my husband's ever shrinking 401K balance

[Goldy1]

MY dh is in his late 30's. He has been contributing to his 40k at his 2 long term employers for many years, I would say since his early or mid 20's
About a year ago, he showed me that he had about 100K in it.
Most of it is his money b/c years ago his employer halted the match.

About 2 days ago, it was at 63K.
I currently have it invested in an ing target retirement 2025 so it is 100% moderate so it's not all stocks. I Went more moderate with it a few months ago due to investment fears and lack of current income.

ALso, he got laid off in nov so no contributions are going in to take advantage of "buy low" to even out previous buying high.
I wonder if next year there will be enough in it to buy a used car. lol

[GREENBACK]

Goldy 1
Everyone is in the same boat that hopefully doesn't sink before retirement. Did you take it out of the 401k to put it in the ING account or is that a 401k option he took? If you moved it I'd think an IRA would have been the better move(more choices).

Can you move a 401k without penalty for a layoff or does he actually need to seperate from his current employer?

[Goldy1]

His 401K through his employer was set up with ING. In other words, his work used ing for thier 401K plan.

I have left i401k funds there. I could move it if we wanted to. This was his first ever layoff at his employer in 8 years there. It was an indefinite layoff, not e temporary one. Insurance etc was cut off for him, and I do not see him getting called back there due to economic conditions of this auto related supplier. lol.

For now, I guess it's ok there. No there are not a ton of options in the plan.
I like the simplicity of target retirement funds.
I suppose I could evenually look at expense ratios (assume this would be the main variable, are there others?) and compare them to a target retirement plan with fidelity where we have our roths(which are also in target retirement date funds.)
If he get s new employer with a 401K I suppose we will roll it over if the job seems stable and esp. if there is a match.

[disneysteve]

There is a growing consensus that the 401k has been a failed experiment. There is a good article about it in Money magazine this month. The average balance is low. Investment options are sub-par. Fees are too high. Participation rate is low. And most workers don't have a clue what they're doing. I think once the current financial mess clears up, you're going to start hearing politicians talking about reforming the 401k.

[jIM_Ohio]

you have 16 years before you can access the money without penalty... so leave it be with a long term plan.

There is a growing consensus that the 401k has been a failed experiment. There is a good article about it in Money magazine this month. The average balance is low. Investment options are sub-par. Fees are too high. Participation rate is low. And most workers don't have a clue what they're doing. I think once the current financial mess clears up, you're going to start hearing politicians talking about reforming the 401k.

I think that is a one sided opinion. It fails because people do not use it and want to rely on something else or deal with it later.

[disneysteve]

I think that is a one sided opinion. It fails because people do not use it and want to rely on something else or deal with it later.

I agree, Jim. Personally, I wish I had a 401k available to me. I can't understand why anyone would have one and not use it.

I do realize, though, that you and I are not the typical American worker when it comes to financial knowledge and retirement planning. In the past, workers had a company pension that was automatic and didn't require any decision-making on the part of the employee. Now, those plans are virtually gone and have been "replaced" by 401k plans that leave all decisions up to the employee. That's a huge change that hasn't been handled all that well.

First problem is at most companies employees need to enroll in the plan. Now, companies can automatically enroll people and I think that's a great idea. That should be the standard practice.

Next problem is the employee has to choose the investments. Most people haven't got a clue. I'd like to see it be automatic that at least 5% of salary goes into a target date fund. Give folks the option of changing it if they wish but at least start them out on a reasonable path. Most people will do momentum investing and just keep doing what is already set up for them. It may not be right but it is reality.

Next, eliminate the option of borrowing your 401k money. That shouldn't be a personal ATM. Make it too easy to get to the money and people suck it dry.

Require some kind of counselling session when an employee leaves the job explaining why they shouldn't cash out the money.

I think lots of things could be done better with 401k plans that would make them more successful.

[Scanner]

YOu can't beat a 401(k)/403(b). . .you get a no-risk 25-100% return from the money match of the employer.

The only downside is the lack of good investments (high management fees) you often have to choose from.

It is also a bit passive for my taste now that I like a more active approach to managing my portfolio.

That being said, you can still actively manage other investmetns and leave your 401(k)/403(b) on autopilot. I don't actively manage my entire portfolio anyway.

[Russell]

Goldy1, I think most 401ks are in the same situation, myself included. My portfolio took a 50% hit but there's not much I can do about it now. Unless you want to spend a lot of time carefully selling and buying stocks it's best to leave things as is. When the market recovers so will your stocks and at that time you can rebalance. If you sell now, you'll be selling low so the best thing to do is buy more now (not necessarily the same stocks/funds as before though). At least that's the approach I'm taking.

[GREENBACK]

I have a pension plan through the state that is , of course, professionally managed. The returns are generally better than what I can acheive in my 457 plan. I don't think it's neccesarily because of the professional mgt. in the pension as much as the limited choices in the 457. There are a few good choices but some of the large caps have grown so big that they don't produce like they used to. I would like to manage this stuff in something where I have more options(IRA) but that's not a possibilty w/o being hit with taxes and penalties. I do O.K. with it and the tax free investing is nice but I really wish these plans offered more options for those who would like to actively manage their accounts. I think this would help those w/ 401k/403b/457 plans.

[jIM_Ohio]

I agree, Jim. Personally, I wish I had a 401k available to me. I can't understand why anyone would have one and not use it.

I do realize, though, that you and I are not the typical American worker when it comes to financial knowledge and retirement planning. In the past, workers had a company pension that was automatic and didn't require any decision-making on the part of the employee. Now, those plans are virtually gone and have been "replaced" by 401k plans that leave all decisions up to the employee. That's a huge change that hasn't been handled all that well.

First problem is at most companies employees need to enroll in the plan. Now, companies can automatically enroll people and I think that's a great idea. That should be the standard practice.

Next problem is the employee has to choose the investments. Most people haven't got a clue. I'd like to see it be automatic that at least 5% of salary goes into a target date fund. Give folks the option of changing it if they wish but at least start them out on a reasonable path. Most people will do momentum investing and just keep doing what is already set up for them. It may not be right but it is reality.

Next, eliminate the option of borrowing your 401k money. That shouldn't be a personal ATM. Make it too easy to get to the money and people suck it dry.

Require some kind of counselling session when an employee leaves the job explaining why they shouldn't cash out the money.

I think lots of things could be done better with 401k plans that would make them more successful.

simple solution which is cheap, and creates jobs-

require all companies with a 401k to offer 4 financial courses per year to employees. Courses could be after hours or over lunch (they don't lose time) and give companies a tax credit when they provide the service or an extra tax if they do not (extra tax might be to change the highly compensated employees provisions to affect top 25% instead of top 5 or 10% for example).

[disneysteve]

require all companies with a 401k to offer 4 financial courses per year to employees.

And require all employees to attend.

[GREENBACK]

These are good fixes but they should definitely open these plans up to more market exposure. Your choices in these plans are still limited to what they think are good safe investments. The education part would help here.

[sweeps]

The 401k has some minor issues, but it's only being talked about right now because the economy is in the crapper. Once the economy recovers, the 401k will be back to being the best thing since sliced bread.

[disneysteve]

The 401k has some minor issues, but it's only being talked about right now because the economy is in the crapper. Once the economy recovers, the 401k will be back to being the best thing since sliced bread.

I don't think so. The low participation rate and low average balance, even for workers nearing retirement, was all true before the market took a nose dive.

[GREENBACK]

I think the low participation rate comes from a generation that watched their parents retire with company funded pensions. I believe there is good potential with these plans and moving forward it will probably be vital that workers participate. I think the whole pension system(particularly in the private sector) is; or maybe already has, gone the way of the dinosaur. I'll state again though that more options in the plan and more education about investing for retirement are needed. I was 5 years into my career before having the first clue about how these things worked.