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Please someone tell me why I could and should continue to invest 10-15% of my in my company 401K as it's continuing to rack up losses far greater than any company match. At this point I'm hovering close to my account balance I had in late 2006. Two years of investments are gone... and I could seriously use the money I contribute weekly to help pay down some debt. Other than the tax benefits is there really a downside to not contributing for a few months?
Long term reality... how much am I really missing out if I decide to not contribute short term... for the first half of 2009.
Going through the same thing... down almost 50% and have less than what I started with in 2005 and that's counting 4 years of payroll contributions...
My employer, like many others no longer offers any matching funds and choices are very limited. I get the sinking feeling I've been sold a bill of goods and the ships going down with me on board.
I asked to cash out and was informed this is not an option as long as I'm employed with the firm. I did lean there is a secret, as in not listed on the menu, money fund that pays 3%... Problem is nothing is guaranteed whatsoever.
How can the markets fully recover is companies like Sears, Motorola, Starbucks, Advanced Micro Devices and others no longer Employer match?
Sears has been dead for about two years, Lampert gutted them in his goofy KMart takeover, Motorola has been in shambles since their bone-headed leader thought the follow-on to the Razr should be "more razrs", Starbucks has been a trainwreck since they decided their path to profits was to plunk down millions across the street from existing stores to capture a few $4 cups of hot water and foamy milk from impatient idiots, AMD is a company that has no real reason to exist as Intel has so much market share as to make them irrelevant. If those are your standards of comparison you are probably right that there is NO WAY for anything to come back.
Of course if your employer truly "hid" the fact that they DO IN FACT have a money market as a choice in the 401K what sort of super sleuthing was necessary to determine this? In my experience just about every plan has some sort of stable value option. Not going to get back what you've lost in that for too long, but looking at long horizon trends it would be inconcievable that there will NEVER be another successful way to invest. My goodness if you were in Asia or Ireland/UK or Eastern Europe when their economies were in literal RUINS after wars and such what would you have done???
Madness!!!
Yes, it makes a lot of sense to DIAL DOWN your contributions a bit to your RETIREMENT SAVINGS temporarily if you've been living beyond your means and truly have to DISCIPLINE to get your finances to the point your debt is small /noneexistent and your RESERVE funds are sufficient to sustain you through unexpected loss of income, but NEVER stop putting aside SOMETHING for retirement entirely! This is EXACTLY the sort of LUNACY that has resulted in governments and other firms having INSUFFICIENT PENSION funds set aside! You MUST always put something toward your retirement savings!!! ALWAYS! ALWAYS!!!
Any firm where an employee honestly asked to "cash out" of the 401K has CLEARLY done a HORRIBLE effort of educating their workforce of the WHOLE REASON for the existence of 401K plans! The legal requirements for the plans are fairly straightforward yet it is clear that if such questions arise the information was NOT delivered in a way that would impress upon all workers the necessity of thinking of a day when one will no longer be earning!!!
Please FIND a public library that has either of these books ASAP:
chet everett... Great information and thank you for taking the time to share it.
No doubt, I could have and should have done more to assess the 401k situation. No explanation yet why the Money Market Fund is not listed as a Investment Options... but, I will find out from Hartford Wednesday. I learned we had the option from my CEO last week when she said she parked a lot of her money there a few months ago.
Perhaps living in the SF Bay Area helped to make me complacent... I know people that worked for start-up companies, like Apple Computer, Google, and others, right out of high school and made enough money to pay cash for their homes by doing nothing more than signing up for the company plan and showing up to work.
Thankfully, I've been a self starter in Real Estate going back more than 25 years... always an investor, never a speculator
I've always been self employed... so the idea of having a job with paid vacation, medical and retirement program was totally foreign to me... My only 401k experience is through my current employer... and I honestly only "Signed Up" to take advantage of the company match and profit sharing... which no longer exist.
I'm more mad at myself then anyone else... I should have known better than listening to all the sales pitches of "Auto-pilot" 10 to 12% annual returns and taking the claims at face value... especially after the reps never seem to last longer than a few months.
Right now is a fantastic buy opportunity, the best since 82-83, in the market I know best... Bay Area Rental Real Estate. I know exactly where to place what's left of my 401k if cashing out were viable.
My CPA/Tax Lawyer advised all his clients last September to "Go to Cash" where possible. I got the message and dismissed it since I'm not in the Stock Market... totally forgetting my 401K exposure...
Last edited by Ultrarunner; 01-20-2009 at 01:44 AM..
How can the markets fully recover is companies like Sears, Motorola, Starbucks, Advanced Micro Devices and others no longer Employer match?
I think the better question is if one is invested in these companies or similar companies, and they go bankrupt, how will a person recover that money? The answer is they won't. They will lose every penny they invested.
Don't know if your familiar with the retailer Mervyns founded about a mile from me in San Lorenzo CA and recently went under?
I have neighbors that worked there... some more than 30 years and their is a problem... apparently their stable value money market funds lost value and employees don't have access to their money... I'm sure something will be figured out
WSJ ran a story about Bernie Madoffs 50 billion fraud wiping out employee's entire 401k's
I know these are exceptions... but real, nevertheless.
401Ks, 403bs, 457s etc have options for cash/money markets. I've never seen a plan where you don't have this option. When you first set up your plan and before you decide on an asset allocation, you park the money in a cash/money market account. So if you are wary about investing in stocks for the time being, you can just keep your contributions in the cash account.
The other thing that I do is I use index funds where available. Index funds will never go down to zero. If the SP 500, Wilshire 5000, or whatever index you use ever went down to zero, that means we are in the midst of World War 3, or the earth was just hit by a giant asteroid and wiped out 90% of mankind etc. We'll have bigger problems on our hands than our dwindling 401ks.
This is a real problem and today I asked the Hartford 401k rep to show me where the Cash Account option appears on my statement of available options.
She took my statement... and then started to scratch her head and said, "It should be here... but it's NOT!"
I called the Department of Labor today to file a complaint... clearly not having the cash account option listed is in the least negligence in my eyes.
Ultrarunner,
I think you really have some grounds for filing a complaint. There really should be a cash/money market option in your 401K...or at the very least, an option for bonds. Good luck in your complaint...do let us know what the outcome of your case is....
I think you really have some grounds for filing a complaint. There really should be a cash/money market option in your 401K...or at the very least, an option for bonds. Good luck in your complaint...do let us know what the outcome of your case is....
Just had a follow-up conversation with the Department of Labor...
In a nut shell it's like this: If not listing the money market fund option is due to an oversight or error... Department of Labor will only require corrective action...
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I should have known better than listening to all the sales pitches of "Auto-pilot" 10 to 12% annual returns and taking the claims at face value... especially after the reps never seem to last longer than a few months. 
