Need advice on my new company's 401K plan

[mathjak107]

while contra is a good fund its not an investment plan. the problem with most folks is they think throwing money into some stock fund is an investment plan. ITS NOT!

you need to think good and hard about your stomach for risk,you need good real diversification, you need need a plan with percentages that when reached will have you rebalancing. you need a plan that guides you along so you know what to do and what to buy as the big picture changes.

i cant tell you how many plans i looked at where folks juast copied their buddy or bought a piece of everything and then watched it all fall in lockstep in 2008 and bailed and lost their money.

[mysticaltyger]

Originally Posted by mathjak107

the thing i dont like about freedom funds is they really are not geared for dollar cost averaging which is the exact opposite of how they are used.

because over time stock prices rise you get less and less shares for your contribution while at the same time the fund is cutting back on its stock allocations leaving you with a portfolio that may be far more conservative then you wanted.

they work much better with lump sum investing.

I'd' never thought of that. I guess that's why you're the "mathjak"

I think plain old balanced funds with low expenses are fine and can be held for a lifetime or nearly so.

I think the whole "target date" retirement concept is off base. No one really knews when they'll be able to afford to retire, especially at the start of their careers.

[mysticaltyger]

Originally Posted by darrell2525

Im not familiar with these plans. But Im also young and mine is set to 60% Small Cap Growth and 40% Small Value Growth. Mine is set for very aggressive, which is all stocks.

Yikes! Small cap stocks have had quite a run up lately. At the very least, you should have some money in large cap stocks to balance it out.

[mysticaltyger]

Originally Posted by PatsCats

I feel really, really old. I remember a day when your company (well, your granddad's company) set aside something called a "pension." Some were pretty extravagant, but most were reasonable. The company invested in the workers, and the workers got a monthly check, a fixed income out of it when they retired. At age 40 you knew what you'd get at age 70 and could plan accordingly. They gave you money as a thank you for putting your life into their product, service, etc.

Today your boss says, "put your money in the Stock Market! We'll match you up to 4%." Then, by the time you retire, yeah, sure, you've got a bunch of money in your 401k, but since it was in the Stock Market, sometimes it went up, sometimes it came down. You may never get the fullness of what it is worth. Today, at age 40 your portfolio might be worth $100,000 and at age 50, $150,000. But at age 70 it might be worth $25,000. You can't plan your retirement on an unknown figure.

Your granddad's pension was his company's investment in him. Your 401k is an investment in the pocket of some Stock Broker who isn't interested in your retirement, only his own. It's a crap shoot. It seemed like a great idea at the time (when the Market was up), now it's cost prohibitive to get out of it. If I had it to do all over again I'd stay out of it in the first place. Put your money under the mattress.

I just can't get accustomed to a system where you can loose money.

But the thing is, the company pension was also invested in the stock market. Employees with pensions had this illusion they weren't invested in the stock market, but that wasn't true at all.

By the way, the problem is that people don't know how to invest. That is the good thing about automating 401K plans into these "target retirement" funds. If people are automatically thrown into a fund that invests a fixed % into stocks & a fixed % into bonds and gradually makes that mix more conservative over time, it takes care of most of the objections you've raised.

The big mistake that was made with 401K plans was expecting that people wuld make good investment choices. Most people are not emotionally equipped to make good investment choices. Most people also undersave.

Having your company automatically enroll you and put you into a target date fund takes care of most of the problems with the old 401ks. Now, we just have to get most or all companies on board with the improved features so that all employees are enrolled and saving something for their retirements.

[mathjak107]

Originally Posted by mysticaltyger

I'd' never thought of that. I guess that's why you're the "mathjak"

I think plain old balanced funds with low expenses are fine and can be held for a lifetime or nearly so.

I think the whole "target date" retirement concept is off base. No one really knews when they'll be able to afford to retire, especially at the start of their careers.

and i suck at math... mathjak is only a combo of my first and last name lol

[mysticaltyger]

Originally Posted by mathjak107

and i suck at math... mathjak is only a combo of my first and last name lol

How funny Thanks for clarifying.