important to you, find the funds that won't invest in Chemical, Oil, Tobacco or Alcohol stocks.
If you are going to own individual stocks you should never own more than 5 or 6. Keeping up with more than that takes up too much time, and unless you plan on commiting several hours every day to doing it, you are setting yourself up for failure - csspublic, on 05/22/2009, -0/+2I agree w/ most the statement -- no reason for people 5 years to retirement to be wiped out unless they were greedy or had poor portfolio management.
But for the 401(k)s ... I'd reassess your comments on tax savings and early withdrawals....
Depending on your bracket your tax savings could be as high as 35% ... or probably at least 25% for most Americans. Thats a 25% return on your investment immediately even if you only put it into general 'bonds'. Even in the 15% bracket -- how many investments do you know of that give you a %15 bonus for putting money in?
The "huge" penalty is 10%, and there are situations where you can withdraw without paying that penalty (hardship, 1st time house, medical bills). While it shouldn't be an 'only' method ... there are some very, very attractive incentives that make 401k's worth maxing out per year. - piper999, on 05/22/2009, -0/+2Its a once in a lifetime chance to buy right now. The economy might still suck and will do for a while but anyone not pouring as much money into stocks as they can manage is losing out bigtime.
- SparkyMaGee, on 05/22/2009, -0/+2What I always find interesting about 401k's is that people are willing to own companies that they despise (like Monsanto, or Haliburton) through deversification. I think if you want to invest its much wiser to pick 10 to 15 stocks in different sectors, and study the balance sheets in each. Know why you own them. 401k's have gotten way to complicated.
- gizram84, on 05/30/2009, -0/+2@donnytomas
So you're basing all "US investments" on 1 failing company? That's pretty stupid. Yes, GM won't get you anywhere, but should I name the hundreds of other US companies that have averaged (as i said) over 30% increases in the last few months alone?
"It's over America, get over it."
It's over? Really? You're are just an immature fool who knows NOTHING about the economy. The DOW is a market indicator showing that this economy is recovering beautifully from this recession. It will take some time, but it is most certainly on it's way. If you choose not to partake, and continue to invest in international funds, be my guest. But don't spout your ignorant lies as if you know what you're talking about. - davdev, on 05/22/2009, -1/+3Putting that much into one sector is beyond dumb.
- adamk0310, on 05/23/2009, -0/+1Worthlessness = 1 - (worth/100)
- reddikilowatt, on 05/23/2009, -0/+1I still get a better deal with the standard deduction, even with my modest capital gains, so I don't see much benefit to the tax savings.
- roodammy44, on 05/23/2009, -0/+1@puter:
The company who holds the 401ks can go bankrupt, then you lose it all.
That's what happened in my example. 401ks and private pension schemes are badly structured. - Hillsfar, on 05/24/2009, -0/+1Along with other benefits, you can start taking money out of a 401(k) at 59 and a half. That's over 7 years before you are 67.
- TexasKoz, on 05/24/2009, -0/+1My company made matching contributions in company stock. I am in a habit of performing a maximum in-service rollover every 24 months. Unfortunately, the bottom dropped out two months ahead of my action.
- yarcod, on 05/22/2009, -1/+2401k's make the investment side of things a lot easier for those who don't have the time or knowledge to study balance sheets. So if by complicated you mean difficult to keep tabs on them morally, I guess. If you have moral reservations... that's a different story.
- Hillsfar, on 05/24/2009, -0/+1In some ways, an IRA has control. In other ways, a 401(k) can make more sense. For example, you can contribute more to a 401(k) than you can a traditional or Roth IRA. More than twice as much (assuming you make enough and can spare it). For another, if a company can match a portion, it makes sense to put some money in.
After you leave, don't forget to roll it into an IRA where you can then control where the funds go. - davdev, on 05/22/2009, -2/+3I disliked just about everything about Bush, but if given the opportunity to pull my money and future payments out of SS right now, and forgo all future claims against it, I would do it in a heartbeat.
I am 33 right now, and I have no faith that SS will be there when I retire, and I would much rather have that money now to invest as I wish - davdev, on 05/22/2009, -0/+1Reason #1 not to have your retirement money in company stock
- LordJezo, on 05/22/2009, -0/+1The market is like someone walking up the hill playing with a yo-yo. As it goes up it also makes wild shifts higher and lower, but eventually you'll be up the slope above where you started.
- publiclurker, on 05/22/2009, -0/+1Strangely enough, there are a few organizations that don't have any other option. I seem to recall Enron made their matching payments in enron stock that could not be sold until age 50.
- yarcod, on 05/22/2009, -0/+1Well sure, the savvy investor would have been moving money around this whole time... probably making big bucks right now. The person who doesn't have the time or the money still has a solid investment in his 401k. In the long run they would come out further ahead than if they hadn't invested anything at all. A slightly savvy person would have moved his 401k into bonds funds as things started looking grim.
Yes, you can make a TON more money following your investments closely. For the common man... 401k's make them manageable, doable, possible. A 8-12% return on investment from a 401k (over the long run) is still better than a 3% return on a money market or something. Especially with tax considerations. - yarcod, on 05/22/2009, -0/+1Maybe you misunderstood what I was saying. As it's in there, it's always "worthless" to you because you can't touch it.
I wasn't saying it's a worthless investment... I'm just saying it's only "worthless" (in the sense this article suggests) if you were pulling your money out right now and you haven't managed it right. If not, don't worry about it. - HawgFrog, on 05/22/2009, -0/+1Traditional pension plans are insured by the FDIC. Even if the company goes under they will pay.
- whiskeythief, on 05/22/2009, -0/+1You are not in any 401K or pension plan. If you were, you would not be so ignorant of their basic facts.
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