401K

[MarathonMike]

So, over the last year, I have lost 13K bucks. I lost 1K since last Monday.
I have stopped putting money into it.
I tried to withdrawl all i could so i could put it in something safe, but of course, the govt tells you to fuck off.
I tried to get a hardship and just save what I could, and they want receipts on home repairs.
Now, im just sitting here watching part of my retirement whither down to nothing.
WTF can i do? Am I missing something? Is there a way I can get all my money out of the market?
Am i just freaking out for no reason?

Doesn't your 401K allow you to transfer funds to fixed income funds from stock based funds? Maybe it doesn't, but mine does.

 

[Flopper]

We are seeing the dangers of having your entire retirement based on a 401k.
People retire thinking they are millionaires but a major stock market drop along with high inflation will eat that up.

The old rule about the best portfolio balance by age is that you should hold the percentage of stocks in your portfolio that is equal to 100 minus your age. So a 30-year-old investor should hold 70% of their portfolio in stocks and 70 year old should hold 30% in stocks. This is only one of a number of allocation formulas. It's probably a bit too conservative for some people. However, investors should reduce their exposure to stocks as grow older.

Is 100 Minus Your Age Outdated?

Find out more about the disputed long-standing rule of thumb that says that your stock allocation should equal 100 minus your age.

www.investopedia.com

 

[rightwinger]

The old rule about the best portfolio balance by age is that you should hold the percentage of stocks in your portfolio that is equal to 100 minus your age. So a 30-year-old investor should hold 70% of their portfolio in stocks and 70 year old should hold 30% in stocks. This is only one of a number of allocation formulas. It's probably a bit too conservative for some people. However, investors should reduce their exposure to stocks as grow older.

Is 100 Minus Your Age Outdated?

Find out more about the disputed long-standing rule of thumb that says that your stock allocation should equal 100 minus your age.

www.investopedia.com

Used to be you could invest in Bonds and CDs and get 6-8 percent
Now, they pay 1%
Stocks are the only game in town if you want any return

 

[Flopper]

Doesn't your 401K allow you to transfer funds to fixed income funds from stock based funds? Maybe it doesn't, but mine does.

I think it's a little late to start pulling money out of stocks. The market is down over 20% and the average bear market bottoms out around 30% to 35% so statistically we are over half way to the bottom.

Pulling money out of the market now thinking you'll get back in when the market is near bottom is a gambling strategy, not an investment plan.

 

[Flopper]

Used to be you could invest in Bonds and CDs and get 6-8 percent
Now, they pay 1%
Stocks are the only game in town if you want any return

I think we will see those rates rising as the fed almost surely is going increase rates at least once or twice. I expect sometime in next 12 mos we will see 5 yr CDs going from 2.5% to 3 or 3.5%. Of course that' still low compared the high rates of the past.

 

[rightwinger]

I think we will see those rates rising as the fed almost surely is going increase rates at least once or twice. I expect sometime in next 12 mos we will see 5 yr CDs going from 2.5% to 3 or 3.5%. Of course that' still low compared the high rates of the past.

I remember getting 4% on a bank Savings Account and 7% on US Savings Bonds

 

[Flopper]

You are overlooking the obvious - the VAST majority of people have no idea how to do any of that, even if you showed them... or they will forget about it... or just not do it.
Most people look at their 401ks as a source of loans. Most people are largely and completely irresponsible with their money to the nth degree.
And this is why replacing pensions with 401ks was doing a disservice to the public.
It was designed by the oligarchy to remove retirement burden from corporations.... more profit. PERIOD.
Now it is then easy for you to say - "well that is their problem"... no... it is OUR problem because the HUGE chunk of people are going to be receiving public assistance because they get on disability etc. because they are too old to work - still have a mortgage, still have car payments but can't work.
That is the already happening scenario.

First, pension plans are not sustainable today, the huge liability is too much for most businesses. They would have be guaranteed by the government. Since the average workers changes jobs ever 4.3 years, half the population would never be vested. Lastly, why would businesses offer them? Over last 40 years pension plans have decreased from 80% to 4% in private sector.

 

[Flopper]

I remember getting 4% on a bank Savings Account and 7% on US Savings Bonds

I remember buying 10% and 12%, 10 yr. tax free municipal bonds in the 80%.

 

[odanny]

Doesn't your 401K allow you to transfer funds to fixed income funds from stock based funds? Maybe it doesn't, but mine does.

Yea, mine too. It's called a "self-brokerage account" and you can move out of their index funds into purchasing individual stocks. Greater risk, and greater reward. You can play it safe with blue chips or you can purchase shares in start ups, the latter has made me quite a bit of money in the past 3-5 years.

 

[iamwhatiseem]

Used to be you could invest in Bonds and CDs and get 6-8 percent
Now, they pay 1%
Stocks are the only game in town if you want any return

By design

 

[odanny]

Now is a very bad time to buy

You shouldn't be blabbering about something you know nothing about.

 

[MarathonMike]

Yea, mine too. It's called a "self-brokerage account" and you can move out of their index funds into purchasing individual stocks. Greater risk, and greater reward. You can play it safe with blue chips or you can purchase shares in start ups, the latter has made me quite a bit of money in the past 3-5 years.

Sure, but TN is worried about being too exposed to the stock market. I was referring to the option of shifting your 401K based stock funds to fixed income funds which is what I did when I retired.

 

[Flopper]

I don’t know of any that aren’t
I had to pay half

I get retirement check monthly from the state of Florida and never paid a cent for it. Most pension plans today that are not frozen are hybrids offering a defined benefit plan and/or a 401k or similar plan. According to a Brookings Economic Study there will be essentially no employer funded pensions plans open to employees by 2050.

Defined benefit plans such as annuities can be included in a 401K giving employees an option for a more conservatives plan. There are many investment options an employer can include in his 401Kplan. One I like is the age based investment fund where investments become more conservative as the employee gets closer to retirement.

 

[Flopper]

My pension will be 39.1% of my current salary, and that's if I wait until 65. The pension decreases for each year prior, so the replacement percentage actually goes down if I retire early.

As public sector employee I do not receive health care upon retirement, I can remain on my employers plan, but I then have to pay the full premium (Employer + Employer portions). Currently for my spouse and I that is about $2200 per month, for which I will receive a $100 stipend that can go toward health care as part of my pension.

Most "pensions" were/are not paid by any worker, defined benefits retirement plans (pensions) were/are paid by the employer at a time when people didn't job hop and thought in terms of careers with a company as part of their total compensation package.

WW

My pension will be 39.1% of my current salary, and that's if I wait until 65. The pension decreases for each year prior, so the replacement percentage actually goes down if I retire early.

As public sector employee I do not receive health care upon retirement, I can remain on my employers plan, but I then have to pay the full premium (Employer + Employer portions). Currently for my spouse and I that is about $2200 per month, for which I will receive a $100 stipend that can go toward health care as part of my pension.

Most "pensions" were/are not paid by any worker, defined benefits retirement plans (pensions) were/are Is 100 Minus Your Age Outdated?.

Yes, that is what I have been trying say, "pensions plans were paid by the employer at a time when people didn't job hop and thought in terms of careers with a company as part of their total compensation package." This was a time when a young man was expected to serve in the military and/or go to college, enter the workforce in search of the right job and company to settle down with. Employers wanted employees that would be permeant thus they offered perks like pension plans, health and life insurance, paid sick time and paid vacations, etc. They sought employees that would be loyal to the company and likewise employees sought employers loyal to them. The benefit package was designed to make it hard to leave the company after a number of years. Quitting your job was almost like desertion. This seems laughable today.

Today most businesses don't expect their employees to last more than a few years nor do the employees. In today's business environment, the primary interest of an employer is what can you do for me today and employees primary interest is how much can I get out you before I move on. In this environment, benefits such as retirement plans have to be transferrable. Pension plans generally are not because they are heavily weight toward years of service and wages.

 

[Flopper]

Which is why it was a disservice to the public to replace pensions with 401ks.
Like I said, 401ks were designed to get companies out of having to pay for pensions.
As well as a MASSIVE windfall to drive up stock values.
It worked flawlessly.
The few won, the majority lose

The purpose was to give employees a way to save for retirement and employers a way to contribute to those savings and both employer and employee would have those contributions shielded from taxes.

Other benefits of the plan over pensions plans included portability. Where pension plans have vesting period typically ten years before the employee got any retirement savings, with the 401k the employee had saving starting the day he contributed to the plan. Also 401k's allow the employee to determine how funds are to be invested and unlike pension plans, the assets belong to employee so there is no danger of losing them due to actions of the employer. When the employee leaves the company he can roll over his 401K into an IRAs or other 401ks. Also, the impending disaster of unfunded pension plans could be avoided. In general, it is difficult for a small business or a single proprietorship to set up a pension plan while 401Ks are relatively easy.

 

[Flopper]

Again - everything you say is true.
But - believe it or not - you are not the only person living in the United States.
Point - replacing pensions with 401ks did 3 things...
1) It took the financial burden of retirement from companies to the employee
2) It created a monumental windfall for the investment banks to make money off of in fees and share price increases
3) It will create the largest population of elderly people deep in debt, no savings and needing YOU to cover their expenses in history that has already began to form.

The financial burden of retirement has never been on the employer nor should it be but rather the employee. Pension plans provide a large tax deduction for employers and the funds going into those plans belong to the employer not the employee. Furthermore, the employer manages those funds and there is no guarantee that those funds will be there when the employee retires. If the company fails those funds may or may not be available to pay retirement benefits. That is not the case with a 401k because the employees own their retirement funds.

 

[Flopper]

Sure, but TN is worried about being too exposed to the stock market. I was referring to the option of shifting your 401K based stock funds to fixed income funds which is what I did when I retired.

There are a number of alternatives to straight bonds and mutual funds that specialize in them. There's convertible bonds, preferred stocks, real estate investment trusts, funds that specialize in defensive stocks, and there's hedge funds, gold funds, etc. The risk level can be high to very low depending on the investment so the novice investors need to investigate before they jump in.

Also, when buying bond funds to avoid risk be sure an select a fund defined as a low risk fund because some bonds carry a high risk.

 

[Remodeling Maidiac]

So, over the last year, I have lost 13K bucks. I lost 1K since last Monday.
I have stopped putting money into it.
I tried to withdrawl all i could so i could put it in something safe, but of course, the govt tells you to fuck off.
I tried to get a hardship and just save what I could, and they want receipts on home repairs.
Now, im just sitting here watching part of my retirement whither down to nothing.
WTF can i do? Am I missing something? Is there a way I can get all my money out of the market?
Am i just freaking out for no reason?

Ride the storm and PRAY for Republicans to take over in fall and 2024.
Unless your living off that income now you should leave it alone

 

[gipper]

Ride the storm and PRAY for Republicans to take over in fall and 2024.
Unless your living off that income now you should leave it alone

Rs won’t do shit. Stop with the duopoly silliness.

 

[Flopper]

An important issue that has not been discussed in this 401K thread is portfolio allocation which is a strategy for spreading your investments across various asset classes. Broadly speaking, that means a mix of stocks, bonds, and cash or other assets. For general investing with no specific goal other than to accumulate wealth, portfolio allocation may not be that important to you. When you have a specific goals such as retirement, paying for college for kids education, you want to make sure that there is adequate funds available to accomplish your goal. With proper allocations of your assets in your plan, you minimize the risk of failure while still getting a good return on your investment portfolio.

Portfolio allocation can be as simple as buying a targeted mutual whose purpose is to give you a good rate of return on your investments over a period of years while reducing the risk each year. For example, if I plan to retire in 2050, I buy a retirement targeted mutual fund dated 2050. So in the early life of the fund, it will be taking risks in order to get an above average rate of return but will become more conservative as the target date approaches. After the target date the fund will continue to become more and more conservative until it is considered without risk, that is it's all cash or cash equivalents.

There are other types of portfolio allocation schemes which target an annualized range of returns for example -5% to + 15%. The idea in this scheme is to make sure your risk of taking more that 5% loss in any one year is very low. Likewise your chance of taking more that a 15% gain in any year is also very low.