Posted on 11/13/2008 5:48:27 AM PST by Libloather
Would you apply that to my Vanguard funds (mutual funds and stocks, mostly) as well?
Ummmm.... I wouldn't use the word "exchange". More like "surrender". Paychecks will be getting smaller, regardless - either through salary cutting or forcing you to kick in more for your company health plan.
Forbes.com has an interesting article: “The Worst is Yet to Come”.
Forbes article actual title: The Worst is Not Behind Us.
Vanguard funds are probably good for a longer term investment horizon. If you don’t need to draw on those funds soon (like within the next year or two) I would leave the funds where they are.
If you need to start drawing on the funds sooner, I would take the hybrid approach of moving enough into a bond fund to generate cash flow income to draw on. (For example, a few hundred thousand invested in a bond fund could generate monthly income of $2500 from the interest without diminishing the principle.) If you have enough in a Vanguard fund (mutuals and equities) that you could move a few hundred thousand into the bond fund to generate your monthly cash flow needs and then have some left over to leave in the mutual funds for growth potential, that would be my recommendation. Of course this depends on how much of a balance you have in the fund now, how soon you need to start drawing on it, and how much you need in monthly income from the fund.
I agree in principal, but 401k’s have been the retirement vehicle for many years now. Unfortunately, the housing bubble sidetracked its importance and now that collapse will take down 401k’s, as well (and pensions).
Granted, losing the match versus being out of employment is a no-brainer. But once it becomes herd mentality in the marketplace, it will be a long time before the company-match returns. Not to mention the fact that less dollars in 401k’s means less dollars in capital markets. Maybe a lot less. And that will hurt everyone - the employer, included. And that, in a nutshell, is also why 401k confiscation by the gov’t would be economic suicide. The markets would be flat-out dead with all of that liquidity pulled out and thrown into a gov’t fund backed by treasuries.
Realistically speaking, people will look back and laugh derisively at the American dream of “retirement”. We leveraged everyone’s retirement for unprecedented, unsustainable economic growth. And we lost.
Thanks so much for your comments. I feel like I have a much better perspective now.
Not me. I work for MSFT and believe me, the benefits there are one of the biggest incentives I have to stay there.
Well, they had Zero's too... at one time!!!
I can understand younger workers (who see zero chance of getting Social Security) being skeptical about a 401K. Zero is planning to take them away anyhow, that should really depress contributions.
Overseas secret accounts might be the only way to adequately plan for a retirement.
That's why like like to refer to him as "Obamugabe". He will destroy "hope" with his "change". We'll have adults in charge of the Congress in a bit more than two years from now.
I especially agree with your comment that having the government take over 401Ks will be economic suicide. Obama is stuck between a rock and a hard place. Funding social programs without bankrupting the United States is tantamount to impossible. At some point in time, investors in the United States will want a greater rate of return because it is a poor investment. "Stealing" 401K wealth to prop up the viability of US bonds appears to be the approach Obama and his team wants to take to fund socialism. It is mortgaging our future.
Well, I hope it was helpful. And I hope most of what I said mirrors the kind of advice and information you would get from the Motley Fool.
You might want to check it out: http://www.fool.com/
It is a wealth of GOOD information on investment and saving.
I’m not an investment advisor, I don’t play one on TV, and I didn’t stay at a Holiday Inn last night. My advice is worth exactly what you paid for it, NOTHING.
Having said that, with a 10-15 year time horizon, I would NOT sell your current investments in your 401K. With the DOW at 8300, if we are not closer to the bottom than we are to the previous high, it won’t matter what you do as all your investments will likely become worthless anyway.
I would continue putting your future contributions in a Money Market or the low-interest Guaranteed Fund, but I would be prepared to move them back into stocks if the market tests and holds a bottom in the near future.
I’ve no doubt under an Obama regime that the market “numbers” will rise in the future; just that inflation will make the rise meaningless. The trick will be to find investments that at least track inflation so you don’t have further losses.
The downside to most 401Ks is that the funds offered usually don’t allow for investments in hard assets or provide overseas investment choices with enough specificity that allow you to pick the few potential winners (Ireland with a top corporate tax rate of 11%, as an example). You also can’t invest in puts or shorts, either.
The only sure fire investment I see going forward would be a fund that exclusively invested in puts and shorts of the major publicly traded print and broadcast media companies with the portfolio weighted by the liberal bias of the company in question. Such a fund does not exist, but if it did, it would make a killing in real dollars over the next four years, as most of these companies go bankrupt.
I wish there were an easy, obvious solution, and there just isn’t. I’ve spent many of these last months trying to determine what the future is going to look like, and at every hint of a silver lining, I’ve thought, “no, it won’t be as bad as the Depression. It will be a U-shaped recession.” Unfortunately, I’ve come to the conclusion that this is going to be as bad as some have feared, and that we are looking at a severe economic depression due to the massive job losses that are in progress and coming down the pike, international carnage, and gov’t meddling in the credit markets. Consumption is already in the process of becoming decimated, and that’s in danger of becoming a runaway train. We’re going to go from a largely aloof society of neighbors to one that is forcibly interconnected for survival. Families will be closer by necessity (a silver lining). But we’ll have to learn to “share” our goods.
It’s a socialist’s wet dream.
I appreciate your comments, and thanks.
Or an L shaped recession. See Forbes.com.
Your observation about neighbor interactions is fascinating. Today we are becoming a cocooned society, with little interactions with faces. Our interactions still occur, but over hundreds of miles through the internet. Like you have said, we will have to "face the neighbors" to survive, if things get really bad. Another good thing is that church congregations may once again become an important aspect in people's lives.
Sorry to hear that. I hope you don’t lose your job. Better start looking though. You probably already are I’m guessing.
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