Sitting on my desk is a mailing from the people who run my employer's 401k, touting an exciting new investment tool that will automatically maximize my investment and tweak it from "adventurous" to "cautious" as my retirement age approaches. At least that's what I think it says; I can barely make head nor tail of it, couched as it is in nice-sounding, empty phrases and high-financesque terminology that probably looks impressive to someone who doesn't read the dictionary for fun. It's low on numbers, contains no math, no graphs, and very little in the way of objectively factual content. Since my 401k is set to be as low-risk as possible -- I know too many people who took a deep plunge when the market was roaring and saw their savings swept away in one slump or another -- I don't know why they bothered to send it to me.
The whole notion of a 401k as usually implemented comes from people who are happy to play the investment market -- especially with someone else's money -- and cannot understand why anyone else wouldn't share their fascination. That I might be hoping to get back out what I put in, without inflation and taxes taking too big a bite, is beyond their comprehension.
I'm convinced that J. Random Guy playing the financial markets -- even mediated by fancy retirement accounts -- is not a good thing. That's a game for those who can afford to lose; most of us shouldn't be sitting at the high-stakes table, staring in fascination as the wheel spins and the dealer turns up a card with a few year's income hanging in the balance. If you wouldn't risk it in Las Vegas, don't risk it on Wall Street -- and don't kid yourself that one is any less random than the other.
Update
4 days ago
11 comments:
Ever since the company offered the 401(k) (and you have to remember that I went to work for the company when it had three full-time employees including myself, so that wasn't instantly), I've operated under the understanding of the Master:
"Certainly the game is rigged. Don’t let that stop you; if you don’t bet, you can’t win."
But I'm careful to keep most of it low- to medium-risk. I got killed in 2008 like everyone else, but since then it's come roaring back and more than doubled.
Even so, if I could take it all out in cash today and keep it in a mattress, I think I would. This market isn't going to last. Or at least, it certainly won't if the GOP keeps acting like Democrats Lite.
The financial sharks are always trying to get the guppies to come swim with them.
I try to stay in a moderate risk category. At 53, I have a few more years to go until I can retire maybe at 62 (unlikely). But I don't have decades to re-invest and/or recover from a severe economic downturn. One bit of advice I recall, is to NOT leave your 401k/IRA in the hands of your company when you retire, roll it over into a bank or another financial institution if you can (I'm old enough to remember the Enron debacle, if you don't know of it, look it up).
At my age, I'm more worried about the government nationalizing my retirement funds than anything else.
Excellent post, and if they don't furnish the math (in understandable terms), low and slow is the best way. That's where I am now, until I can figure a way to get it out without getting killed on taxes.
they will get it. to much is held there for them not to nationalize it. What with 2 trillions or more in student debt. Son in Law got a physic BA and a maters degree in chemistry. Can't find anything so he is going to retrain as an electrician. Go figure.
He won't be paying back his loans any time soon and I would imagine those who majored in basket weaving are in even more dire straights.
No, I will be lucky to be buried when I die. So much for the flying cars and vacations on the moon.
Unfortunately, you MUST assume some risk if you're going to reap the rewards. CDs and other more or less "risk free" investments won't yield enough to even keep up with inflation. Most annuities are designed to make money for the person who sells them.
FWIW: We and my extended family have been very happy with Edward Jones as our broker, but you might want to interview more than one agent. Some individual stocks can be OK, my Dad did very well with Phillip Morris over the years, for one.
Jim, I'm unwilling to gamble that way. Precious metals are an inflation-free investment; they do not make money, but they don't lose it, either. Gambling with your retirement money strikes me as plain nuts.
Roberta,
IMO, only the rich can afford to invest mostly in precious metals. If you look at charts that show the historic price moves of gold and silver, you'll see why. You will not lose your investment, but if it's not growing, it's nearly the same thing.
I don't claim to be an expert in investing, and I've certainly made a few mistakes over the years. However, overall, our portfolio is still growing. Yes, it took hits in 2000 and 2008, but it's recovered and then some.
It will cost you nothing to consult with an Edward Jones advisor, and ask specifically about "Index Funds". These are about as close to "no risk" as you can get in the stock market. See: https://en.wikipedia.org/wiki/Index_fund for details.
Regarding Edward Jones, see: https://en.wikipedia.org/wiki/Edward_Jones_Investments
I don't believe in gambling: I've never been in a casino and haven't spent even $5.00 on lottery tickets in my lifetime.
Jim writes: "Roberta...only the rich can afford to invest...."
Let me just stop you right there. My 401k is set to the minimum. That's all I can afford.
My "retirement planning" is rather more grim than talking to the nice man from Edward Jones. I hope to work until I die. Let's just leave it at that.
Roberta, "grim" is when you have to work until noon on the day of your funeral.
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