The effects of the current economic crisis have touched everyone. Even if you still have a good job and a paid up mortgage, chances are your monthly 401(k) statement will remind you that you’ve lost a good chunk of your savings.
Trillions of dollars have evaporated from those accounts that have become the prime source of retirement funds for a majority of American workers, affecting their psyche and their future. If you are still young enough, there’s time to rebuild and recover, but if you are in your 50s, 60s or beyond the consequences can be dire, and its drawing attention to the shortcomings of a retirement system that has jeopardized the financial security of tens of millions of people.
I caught this on the morning run. Makes the heart sad. Read or watch it all.
It is probably the case that people who will rely on 401-K and other invested reserves for a substantial part of their retirement income , if they’re going to try to manage these accounts themselves, should have a mix of investments to include mainly insured cash (things like CD’s, Treasuries, etc.), then fixed income, high grade bonds, and then, finally, some very modest portion in a diversified equities fund. People who have lost “half” of their 401-K accounts must have been essentially all-in with equity investments. Perhaps not inappropriate for a 28 year old, but crazy for someone even 10 or 15 years out from retirement. The problem may be that most of the “education” about self-directed retirement investments has come from the financial services industry itself. Lots of people seem to have locked their accounts into a mutual fund or two and then gone to sleep until the 4th quarter of 2008. My own feeling is that for folks without a strong defined-benefit plan to stand up alongside social security, a well-insured TSA or something similar would make far more sense . . . . Closing the gate after the cows have wandered, I know, but a cautionary tale for those who will come after.
Bruce Robison
The problem for most was that they were in equities trying to catch up and before they could catch up, the market went down. Now they are just trying to salvage the 40-50% that remains and not lose that. Almost everyone I know, who had intended to retire within the next 5 years (myself included) have now resigned themselves (myself included) to working at least 10 more years, assuming our health holds out. That’s another reason people get so upset when this Administration talks of raising taxes dramatically or setting up means testing for social securty.
The stock market can be pushed up and out on a limb by groups of people that seem to be stupid or crooked. And then they scream for a handout, not forthcoming, when the limb breaks. I heard a wise saying about the stock market – prepare to lose as well as gain – it does work out that way sometimes.
I saw the 60 minutes segment on 401K’s and it was an absolute sham! People, markets go up and they go down. Some or most of you should have been led through a risk analysis that tested your tolerence for risk when settin up your IRA and how many years you expected until retirement. If you followed this planning process, you should have diversified portfolio. And every fund prospectus you read discussed the risks of the funds you selected (you did read those, didn’t you?????).
What was so dishonest about the segment and much of the current financial reporting is that in all likelyhood you haven’t lost much of anything!!!! Yes, your assets have gone down in value, but unless they go into bankruptcy or you liquidate them right now, the assets will come back. In fact, right now represents a terrific buying oppportunity. I just recently transferred 7 figures of investments out of a fixed value treasury fund into equities which are now down about 46% from last year. I can’t wait to see them grow!!! All your income streams that are reinvested for you are buying at the same fire-sale values. Good grief, either you can go through life with the cup half empty or half full. Be positive, take it half full!!!!
It’s okay. Obama’s gonna take care of everyone.