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Old 04-30-2013, 08:56 AM
 
Location: Texas
35,209 posts, read 19,266,750 times
Reputation: 20835

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Seems like the Wall St brokerages always win, though.

Even if this bastion of capitalism uses taxpayer bail-out funds to pay themselves billions in bonuses they earned by crashing the economy.
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Old 04-30-2013, 08:57 AM
 
11,780 posts, read 8,586,532 times
Reputation: 3425
Quote:
Originally Posted by Maabus1999 View Post
Anyone who has a 2% fee structure on their 401K deserves to lose their money....that is hedge fund levels. And honestly those hedge funds aren't the best deal either IMO but the rich flock to them.

Seriously folks, if you have no clue about finance, invest your 401K stock equity portion ONLY in the SP500 tracking fund! It should have a fee structure under 0.2%. Heck some I believe are under 0.1%.
The problem is that many 401K's don't give you index fund options. I have various stock and bond fund options and even a cash account option, but I have no index fund option. I don't think any of the funds are charging 2% though.
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Old 04-30-2013, 08:59 AM
 
8,399 posts, read 5,302,461 times
Reputation: 2314
Quote:
Originally Posted by TrapperJohn View Post
Open an IRA. Or a Simple. Or put some money in your mattress. Or a Roth. Or all of the above.

As for the company stock blurb - total BS.
What does an IRA have to do with the failure of 401k's?

IRA's suck in comparison in terms of the amount one is allowed to save annually in an IRA is dwarfed by what one can save in an 401k. Roth IRA's suffer the same problem, putting money under a mattress is a horrible idea and again has nothing to do with how badly the 401k has performed as a retirement savings tool for the vast overwhelming majority of Americans.

Company stock used to be the only option offered by many companies in 401k plans and that was only recently changed. This is objective reality.
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Old 04-30-2013, 09:04 AM
 
Location: NC
1,673 posts, read 1,529,491 times
Reputation: 523
Quote:
Originally Posted by lycos679 View Post
It's possible in theory to lose 2/3 of your potential gains if you are paying an annual expense ration of 2%. Many mutual funds have received heavy criticism for exactly that reason. Why would anyone pay fees when they can just buy an index and the fund doesn't outperform the index.



How are 401K's a failure? Deferred taxes on principal and gains, company matching, and a range of choices. I just wish SS contributions could be directed to my 401K.
Lycos, and Iamme, you two are arguing over two seperate things. The 401k program itself and the knowledge of people on how to use it.

The 401K program works awesome on paper (could be improved a bit IMO but pretty dang good) and is one of the best retirement vehicles out there.

The problem is the vast, vast, vast majority of Americans have no clue on how to manage it. And when I say vast, I'm talking 90%+. And since most Americans have mismanaged it poorly, it is a very SHODDY retirement tool in reality for most Americans. But it isn't the 401Ks fault; instead, it is more the average American's inability to take on the reponsibility. Even if they do actively manage it, they most likely then do not have the knowledge to succeed to the level they envisioned.

So what the 401K program has shown in the end that Americans can't handle their retirement correctly, and sadly is why the social security program (in some form) can never go away unless we want to have "retiring" Americans living off their children (who probably can't support them), living in poverty and therefore not spending money to help the economy circulate, and/or working until they literally die.

Now this isn't a call to get rid of the 401K program. But more so a reality of the situation. If the 401K program had a "required" contribution percentage that an average person could not touch (could still add more on your own with compnay matching as it is now), was managed by a low fee trust, and was tasked for long term retirement planning, then yes we could get rid of SS in favor of a 401K.
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Old 04-30-2013, 09:05 AM
 
Location: Palo Alto
12,172 posts, read 7,036,737 times
Reputation: 4175
Quote:
Originally Posted by Iamme73 View Post
What does an IRA have to do with the failure of 401k's?

IRA's suck in comparison in terms of the amount one is allowed to save annually in an IRA is dwarfed by what one can save in an 401k. Roth IRA's suffer the same problem, putting money under a mattress is a horrible idea and again has nothing to do with how badly the 401k has performed as a retirement savings tool for the vast overwhelming majority of Americans.

Company stock used to be the only option offered by many companies in 401k plans and that was only recently changed. This is objective reality.
Company stock? I think you need to check up on the law.

My options were an alternative to people who you claim don't have other options. Everyone has options.

401(k) plans weren't intended to be the primary retirement vehicle.
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Old 04-30-2013, 09:09 AM
 
Location: NC
1,673 posts, read 1,529,491 times
Reputation: 523
Quote:
Originally Posted by lycos679 View Post
The problem is that many 401K's don't give you index fund options. I have various stock and bond fund options and even a cash account option, but I have no index fund option. I don't think any of the funds are charging 2% though.
Most funds have the index fund in some form, but they may disguise it on first glance with fancy names. Look for the lowest "fee" fund and that most likely is an index of some sort. You can also make your own "index" out of several funds if you look at how they invest the fund. Usually only takes two, maybe three, funds in the correct percentages to make an index fund, which will be the most stable.

EDIT: Another key word for 401K investing if you are unsure of how to do it wisely: PASSIVE!!! Do not invest in active funds if you can help it! They have much higher fees due to "trading costs." Passive funds are almost as good as a straight index fund in fees.
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Old 04-30-2013, 09:12 AM
 
8,399 posts, read 5,302,461 times
Reputation: 2314
Quote:
Originally Posted by Maabus1999 View Post
Lycos, and Iamme, you two are arguing over two seperate things. The 401k program itself and the knowledge of people on how to use it.

The 401K program works awesome on paper (could be improved a bit IMO but pretty dang good) and is one of the best retirement vehicles out there.

The problem is the vast, vast, vast majority of Americans have no clue on how to manage it. And when I say vast, I'm talking 90%+. And since most Americans have mismanaged it poorly, it is a very SHODDY retirement tool in reality for most Americans. But it isn't the 401Ks fault; instead, it is more the average American's inability to take on the reponsibility. Even if they do actively manage it, they most likely then do not have the knowledge to succeed to the level they envisioned.

So what the 401K program has shown in the end that Americans can't handle their retirement correctly, and sadly is why the social security program (in some form) can never go away unless we want to have "retiring" Americans living off their children (who probably can't support them), living in poverty and therefore not spending money to help the economy circulate, and/or working until they literally die.

Now this isn't a call to get rid of the 401K program. But more so a reality of the situation. If the 401K program had a "required" contribution percentage that an average person could not touch (could still add more on your own with compnay matching as it is now), was managed by a low fee trust, and was tasked for long term retirement planning, then yes we could get rid of SS in favor of a 401K.
I am dealing with objective reality of the 401k program. The 401k program is a failure that poorly serves the needs of Americans.

The 401k program has been in existence for over 30 years, it still has high fees, to many 401k plans still have horrible choices, blaming Americans for the misapplication of the 401k program as a retirment vehicle doesn't make sense to me.
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Old 04-30-2013, 09:12 AM
 
9,856 posts, read 13,418,079 times
Reputation: 5453
Quote:
Originally Posted by Midpack View Post
My former employer had funds in their 401k with fees as high as 1.5%, and I don't doubt there are other employer 401k plans that were higher. My former employer had only one index fund, and S&P 500 index with fees of 0.5%, that's highway robbery for an index. The other funds were all actively managed no-name funds.

Though fees were clearly shown on the 1-page summaries available to all employees, I am sure some didn't notice or even realize what they were. Some undoubtedly ignored everything, even what asset (sub)class, except reported returns.

I don't think the show was intended for knowledgeable 401k investors, and sadly there are probably more naive investors out there, blissfully unaware of 'what they don't know they don't know.'
I wouldn't blame wall street for people not reading fee schedules. Wouldn't you factor 401k returns into net compensation packages when considering whether or not you accept that job? If the 401k isn't favorable enough, negotiate a higher salary so that you can invest outside of a 401k for retirement.

Quote:
Originally Posted by fibonacci View Post
And how many people actually get the so called return of 7%? Lower fees, but many people get lower returns. Also, I agree, many 401ks have lower fees than 2%, even much lower fees than 2%, however, many 401ks have even higher fees than 2%. Many people also don't have a choice of which 401k to invest in through an employer.

Historically, nearly everyone in the market has gotten around a 7% return over any given 40 year period. If you only have one or two options in terms of 401k, then maybe you should have considered that before accepting the job. Negotiate a higher pay, don't use the 401k as heavily and hire a better manager to invest with lower fees for you.

Also, is a manager works to get you a 7% return after fees were taken out, why is that a bad thing? If you get a better return than an index, why would you complain that you paid someone to do it?
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Old 04-30-2013, 09:15 AM
 
8,399 posts, read 5,302,461 times
Reputation: 2314
Quote:
Originally Posted by TrapperJohn View Post
Company stock? I think you need to check up on the law.

My options were an alternative to people who you claim don't have other options. Everyone has options.

401(k) plans weren't intended to be the primary retirement vehicle.
Are you dense? Many companies only offered company stock in the 401k plan. This terrible option for employees was only relatively recently changed. Please deal with reality.

I know they weren't intended to be primary retirement vehicles that is what pensions and social security were for, but companies have gotten rid of pensions by selling the government and the public on this idea of the 401k or IRA's both of which are terrible options for most Americans to save for retirement, and both have failed.
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Old 04-30-2013, 09:21 AM
 
Location: Central Texas
13,720 posts, read 25,521,627 times
Reputation: 9216
Quote:
Originally Posted by fibonacci View Post
Just another example of the facade of social mobility in the US. All the laws on the books are written to protect the uber rich and Wall Street banks due to the fact the government is impregnated from top to bottom with friends of Wall Street. How are the regulators supposed to regulate when there's a revolving door of employees between government regulators and Wall Street? Then when Wall Street's gambling blows up, tax payers have to bail them out so our entire way of life doesn't collapse due to financial armegeddon. Yeah, America is "the land of the free" alright. NOT.

PBS Drops Another Bombshell: Wall Street Is Gobbling Up Two-Thirds of Your 401(k)
Please explain the reality of the quote below from that article:

"Smith: Take an account with a $100,000 balance and reduce it by 2 percent a year. At the end of 50 years, that 2 percent annual charge would subtract $63,000 from your account, a loss of 63 percent, leaving you with just a little over $36,000. "

This example is ridiculous. It seems to assume the money in a 401K is sitting in cash, as if it were a savings account.

If the balance of the 401K is invested in commonly available stock funds it will would have earned up to 12% per year for the last 10 years. The Russell 2000 returned 12.5% for the last 10 years. Even the difficult 5 year period gained 9.03% per year. I think everyone should pay attention to the costs of their 401K (and IRAs). But that is easy to control.
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