ok, convince me 401 K is still smart choice

[glock35ipsc]

These are accounts that I have not touched - not added to, not taken from, not altered anything about the investments held in the accounts. I have just left them alone untouched.

Traditional IRA:
6/23/07 value - $18,449.85
12/31/08 value - $9,379.37
12/31/09 value - $14,199.97
Today's value - $17,725.30

I realize that I'm a little late to this game, but look at Disney Steve's numbers and think about this for a moment...

He left this particular account alone. Between 07 and 08, the loss in value would have me guessing that the share price of the stock/bond/mutual fund/ETF or whatever it was had dropped by nearly half. If he had purchased (especially through dollar cost averaging) into this account during the time those prices had been depressed, on paper he would have made a killing come 2009!

That's the best time to buy, when things are going down. That is, as long as you are buying into quality investments, and not some shady stocks. Like Warren Buffet says: "try to be fearful when others are greedy, and greedy only when others are fearful." That is almost a sure fire way to growing a successful account.

My wife's 401(k) and 457 are matched 100% up to the first 8% and 3%, respectively. My SIMPLE IRA is matched 100% up to 3%. We have never decreased contributions to those, and all the while got all the "free" money invested into our accounts.

I'm not sure which I like better... free money, or compound interest! Heck, I love 'em both!

(BTW DisnetSteve - Not picking on ya, just using your numbers as a reference. )

[littleroc02us]

I believe sometime back I had mentioned that when I left my previous job I cashed out my 401K due to the market crashing and me watching my piddly 2000 shrinking fast! okay, so fast forward 2 years later. I have a new job that later this year I will be eligible to contribute to a 401K. the company does a profit sharing. so either way they contribute to mine even if I don't. My thoughts are this.

So, by cashing out your 401k you've missed out on the 100% return. The best part about 401k's is that the employer is giving you money basically to invest along with yours. The key to longterm investing is to not touch your money and to keep putting more in.

[LivingAlmostLarge]

Cicy33, here is true numbers. contributing the maximum for 2006-2010 = $75k contribute
401k
2005 - $5kish
2011 - $189602

My DH started in 2005 with a job in September and we contributed I think $5k. Then we started maxing out in 2006 until now.

[disneysteve]

He left this particular account alone. Between 07 and 08, the loss in value would have me guessing that the share price of the stock/bond/mutual fund/ETF or whatever it was had dropped by nearly half. If he had purchased (especially through dollar cost averaging) into this account during the time those prices had been depressed, on paper he would have made a killing come 2009!

(BTW DisnetSteve - Not picking on ya, just using your numbers as a reference. )

This is an account that I don't actively contribute to anymore. That's why I didn't add to it. It wasn't because I was scared off by market conditions. I hold similar funds in other accounts and I did dollar cost average into those over this period. So I did make that killing - just not in this account.

[Seeker]

Every single 401k is different.

Previously I worked for a company that essentially whenever the company had difficult financial times, they'd not contribute any monies to the employees 401k. So the "match" was come and go. Employees were free to continue or suspend their contributions as well.

With that company 401k plan, I'd not be vested until 5 years from the start date. So, with non-vesting status (I did not work for that company for that long a time period), I lost all their matching portion of the contributions.

When I left that company, they moved my remaining share of the money into an IRA account from one financial broker to an entirely different financial broker.

Essentially now, I pay a yearly management fee since the total dollar amount is below some minimum balance.

So that 401k turned to IRA was a total complete waste of just short of five years in that workplace. Grrrr.

---

At any rate, the only advice I can offer you Cicy, is to read the policy and understand the terms.

Check with your peers at the company and see if they have any regrets about contributing to the 401k plan that is offered by that company.

Understand the vesting terms and company policy.

Understand what the company may do if they hit financial constraints. From peers find out if the 401k has been suspended for any period of time in the past.

Ask questions if you do not understand what you read. HR should be able to help.

[disneysteve]

With that company 401k plan, I'd not be vested until 5 years from the start date. So, with non-vesting status (I did not work for that company for that long a time period), I lost all their matching portion of the contributions.

When I left that company, they moved my remaining share of the money into an IRA account from one financial broker to an entirely different financial broker.

Essentially now, I pay a yearly management fee since the total dollar amount is below some minimum balance.

So that 401k turned to IRA was a total complete waste of just short of five years in that workplace.

Why was it a waste? Okay, so you didn't get the match. You still got to put money away for retirement pre-tax and now the money is totally in your control in the IRA. If you don't like the fee structure where you are now, move it to another company. There is no reason to keep paying an annual fee.

[moneybags]

and for the one that listed the taxable income issue. Again, that is not an issue for me. I don't make more than 24,000 a year right now. so lowering my taxable income is not a huge incentive for me. perhaps if I earned closer to 40,000 it might be.

I don't know your filing status or dependent situation, but there are still tax savings to be had at your income level by investing in a 401k. If you invest $1000/year, you could possibly save $100-$150 in taxes. There is also a great tax credit for people with income in your range. You can get up to half your savings back in a tax credit, depending on your situation. So if you invested my $1000 example, you might be able to get another $500 reduction in your taxes. Invest $1000, get $600-$650 reduction in taxes. Again, this is just an example and without all your exact details it may not apply to you.

[gambler2075]

Therein lies the problem. If you only invest when it feels safe you will be buying high and selling low. I'm sure it felt safe to invest in early 2007 as the market was flying high but the economy was secretly rotting away. The best time to invest was from Nov 2008-March 2009 when there was blood on the street and everyone was saying the sky was falling.

I think this reflects the real problem here. It is that people, for some reason, cannot bring themselves to being contrarian. People buy high because everyone else is doing it, and sell when everyone else does, thereby locking in losses. I look at people that got out of the markets in March, 2009 (and are just now getting back in) and all I can do is shake my head. If you just think about it, the more people that are telling you to sell, then the more you should be buying... because everyone is selling and nobody is left to sell. Same thing when you feel like you should be buying. Just look around, does everyone else say that you should be buying? If so, you should be pretty darn scared about buying, because soon, nobody will be left to buy.

One graph which I love, shows the typical cycle of fear vs greed in a typical stock. You can extrapolate to the overall markets, which shows why it is foolish NOT to be a contrarian.

Timing the market doesn't work.
Time in the market does work.

I love it how people make these blanket statements... Maybe, for the MAJORITY of people, your statement is true. But everytime I hear something like this from non-traders, people who would have no idea about the nitty-gritty of trading, it makes me want to smack them upside the head with my 1099 forms (2009: 542% return, 2010: 125% return).

Whatever.


g

[jpg7n16]

I love it how people make these blanket statements... Maybe, for the MAJORITY of people, your statement is true. But everytime I hear something like this from non-traders, people who would have no idea about the nitty-gritty of trading, it makes me want to smack them upside the head with my 1099 forms (2009: 542% return, 2010: 125% return).

Whatever.


g

Conveniently, we usually give advice that needs to be applicable to the majority of people - so it works out

For anyone reading this post by gambler - and seeing his ridiculous returns (well done btw) please remember that he's been doing this a long time (experienced) he knows a lot about the science/process/art of trading (educated) and he has several hundred thousand with which to use in his trading strategies (large positions, able to qualify for reduced comissions on account size and trading volume, larger positions = smaller percentage paid to comissions).

And he's very good at it (obv)

But most people - who have no experience trading, no education on trading, and little capital (equals little positions, and higher comissions), would fail miserably at this without a lot of luck. - by Gambler's own admission in other posts, most people who enter into the world of trading fail miserably.

[gambler2075]

Sorry for the little rant... I guess I get a little defensive at times when it comes to trading. I think the reason for this is that, imo, the vast majority of the non-trading public pretty much hates traders, for some reason. I think everyone blames traders for tanking their 401K's and probably more than a few harbor some resentment at anyone who is successful at it, without realizing how difficult it is to be good at it. IMO, the people that are the true culprits here are the big banks/analysts. They are the ones who are making an absolute killing off the backs of retail traders... by convincing mom-and-pop non-investors that venture into the world of stocks to buy high and sell low (by upgrading at the top and downgrading at the bottom). It is also this resentment of traders that pushes things forward like the 1/4% tax they are trying to add on basically ALL equity transactions.

Here is a link to over 1000 pages of comments from a trader messageboard I am on.

Forums - 1/4% Tax on all stock trades pushed in NY Times today

Essentially, traders view this tax as something that would kill most traders, and dry up liquidity. They also view it as something that the vast majority of the public would use to essentially 'get back at' traders for 'tanking their 401Ks'. As a side note, I have noticed that there is a huge difference between telling someone that you 'manage your investments' vs mentioning that you are a 'trader'. People look at you completely differently.

Finally, I'd like to point out that successful traders pay quite a bit in taxes, which benefits society, and, the people that are non-traders. Last year I had to pay over 200K$ worth of taxes on my trading profits, which is one less reason for non-traders to hate traders.

g

[disneysteve]

I love it how people make these blanket statements... Maybe, for the MAJORITY of people, your statement is true.

Conveniently, we usually give advice that needs to be applicable to the majority of people - so it works out

Exactly. When I give advice here, or elsewhere, I am typically addressing the masses. I would never suggest to someone that they become an active trader as the basis of their financial life. For the vast majority of people, probably nearly 100%, the key to long-term success will be investing in a diversified portfolio and feeding that portfolio steadily throughout their working years.

by Gambler's own admission in other posts, most people who enter into the world of trading fail miserably.

Sorry for the little rant... I guess I get a little defensive at times when it comes to trading. I think the reason for this is that, imo, the vast majority of the non-trading public pretty much hates traders, for some reason.

I don't hate traders at all. On the contrary, I quite admire those who are able to do it successfully. It takes a serious skill set to accomplish what you have accomplished and it simply isn't something that most people can do. Either they don't have the knowledge, the bankroll, the risk tolerance or the "cajones" to go that route.

[dbstylee]

401ks are horrible given the quantitative easing by the fed...any paper assets are going to be devalued at the rate of the dollar...in this market precious metals and commodities are the only way to go

[YourLifeSolution]

Do it again, but if you hate risk in the market so much then just invest in super conservative/fixed investments. My father did and 30 years later has done quite well being so risk-free.

[Frugal]

I went ahead and cashed mine out after getting laid off from one job. Maybe not the best choice, but it gave me immediate money in a crunch, even after paying a penalty.