My 401k Has Turn To Complete Shit

[loco]

Those heavily invested in the stock market are taking a bath right now. Losing a decades worth of invested money in a few months must sting.

What are you talking about?  They haven't lost a penny unless they sell.

I am very heavily invested in US stock index funds and some international stock index funds, since my 20s.  I have never lost a single penny.  I have only watched my wealth and net worth grow exponentially over decades.  That's the benefit of investing long term in broad stock index funds.

[loco]

For a broad market fund YTD down 22%, over the past 1 year down 15%, over the past 3 years up 23%, over the past 5 years up 50%.

Eggxactly!  Time in the market, not timing the market, is what builds wealth.

[OneMoreRep]

I've never been a fan of 401K's. To be honest, as an accountant with close to 30 years of experience, I'd say 401Ks are a fucking scam.

I wish that when I was younger I could have been offered a true pension. American Express was the first company to offer pensions as far back as I can remember. Unfortunately, very few companies offer pensions at this point (back in the 80's it was still pretty common with over 40 million Americans having true pensions). Pensions, given that they mean an employer has to pay you a percentage of your prior salary (sometimes the full amount) following retirement until you die, is a VERY costly endeavor. All this changed starting back around 1974 when they passed the Employee Retirement Income Security Act. No surprise, companies decided to shift risks from themselves onto employees and the advent of 401K's took place. All it took was to trick employees into thinking that giving them a 401K plan meant they had "more control" of their retirement finances, when in reality a 401K isn't a retirement account, it's a glorified investment account that gets taxed on the backend.

Still, some companies like Exxon, Coca Cola, GM and UPS offer a combination of pension and 401K plans. If you're lucky enough to have both, you're in the money.

"1"

[King Shizzo]

Look on the brightside, Vince. Losing any % of nothing is still nothing.

I don't think you are in too deep (no homo)

[loco]

I've never been a fan of 401K's. To be honest, as an accountant with close to 30 years of experience, I'd say 401Ks are a fucking scam.

What's the alternative for those who have no access to a pension, but have access to 401K with employer match?

Pensions, given that they mean an employer has to pay you a percentage of your prior salary (sometimes the full amount) following retirement until you die, is a VERY costly endeavor.

Unsustainable for many companies.

Still, some companies like Exxon, Coca Cola, GM and UPS offer a combination of pension and 401K plans. If you're lucky enough to have both, you're in the money.

"1"

I agree, but I'm surprised you think a combination of both is great since you say 401K is a scam.

[Humble Narcissist]

What are you talking about?  They haven't lost a penny unless they sell.

I am very heavily invested in US stock index funds and some international stock index funds, since my 20s.  I have never lost a single penny.  I have only watched my wealth and net worth grow exponentially over decades.  That's the benefit of investing long term in broad stock index funds.

Enjoy.

[loco]

Enjoy.

Thanks!  I am enjoying, and so are many others.

[King Shizzo]

I've never been a fan of 401K's. To be honest, as an accountant with close to 30 years of experience, I'd say 401Ks are a fucking scam.

I wish that when I was younger I could have been offered a true pension. American Express was the first company to offer pensions as far back as I can remember. Unfortunately, very few companies offer pensions at this point (back in the 80's it was still pretty common with over 40 million Americans having true pensions). Pensions, given that they mean an employer has to pay you a percentage of your prior salary (sometimes the full amount) following retirement until you die, is a VERY costly endeavor. All this changed starting back around 1974 when they passed the Employee Retirement Income Security Act. No surprise, companies decided to shift risks from themselves onto employees and the advent of 401K's took place. All it took was to trick employees into thinking that giving them a 401K plan meant they had "more control" of their retirement finances, when in reality a 401K isn't a retirement account, it's a glorified investment account that gets taxed on the backend.

Still, some companies like Exxon, Coca Cola, GM and UPS offer a combination of pension and 401K plans. If you're lucky enough to have both, you're in the money.

"1"

A Jewish accountant....

[IroNat]

Many people lack the discipline to spend less than they make and save/invest the difference.

Many people spend MORE than they make.

They also make poor decisions about the investment options in their 401k and IRAs, or abdicate their decision making to financial advisors who do not have their best interests at heart.

Remember the fable of the grasshopper and the ant?

Many, if not most people are grasshoppers.

Some of the biggest investors in mutual funds are pension funds.  The pension funds siphon off extra fees from the amounts contributed by the company.  Some pension funds, teachers for example, require contributions directly from the employees' pay, just like 401ks.  The employees have no say in what the Administrator of the pension fund (usually an insurance company) invests the moneys in.

[OneMoreRep]

What's the alternative for those who have no access to a pension, but have access to 401K with employer match?

If you mean investment vehicles, I lean more towards real estate or even possibly offering small-medium sized loans with generous interests.

Now if you mean as solely related to working for a company and based off of what they offer, if you qualify, can roll over the 401K into a Roth IRA and then choose whatever investment strategy you want. Going with a Roth allows you to pull your money out when retired and pay no taxes. If you don't qualify and make higher amounts, can also consider a self-directed IRA. 

I agree, but I'm surprised you think a combination of both is great since you say 401K is a scam.

The combination of the two isn't bad. While I think 401Ks are a scam (which I can explain with relative ease: you're essentially at the mercy of the market, are providing the funds for big financial firms to indulge in subsidized gambling and are still expected to pay taxes once you're no longer employed or past a certain age), if you have a set pension that you will receive, a hybrid approach (pension + 401K) can at least allow you to diversify your money a bit better. Now, if you use a separate company like Vanguard for instance, outside of what your 401K utilizes, you can also do the diversification work alone and still make out pretty well. Still, you'll be at the mercy of the markets.

401Ks completely took away the burden of companies having to set people up past retirement. Moreover, they give incredible tax incentives for the companies that use them. Companies only "match" because they get deductions.

It's sad, because back 40-50 years ago, if you worked for a major company for 20-30 years, you could retire and still collect 80-100% of your salary until death. Today, you can retire at 65 and if on that same year the market takes a nose dive, you could take up to 10 years to recover, it at all, and could find yourself on poor street living off of social security, savings and liquidation of assets.

"1"

[IroNat]

No way did you retire with 80-100% of your pay from a company pension ever.

My grandfather was Superintendent of a major commercial bakery for over 40 years.  His pension at retirement was a couple hundred a month.  A pittance.

Proper asset allocation mitigates wild swings in the market.

But you must take advantage of the educational resources provided by 401k plans to make wise decisions.

Unfortunately, many people are too lazy, too afraid, or too dumb to do so.

This is the real problem with IRA and 401k plans: the employee is not mentally and/or emotionally equipped to manage money.

I often see the same behaviors here about money management.  Poor decision making and understanding of money management.  Mainly from lack of knowledge.

[OneMoreRep]

No way did you retire with 80-100% of your pay from a company pension ever.

What if I show you proof that it not only used to be possible, but still is depending on who you work for? Would you ever consider city cops to be capable of retiring after 20-25 years of service with ANNUAL pensions over $100,000? If so, what would you make of that?

Source: https://www.lohud.com/story/news/politics/elections/2019/08/06/these-new-york-police-officers-recently-retired-100-000-pensions/1933375001/

Many companies have total pension assets that run into the BILLIONS: https://www.swfinstitute.org/fund-rankings/corporate-pension

My grandfather was Superintendent of a major commercial bakery for over 40 years.  His pension at retirement was a couple hundred a month.  A pittance.

It depends on who you worked for.

If you worked for American Express, IBM, Ford Motors and/or Exxon prior to the year 2000, you probably were in line to retire and collect 80-100% of your salary until death. All of that changed even for those companies by around the year 2000. They did away with any semblance of pensions. At most, they have hybrid options.

"1"

[epic is back]

ghey people never lie

[IroNat]

What if I show you proof that it not only used to be possible, but still is depending on who you work for? Would you ever consider city cops to be capable of retiring after 20-25 years of service with ANNUAL pensions over $100,000? If so, what would you make of that?

Source: https://www.lohud.com/story/news/politics/elections/2019/08/06/these-new-york-police-officers-recently-retired-100-000-pensions/1933375001/

Many companies have total pension assets that run into the BILLIONS: https://www.swfinstitute.org/fund-rankings/corporate-pension

It depends on who you worked for.

If you worked for American Express, IBM, Ford Motors and/or Exxon prior to the year 2000, you probably were in line to retire and collect 80-100% of your salary until death. All of that changed even for those companies by around the year 2000. They did away with any semblance of pensions. At most, they have hybrid options.

"1"

Those top cop pensions were because they gamed the pension plan by double dipping and loading up their overtime in the years prior to retirement.

Very unusual and basically un-ethical.

Cops generally retire with pensions equal to half-pay.

[Freemason]

Ironat with all due respect you are very misinformed. I am sorry the bakery your father worked for had a horrible pension.

Pension benefits are spelled out at job offer. There is a multiplier (let’s use 1.5% as an example). There is also a final salary calculation formula (such as highest earning year or average of final five years). What income is pensionable I’d speed out as well and while some require zero employee contribution MOST have a contribution rate between 3-8%. So once you calculate your final income you use the multiplyer to figure the benefit. A 1.5% multiplier would pay 75% on a 50 year career. Multipliers can be up to 3% so many pensions have fantastic payouts. Pensions also offer additional perks such as Deferred Retirement Option Plans which enhance incomes even more.

Many pensioners will retire with better than 80% of their salary. I am one of them. Numerous government employees will retire with 75-100+% depending on the amount of time they put in. Before you believe government pensions are the only ones with such benefits I will point out several private pensions that were similarly funded prior to the abandonment of pensions such as: teamsters, Southern Bell, AT&T, First Union Bank, BOA, Publix and many others.

Also, pension funds don’t siphon any money. Here’s how it works. A fund has administrative staff which are compensated (everyone can have an opinion on those paychecks) but receive no compensation from fund investments. Fund investments are decided by Trutees which are generally unpaid or modesty paid individuals that can be elected by the membership.

Advisors can be hired/retained by Trustees and are compensated. They help guide investment decisions.

Otherwise all returns are kept within the fund. All financial transactions are available to the membership to see.

All losses by pension funds are covered by the employer. All gains act to reduce the employers cost so the employer has a real interest in finding good Trustees and paying tip dollar for quality advisors.

As said before, a 401 management company takes your contribution combined with your employers contribution, pulls a fee, invests what’s left, pockets a percentage of all gains but passes ALL losses onto you. They are a decent investment vehicle but problematic to plan a retirement with solely. They were designed to supplement pensions not replace them.

[Freemason]

Those top cop pensions were because they gamed the pension plan by double dipping and loading up their overtime in the years prior to retirement.

Very unusual and basically un-ethical.

Cops generally retire with pensions equal to half-pay.

Wrong. Most police in Florida receive no overtime in pension calculation. Neither do I. You really have no clue what you’re talking about.

[OneMoreRep]

Cops generally retire with pensions equal to half-pay.

Which depending on what rank you have, are pretty damn good!

https://openpayrolls.com/rank/highest-paid-employees/nassau-county-ny

You have some police officers, sergeants and detectives making between $185-200K. Even at half-pay, that's phenomenal to collect $100K/year for the rest of your life after about 25 years of service. Imagine retiring at 50years of age and collecting a $100K salary for the rest of your life?

"1"

[OneMoreRep]

What I will add is that as an accountant, I have MANY clients that are retired and used to work for American Express in the 80's & 90's and are collecting a pension that provides well over 80% of their top pay at time of retirement. I also have many retired NYPD officers that are collecting serious pensions at this point.

This is the truth, no fuckery. I actually wish I had worked for some of these companies myself, but never had the opportunity to do so. Hindsight is a bitch.

"1"

[FitnessFrenzy]

you are a smart man loco.

[King Shizzo]

A 50 year career? Are we talking rollover?

40 to 50 years at the same company is very rare. It will be almost non existent, with today's business climate. I'd argue that you invest 3-6% of your check into a savings account, every pay period.

It may not garner profit, but you won't lose anything either, unless the banking system collapses. Then, guns and baked beans will be equivalent to today's gold.

[loco]

If you mean investment vehicles, I lean more towards real estate or even possibly offering small-medium sized loans with generous interests.

Now if you mean as solely related to working for a company and based off of what they offer, if you qualify, can roll over the 401K into a Roth IRA and then choose whatever investment strategy you want. Going with a Roth allows you to pull your money out when retired and pay no taxes. If you don't qualify and make higher amounts, can also consider a self-directed IRA.

I was referring to your advice to young, working people who have access to a 401K plan and no access to a pension plan.

How can they roll over their 401K if they don't have one because you'd advice them it's a scam?

You can't roll over a traditional 401K to a Roth IRA.  Assuming you meant a Roth 401K to a Roth IRA, a personal Roth IRA has a contribution limit of $6,000/year, while a 401K has a much higher contribution limit of $20,500.  Employer match is always deposited into a traditional 401K even if you contribute only to a Roth 401K.

Are you suggesting contributing to a Roth 401K as much as one can afford (over the $6,000 Roth IRA limit), then roll it over to a personal Roth IRA that has better investment options, then repeat yearly?

I agree that personal IRAs offer many more investing options (not all of them good options) than many 401K plans offer, but what strategy in particular are you suggesting would be better in an IRA than in a 401K?  A low cost S&P 500 Index fund or total US stock market index fund are plenty good options in a 401K plan.

The combination of the two isn't bad. While I think 401Ks are a scam (which I can explain with relative ease: you're essentially at the mercy of the market, are providing the funds for big financial firms to indulge in subsidized gambling and are still expected to pay taxes once you're no longer employed or past a certain age), if you have a set pension that you will receive, a hybrid approach (pension + 401K) can at least allow you to diversify your money a bit better. Now, if you use a separate company like Vanguard for instance, outside of what your 401K utilizes, you can also do the diversification work alone and still make out pretty well. Still, you'll be at the mercy of the markets.

401Ks completely took away the burden of companies having to set people up past retirement. Moreover, they give incredible tax incentives for the companies that use them. Companies only "match" because they get deductions.

It's sad, because back 40-50 years ago, if you worked for a major company for 20-30 years, you could retire and still collect 80-100% of your salary until death. Today, you can retire at 65 and if on that same year the market takes a nose dive, you could take up to 10 years to recover, it at all, and could find yourself on poor street living off of social security, savings and liquidation of assets.

"1"

You either believe 401K is a scam, or you believe one can use it in addition to a pension plan to make your retirement plan better.  I don't see how you can believe both.

I don't know about you, but I don't invest or participate in anything I believe to be a scam, and I don't advice anyone to do so either.

[FitnessFrenzy]

Ironat with all due respect you are very misinformed.

[Freemason]

A 50 year career? Are we talking rollover?

40 to 50 years at the same company is very rare. It will be almost non existent, with today's business climate. I'd argue that you invest 3-6% of your check into a savings account, every pay period.

It may not garner profit, but you won't lose anything either, unless the banking system collapses. Then, guns and baked beans will be equivalent to today's gold.

It is certainly rare now in careers with no pensions. But it’s more common than you believe in careers that do involve pensions.

I’m not advising anyone to get out of 401s. I’m simply pointing out how corporate America fucked over the entire workforce by ditching pensions for 401ks. Now you have very little choice unless you pursue specific careers. Receiving a pension is exactly why I am in my chosen career. I gave up a six figure income in exchange for a starting pay of $31,000 a year to acquire it.

[GymnJuice]

Pensions aren't an option for many. 401k lets you invest the money now pretax and it grows tax free. When you take it out you will presumably be in a lower income tax bracket because you've retired. You're only taking out what you're spending. (Presumably not to pay a mortgage etc.) I'm not a financial guy but that's my understanding of it.

Other guys feel like Democrats are going to increase tax rates in the future anyway, so they'd rather pay their taxes now and not defer it until later.

[King Shizzo]

It is certainly rare now in careers with no pensions. But it’s more common than you believe in careers that do involve pensions.

I’m not advising anyone to get out of 401s. I’m simply pointing out how corporate America fucked over the entire workforce by ditching pensions for 401ks. Now you have very little choice unless you pursue specific careers. Receiving a pension is exactly why I am in my chosen career. I gave up a six figure income in exchange for a starting pay of $31,000 a year to acquire it.

And how do you suppose that will work out for you, in the long run? I'm interested.