[BAGAGT1]

Originally Posted by pennywise

Thanks to 401's, etc we lost a bundle in this last turn (we are older - more savings in investments). All employer match, all earnings, and some principal lost because you cannot touch the money. Thus, I will control my fate. It will take 20 years to recover what was lost. Be careful what you read and believe. Remember bias, who is telling you, and why?

Whooah! Let’s break this down a little. First not all 401k’s plans are created equal. While it is true that with all 401k’s there are rules that everybody has to abide by, the rules on how you manage your 401k differ greatly from one plan to the next. For example, my 401K plan allows me to change my contributions, and/or transfer monies into all eight available funds on a daily basis. The plan updates the performance of the funds on a daily basis. My company contributes to my 401K account with shares of the company, thankfully, after the Enron/WorldCom debacle, I can now sell/buy my company shares whenever I want. What that means for me, is that while I lost a little money during the last recession, I managed to move most of my money into money markets and bonds shortly after I saw a downtrend in the market, so I didn’t lose that much. Once I saw an uptrend in the markets, I transferred monies from the money market and bonds back into my growth funds and value funds.

Now as I said earlier, not all 401k are created equal. My wife’s previous 401k plan did not allow changes in contributions except twice a year. Most importantly the fund performance was only updated quarterly, so there was a huge risk of losing money because you are in the dark during a downturn in the market. I didn’t like that 401k plan much, I couldn’t be as aggressive as I would like. Fortunately, my wife’s new employer plan is similar to my current plan, so I am more comfortable in investing more aggressively.

Also, you can’t forget the company match (if you get one, that’s an automatic percentage match, that you could never find in any other investment) and the tax benefits of the 401k. With that said, I do understand that not everyone has a great experience with 401k’s but in reality, the 401k is just an investment vehicle, and like all other investment vehicles, it has to be managed properly. I haven’t seen a 401k yet, that didn’t offer a money market fund or bond fund, and those are the safe havens that you need to move your money into when things get rough.

For the record, I do agree with you about being careful about who you listen to, the “experts” usually work for large finance firms, and it is usually in their best interest for you to buy and hold an investment rather than move your money when an investment fund doesn’t perform well. But I do believe that the 401k (or 403b etc.) is one of the best investment vehicles for most people to start a retirement account.