Posted on 11/10/2008 4:22:57 AM PST by Libloather
Stock market drama has some rethinking 401(k)s
Worried employees wonder if they should stop contributions, others in dire financial straits take out loans
Sacramento Business Journal - by Anne Gonzales Correspondent
Friday, November 7, 2008
In another ripple effect of the economic downturn, financial advisors and retirement plan administrators are getting swamped with calls from employers and employees about their 401(k) plans — asking if they should curtail or eliminate contributions.
Some employees are also cashing out their 401(k)s or borrowing against their retirement plans to avoid eviction or foreclosure, or to pay medical bills.
When an employee takes a peek at his 401(k) statement, chances are he’ll have the urge to jump out of today’s stock market.
But employees — especially younger ones — who sweat out the bear market and maintain stocks in their 401(k) portfolios could be rewarded with a fatter nest egg for their retirement, experts say.
The problem I see is that we all kinda got used to 401K situations and don’t see ourselves just dumping it. I don’t see any vehicle that they’ve offered that really beats the 401K. I certainly won’t admit that 401K perfect, but I’ve been doing it twelve years now. It makes sense and most of the rules are ok, although I’d like to see a minor change or two.
These guys may sit around and talk this up on Sunday chatter shows...but I think when they sit down in front of real folks...and their explanations for a alternate plan just don’t work...the idea will drop right there. We’ll all laugh about the chat and talk...and how the Obama plan simply fell quickly in the first 100 days.
Buy High!
Sell Low!
I’m dumping and getting out of debt. Cheaper than what the increased tax rate will be despite the penalites and also at least except for taxes, my money won’t go for funds for illegal aliens getting benefits. This is a piece to stop people like me from dumping so there isn’t trouble at the market, that’s it. Yea, someone under 25 probably better just to stay in it if you stay in the USA.
Liberals with the malignant neglect by Republicans have gutted most real money assets. 401K's are real dollars and huge pot to plunder. I do not share your optimism regarding anyone stopping this bunch if they decide to 'take' 401Ks for the good of the children. This election was about payback to those rich republicans that President Bush cut taxes.
What struck me was the ever common 1/3 - 1/3 - 1/3 split in just about everything.
The more important (of the past) and least known nor remembered was the 1/3 of Americans that supported and fought for Independence ... waaaayyyy back there in ancient history .. 1776 and beyond.
The dumbest thing you can do is to stop contributing based on current market conditions. Now is the time to start contributing.
For those who have already built a sizeable nest egg, I would suggest considering playing defense. I recently put half my retirement into TIPS (Treasury Inflation Protected Securities). The return is not sexy, but it as bullet proof as anything you will find out there (including gold in my opinion). I am projecting that my true wealth in these TIPs will approximately double in 22 years (when I retire at 67). Of course the feds could mess with the CPI(U) used to calculate inflation or default, but I am not sure the stock market would survive a default either (then gold in the mattress would be the best option - not pieces of paper). I see inflation taking off like crazy because Obama is going to need to print lots of money to make his constituents happy.
The other half I plan to keep in equity or cash moving back and forth with the market (for example I recently put back about half of what I had pulled out during the fall at about 120 points lower in the S&P 500 than when I had pulled it out). I am still down 15% for the year, but it could have been a lot worse. I have an S&P sell point in mind in which I will pull even more off of the table.
As far as the recent discussions on what to do with the 401(k)s. Moving forward I suspect that they will dramatically limit the tax deductibility for medium and high paid employees and perhaps ensure that a balanced portfolio option is offered/mandated as the default choice (ie increasing bonds and short term as you get older). I think folks should take a test on finance before they are allowed to put their 401(k) money into equities and especially their company’s stock.
The funny think about pretax 401(k)s is that they are a good deal for the government (this is why Roth’s are becoming so popular). With the penalty on Social Security on high earners in retirement, the Fed probably gets back more than what was protected.
Those who were within 10 years of retiring that were heavy in equities before the crash were absolutely insane (or uninformed).
If has gone down before during at least three or four times that I can remember and has always returned.
The people who own and run the left wing Democrat party are all Billionaires so they will not allow the market to continue down.
Bump for later.
That is totally wrong the left is rich and the Democrat party is owned by left-wing anti-American an billionaires.
You over estimate their power. You seem entirely incognizent of the forces that drove the economic crash under Carter.
I will also say that your blind refusal to see the threat of socialist government confiscation of personal wealth, even when they state that intention to your face is truly staggering.
You need some sort of therapy. Denying reality and refusing to prepare for announced events is unhealthy.
No because when they sit down in front of real folks, they'll tell them how they're offering a pension plan that greedy employers no longer offer them. They'll tell them how the new plan will not have any way it can drop like their 401(k)s just did. And to really get the fish on the hook, they'll tell them they're going to give the value of their 401(k)s before the crash. Wait till you see how many people run to this.
I’ve already stopped contributions and I’m now contemplating taking enough cash out of my IRA’s and 401K to become debt free. Even paying the penalty and the tax on the money I withdraw isn’t a big concern to me. Obama potentially nationalizing my 401 is my biggest concern.
401Ks are a great deal - under todays rules. But the Dems are already talking about “confiscating” (not their word) your 401k and turning it over to Social Security. Billionaires don’t need 401Ks, only the middle class. I wouldn’t be suprised to see some form of socialist redistribution of 401ks from those who “can afford it”.
I’ve been thinking about the “401k confiscation” idea that Democrats have. Of course, they don’t think beyond stage 1, they’re leftists. Actions and decisions don’t, or shouldn’t, have consequences.
What happens when you “pull out” 401k money to put under gov’t control? You must SELL STOCK to do so. And what happens when there’s a massive selloff of stock?
The market crashes. And along with it, the rest of the economy.
Now, this can be viewed two ways -
They can see that this would be incredibly harmful, and eschew doing it,
or, they can do it anyway, KNOWING what will happen, then pointing at the market crash and saying “aren’t you glad we saved your 401k from that?”
“Liberals with the malignant neglect by Republicans have gutted most real money assets. 401K’s are real dollars and huge pot to plunder. I do not share your optimism regarding anyone stopping this bunch if they decide to ‘take’ 401Ks for the good of the children. This election was about payback to those rich republicans that President Bush cut taxes.”
I am looking at it this way. Social Security has to be fixed and these 401K’s seem like the perfect vehicle for the RATS to raid so they can redistribute the wealth.
I expect that they will frontend load the taxes on it and resupply social security.
With the market down as low as it is, now is the time to increase your 401k deductions to maximize the profit when the market recovers. If you are only contributing 5% now, bump it up to 10%.
Buy more at the low prices! Look at it as a stock sale!
Of course, you need to pay attention to the Dems plans for 401k’s. If they are going to seize them, then all bets are off.
I’m trying to figure out what I will do if that is really coming. Cash out and move it to savings? Cash out and play the market on my own? Either will be better than the 3% the govt will offer.
The left never says who the 'rich' Republicans are they just said that the Bush tax cuts were for 'rich' Republicans. Liberals are now after the vast middle class or that huge pot of money represented by the savers. Of course the elite rich are liberals and they own the poor and they plan to use the wealth of the middle class to drive this nation into complete serfdom.
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