401K's a sinking ship? Options Anyone?

[California]

Gonna put my 2 cents worth in. ... [more]

Put your money in, do it when you are young, and forget about it until you hit 55. Then retire and do what you want to do.

... [more]

Agree with all your points. (except the last). Your investment strategy worked for me. too. The chart I posted above (post #88) shows how a booming market multiplied the money put in when I was young, allowing early retirement. Everybody, listen to RSKY.

As for the last point about pooling IRA's. I think that idea was floated by the bankers for their benefit alone, to see if they could get away with it. And I thought the idea first appeared during the last Republican administration. Then when people said it stunk, the bankers claimed it had been a Democratic initiative. I know of no influential Democrat involved in the initial concept.

But back on topic: I agree that early and heavy IRA contributions, before you have many responsibilities, is the way to buy yourself financial security later. Regardless of market conditions take advantage of employer-match opportunities. And during times when the market is all gloom and doom, that is the time to buy, at least if it will be 10+ years before you will need to take that money out.

Thanks for the insight!

 

[ultrarunner]

I know it works for some and they have my respect.

In my case... several stocks that I had for decades were delisted... there was nothing to come back.

At work... the only thing I can say is I took a cut in pay to become a benefited employee with match, stock plan, profit sharing, etc...

Looking back it is my biggest financial regret because one by one the promised benefits ceased to exist.

Lots of people around here ask me for advice and I told them I stopped contributing when the match stopped as a matter of principal plus we also had a poor plan with high fees that management refused to acknowledge... they insisted the employee paid zero in fees and I had the fund documentation to prove some funds had as much as a 3% cost taken off the top...

The elimination of the match was temporary and 7 years later it still stands.

Investing in rental property between age 21 and 32 is where all of my "Wealth" is... working a W2 job without the benefits is a paycheck...

 

[mjarrels]

Best investment you can make in this country is to buy a congressman or senator and watch the grant money flow in to make meaningless studies.

mark

 

[RSKY]

I never have, with one exception, and never will invest in a single issue stock. I always invest in mutual funds. I also go over the funds and make sure they are not invested in the same companies.

The one exception was when I worked for Goodyear. Their stock is notorious for making wild swings. It dropped to $3.89 while I was employed there and I managed to buy in at around $5. Sold most of it at $15 and rode the remainder down to $8 before I sold.

My IRA is invested in eighteen different mutual funds. All of which are as diverse as possible. Every month some gain and some lose but the overall trend is up.

I have a fund that had paid 50% each of the two years before I bought in. It had made a 30% return for the first four months after I bought in and I was ready to dump more money into it. Then the 'Fidelity Lady' called for our regular quarterly chat. She doesn't exactly tell me what to do but she does make strong suggestions. She strongly suggested that I stick to my original plan and keep my money spread out in different sectors of the economy. So instead of putting more money into the super performing fund I took money out of it and spread what I had gained from it among the dozen or so other funds I am invested in. Over the next two months the super performing fund became a super losing fund and some of the others that had made absolutely nothing took off and made me a nice return. The point I am trying to make is to spread your investments out in different sectors of the economy, make a plan, and stick to it.

Even though the 'Fidelity Lady' told me last year that all the bond fund managers said there would be little gain in their funds this year I still have four different bond funds that invest in different types of bonds. I also have some aggressive growth funds, some conservative value funds, and everything but a precious metal fund. The precious metal funds seem to be guaranteed losers.

I always look at the provided graphs for a funds performance over its lifetime. I look for a steady growth and for how long it takes a fund to rebound after a downturn in the economy.

I have found that Fidelity seems to have better informed people working for them than does any of the other companies I have dealt with. If I ask a question they can answer, none of the "I'll find out and get back to you later" bull that I've had to listen to with others.

The 401K confiscation plan was put forward by a Democratic Congressman who is no longer in office. His name and state escapes me but he was heavily backed by some bankers and Wall Street types. I don't think it will ever happen but there are a lot of things going on in this country right now that I couldn't imagine twenty years ago.

RSKY

 

[forgeblast]

Just curious what funds are people in? I pay into my pension every check and we started a 403b for my daughters education. This Jan 2015 will be no more day care payments (she starts Kg in Sept!), the money we are putting into daycare will go into her fund also. The day care $ came out pretax and out of my checks for the calendar year. I want to be able to spread out the funds she is in and I am looking for suggestions.

 

[Soundguy]

in the end... you can't have too much money at retirement..

 

[MossRoad]

Just curious what funds are people in? I pay into my pension every check and we started a 403b for my daughters education. This Jan 2015 will be no more day care payments (she starts Kg in Sept!), the money we are putting into daycare will go into her fund also. The day care $ came out pretax and out of my checks for the calendar year. I want to be able to spread out the funds she is in and I am looking for suggestions.

I'm pretty sure a 403b is not an education savings plan. Its similar to a 401k (but for not-for profit, education and religious employees, etc... special folks that don't qualify for a 401k) and not meant to be withdrawn from until reitrement. I think you'd want a 529 plan for college savings.

 

[MossRoad]

in the end... you can't have too much money at retirement..

Yeah, but that would be a great goal to chase, wouldn't it??? :laughing:

 

[California]

I never have, with one exception, and never will invest in a single issue stock. I always invest in mutual funds. I also go over the funds and make sure they are not invested in the same companies.

...the 'Fidelity Lady' called for our regular quarterly chat. She doesn't exactly tell me what to do but she does make strong suggestions. ...

I always look at the provided graphs for a funds performance over its lifetime. I look for a steady growth and for how long it takes a fund to rebound after a downturn in the economy.

I have found that Fidelity seems to have better informed people working for them than does any of the other companies I have dealt with.

RSKY

Just curious what funds are people in? I pay into my pension every check and we started a 403b for my daughters education. ... I want to be able to spread out the funds she is in and I am looking for suggestions.

Fidelity for me, too. I am continually impressed by their quality of advice and level of service. Their fees are near the lowest, and the top-tier quality is everything I could want. I see Vanguard as the only other top alternative. Vanguard has the lowest fees in the industry but is better suited to the very sophisticated investor or the buy-and-hold retirement investor who doesn't need advice. Last time I checked Vanguard's phone service was limited to Eastern business hours, in contrast to top quality people on duty 24/7 at Fidelity. The cost of account-maintenance fees makes a difference over decades so Vanguard is a good choice for some.

Forgeblast, I have studied various investment models (MBA) and while sophisticated strategies are useful for someone familiar with an industry, I keep coming back to the model shown to beat all other general non-specialist investors: Over long time periods, an S&P index fund will put you in the 85th percentile of results compared against managed funds, a personal investment manager, dartboard investing, or whatever. No other strategy or managed fund ranked as high. That's the math, the statistics, comparing all retail investors. I'll add a personal theory: The firms in the S&P 500 are so powerful that they can lobby legislation and manipulate enforcement to their advantage, and to the detriment of smaller firms. So these firms have a heads-I-win-tails-you-lose supremacy advantage. No wonder investing in them is the most effective strategy. And you need the diversity across all 500 of them because the retail investor never has information ahead of the professional investor he is betting against. The only concern is if your education money will be needed before a complete market cycle has run its course - and the S&P is at record highs today so waiting a while might be prudent. The contrary of that is that interest rates may rise in the future, lessening the value of funds parked in bonds etc as you wait for a market slump. A portion in each of these alternatives might be a good idea. Remember, investment return is what you get paid tor taking on risk.

 

[TheGoose]

I have seen that DJIA chart many times over the years and I always shake my head because it always has been and always will be a shell game. There is only one stock that is part of the original "Dow 30" since it's inception and that is General Electric. The rest have either went backrupt or have been kicked out one by one as they go broke. If you don't believe me, look it up.

I wish someone would post up an adjusted chart showing ALL the stocks that have comprised the DJIA over the years and show everything, including the losses people sustained when companies like GM etc. fell out.

Before Christmas we started a discussion on family finances with our kids. They have come to realize how fortunate they are to graduate college (+ grad school for one, so far) without any debt. I used the chart below to illustrate how I was able to retire in 1998 age 54, put them through college a few years later, and today still have what I had the day I retired.

What worked for us was to put the full allowable amount into IRA's and Deferred Compensation every year after these were invented in the mid 70's. Also when we started out, it took a year of lean living to accumulate our first $1,000 in non-IRA savings. We used that for the down payment on a duplex, so the tenant paid our housing cost in those early years allowing us to save a good part of our income. Later we owned a couple more rentals for a few years, then in the 80's (when we were fed up with tenants) sold the real estate and invested it all in the market, mostly an S&P index fund.

Money hasn't been a problem ever since those first early lean years. And we didn't live too bad even then - vacationed to Hawaii, Virgin Islands, Baja California the year the new highway opened down the peninsula, and lots of camping all over the Sierras both before kids and with the kids. Later took them to Canada, DC, and London, and still later on in college they were all over - France, semester in India (where we visited one daughter), semester in South Africa, Mexico, Central America, and South America several times (we visited other daughter there), even China. Our austerity in our 20's paid off well later on.

Our particular plan wouldn't work today but I hope others can find their own way to get from zero to comfortable. So far as I can see owning, fixing up, reselling rentals is the best way to start with near-nothing and multiply it into a nest egg.


Whenever you have an opportunity for an employer match, by all means take advantage of that to the maximum! Even if you don't get a match (we never did), an IRA (particularly Roth) or 401k, 457 etc is still the best way to accumulate savings for retirement. And looking back over the 2009 posts that started this thread, I see some posters had plans with high fees. Those fees will kill your savings. An index fund with fees under a half percent will accumulate savings far more effectively than a managed fund that has to make a percent or even up to six percent or more, before your own money is used to earn anything for you. History has shown that low fee index funds outperform anything else available to the retail investor.