No more 401k's for us!!

[libby74]

DH's 401k lost over 1/3 of it's value in the last year. I can track it on line but finally stopped doing that when every single day it was down a few thousand dollars. I did move his investments around some and put most of it (for the time being) in a safety fund. That stopped the downward spiral and at least we weren't losing every day.
My brother tells me he lost almost 40% of his 401k. He was hoping to retire in 2 years, but now doesn't know how he'll be able to.

 

[addiebee]

Originally Posted by coaster

AddieBee - brokers and financial advisors are supposed to do suitability profiles so that their recommendations fit their clients' financial needs. I'd start with the broker's manager and work your way up. Their are procedures set up by NASD to address these issues. Furthermore, if the broker had a limited power of attorney to place trades/transactions on her behalf there's a higher level of fiduciary responsibility that might have not have been followed, and there might be some sort of financial redress for her grievances.

I wouldn't just leave it with pulling the accounts. That broker might have more elderly clients in the same spot.

Thanks, Tim. Actually, I was thinking the same thing. What really ticked me off was him arguing with me about it. He kept saying, she has good stocks. And my brother and I kept telling him, she is too exposed. You need to reallocate. And if we liquidate good stocks... well... nothing in her portfolio is bad re: blue chip type holdings. The portfolio should have been adjusted 10 years ago. Heck - she has 80 percent securities!!!

This guy has the title of Vice President at Smith Barney... I am pretty sure this is a sales label. My sister said at our family meeting Sunday, that this guy "scr@wed Mom." And you're right, he probably has other elderly clients.

 

[coaster]

The person to start with should have the title of "Compliance Officer" in the "Compliance Department" -- this is the individual responsible for ensuring that all employees follow SEC and NASD regulations as well as brokerage guidelines and procedures AND ethics codes. Above him/her might be a Managing or a General Partner, General Manager, or a Principal or Principal Partner, or a Principal Broker. You might find names to go along with those titles if the outfit has their own website.

Brokerage firms are generally very careful to keep a clean sheet with the exchanges and the regulators, because they stand a lot to lose if their license and registration are lifted. So, when a client loses money, and if it's due to some negligence on the part of the clients' broker, his/her firm might be willing to negotiate some sort of "make good" deal. They really do want to keep these things out of the courts. If you go in there, knowing that, you have more leverage to get satisfaction.

 

[rahma]

I know what my balance was at the end of September. I figure I'll look at it again in oh, September 2012

 

[lizzie]

I started working for WalMart in '86 and I remember Black Friday in '87.I can remember years ago they used to tell us the story about if a person bought 10 shares of our stock in the beginning when it was offered on the market,with all the splits,etc. over the years you could be a wealthy person.I have continued to buy stock all these years...haven't sold much.I'm just hangin in there.I have a few years left before I retire,so we'll see how it goes.

 

[tara g]

I was going to start investing in a 401k once I got married and had turned 21. At my job, you have to be 21 before enrolling (although at my previous one, you did not need to be 21). I got all the paperwork and was going to talk with a financial advisor about how to go about enrolling and what the best options for me were.

Then I saw the market go down, and people begin to lose a lot of their investments. I'm perfectly fine keeping my money in a money market account with the bank - we earn about $16/month in dividends on it right now (and as we add more money to it, the more we earn). I was thinking of using an account like that to save for future retirement instead of 401k. You have to work for a certain amount of years (4 or 5 I believe) before you're vested enough for the company to add to your 401k anyway.

 

[coaster]

It'll be a pretty thin retirement. The interest you get on your money market accounts usually just barely covers inflation and taxes. i.e. the value of your money doesn't grow over time, even though the number on the account statement does.

Run these numbers through a spreadsheet: start with $10,000 and compound by 3% for a typical average money-market like yield, and compare with 8% which is a conservative estimate of stock growth plus dividends. What's the difference after 30 years?

3% starts at $10,000 ends up at $72,817
8% starts at $10,000 ends up at $301,879
that's a difference of over 400%

So, you say in the money market at least you know you've got something for sure after 30 years, whereas the stock market goes up and down and you don't know if it'll be up or down when you need the money. True. But what's the bigger risk: you know for sure that whatever you can buy now with $10,000 will cost you $72,817 in 30 years if inflation is 3% -- that's a 100% probability (that your money-market return will track inflation; that's just the way it works). Or would you rather take the risk that your investment might be down by 40% just when you need it? 40% off of $301,879 is still $181,127, or two and a half times what you'd get from total safety.

Sooooooo.....what's really the bigger risk? Knowing for sure that your money won't grow over time, or knowing for sure that it'll be worth more than sitting in a money-market account, but there's maybe a 20% chance (one in five -- the average bear market cycle) that it'll be worth less than it could have been, had the market not gone down.

1.) Money-market: 100% probability of money not being worth any more than what was saved

2.) Stock market: Perhaps about a 50% chance that it will be worth less than what it peaked out at, and a 20% chance that it will be worth quite a bit less. But virtually (barring nuclear winter or something like that) a 100% chance that it will be worth more than option number one.

 

[cococat]

Yes, things aren't being profitable for us either.

Originally Posted by coaster

I don't know why people run to the store when there's a 40%-off sale on shoes, but when there's a 40%-off sale on investments, they run the other way.

What a good way to put it

 

[addiebee]

Originally Posted by coaster

It'll be a pretty thin retirement. The interest you get on your money market accounts usually just barely covers inflation and taxes. i.e. the value of your money doesn't grow over time, even though the number on the account statement does.

Run these numbers through a spreadsheet: start with $10,000 and compound by 3% for a typical average money-market like yield, and compare with 8% which is a conservative estimate of stock growth plus dividends. What's the difference after 30 years?

3% starts at $10,000 ends up at $72,817
8% starts at $10,000 ends up at $301,879
that's a difference of over 400%

So, you say in the money market at least you know you've got something for sure after 30 years, whereas the stock market goes up and down and you don't know if it'll be up or down when you need the money. True. But what's the bigger risk: you know for sure that whatever you can buy now with $10,000 will cost you $72,817 in 30 years if inflation is 3% -- that's a 100% probability (that your money-market return will track inflation; that's just the way it works). Or would you rather take the risk that your investment might be down by 40% just when you need it? 40% off of $301,879 is still $181,127, or two and a half times what you'd get from total safety.

Sooooooo.....what's really the bigger risk? Knowing for sure that your money won't grow over time, or knowing for sure that it'll be worth more than sitting in a money-market account, but there's maybe a 20% chance (one in five -- the average bear market cycle) that it'll be worth less than it could have been, had the market not gone down.

1.) Money-market: 100% probability of money not being worth any more than what was saved

2.) Stock market: Perhaps about a 50% chance that it will be worth less than what it peaked out at, and a 20% chance that it will be worth quite a bit less. But virtually (barring nuclear winter or something like that) a 100% chance that it will be worth more than option number one.

Really well explained, Tim. The point is not to be afraid to invest in equities at their ages. I once worked at a place where we got 25 percent matching on our 401Ks.... I was putting away about 10% of my salary at the time. Sitting around the lunch table, I could not convince one of my co-workers that the 401k was a good deal - free money from the company. She was a bright woman, college-educated, but I guess terrified of putting her money anywhere but in a savings account. Oh well...

 

[tara g]

Originally Posted by AddieBee

I could not convince one of my co-workers that the 401k was a good deal - free money from the company. .

I've still got 2-3 more years of employment before my company will contribute any money to my 401k. So maybe then I will think about enrolling. Until then, I'm fine seeing my money stay where it is right now, even if it isnt growing as much. I dont plan on many bills - we're paying extra on our mortgage when our house is finished (expecting to pay it off in 20 years instead of 30), so that'll put me at 41 years old and not paying for a house anymore. I'm leery of the 401k because I've seen my FIL lose about $5,000 in the last few months from his. My aunt took a $1.2mil hit earlier this year with the messed up market.

I dont think I'll ever fully retire until I'm way up there in age. I get bored too easily