Cargo Man

Since 2008, I have lost money in the market and have been disturbed by current events.
I'm beginning to wonder if the market is a Ponzi scheme.
So I,m not comfortable with a 401K at the moment. Any recomendations?

EasternATC

More information please. Would your company contribute any matching funds? Precisely how is the money invested?

Regardless, it's usually best to have a 401K just so you can say you are--wait for it--saving for retirement. Small contributions over long periods of time really do add up, even at low rates of return. Don't forget the tax benefits and the portability should you change jobs.

Cargo Man

Yes , I believe matching is up to 5% of our pay. I also wasn't thinking about portability of job chaging. I 'm glad I asked.

DYNASTY HVY

Maybe this will help explain the plans .
http://en.wikipedia.org/wiki/Roth_401(k)




Ally

Twin Wasp

Life is a Ponzi scheme. The question is, how bad do you the meltdown is going to be? Stocks are not the only thing most 401ks let you invest in. Move down a step or two to government bonds, "backed by the full faith and credit..." If you think the US government is in jeopardy, a 401k is probably not for you.

Go to the far extreme, what's gold worth? You can't eat it and it doesn't keep you warm but people are paying a 1000 dollars an ounce, hoping and expecting that other people will also think it's worth that much. But if push comes to shove, what use is it? A brick of 7.62x39 could be much more useful.

globalexpress

Cargo Man-

I could try to help you if you want. I have my Series 65 but I am not working as a financial planner, so I have nothing to sell you- don't worry!! Consider any advice I would give you as "general stuff to think about" only.....

Questions you would need to answer for starters:

1) How many years do you have to go to retirement?

2) How much money do you want to have annually, after Social Security, pensions, PBGC, etc., to live on?

3) What are the investment options in your 401(K)? (list the 5 letter identifiers)?

4) How much risk are you willing to take? (not an easy question to answer, but I'll frame it like this since we're talking generalizations.......how much would the stock market have to drop before you got so scared that you would sell everything, including your long term investments in stock?)

5) How much income do you have now?

6) How much do you think you can put into a 401K, IRA, whatever, per month? Is there a company match to your 401k?

Your comment about the stock market being a ponzi scheme may or may not hold out to be true. We can look at long term historical returns of various asset classes and hope(!) that those returns will continue into the future long term. However, the future for equities, bonds, real estate, commodities, whatever, may not look like the past. We invest in "risky" securities such as these in the hopes that the future for these asset classes will look like the past and we'll be rewarded for that risk many of us take. However, if a person is going to jump into and out of the market based on short term losses, those types of investments are probably not suitable for you, or at least not in large doses. If you personally can't handle the wild ride that equities provide, for example, there are ways to dampen those oscillations, but of course the expected returns for these less risky securities will likely be lower long term.

Anyway, if you want to throw some general information up, I'll give you some ideas to think about. Again, not trying to sell you or anyone of this forum anything (I have nothing to sell!)- just trying to help a brother out I honestly feel badly for people, especially my peers, who aren't financially savy and get taken to the cleaners by some less than reputable "financial professionals" more interested in generating commission than working in their clients' best interest.

BoilerUP

My wife feels the same way as the OP about her Roth IRA...pretty much even from when we started & seeded it in early 2007.

The market is lower than it was for a good portion of 2008, which explains why your 401k has lost money...although any mutual funds you bought last fall near the market lows should have given you a pretty good return by today (at least if they were primarily stock funds).

At the very least, contribute enough to get the maximum company match - you're leaving free money on the table if you don't. Plus - if you're concerned about losing money then put your entire 401k worth in a Money Market fund. You won't earn much (maybe 1%?) but you'll largely be protected against losses.

Cargo Man

I missed this open season month to start a company 401K . Last time I didn't do it cause it really looked like a furlough was coming.

Thanks all.

VTcharter

Staright Money Market accounts are little better than a savings account and hard to classify as an "investment" to me. Money market funds are slightly better in a good market but are not immune to losses either. For instance, in the last year, some money market funds have actually lost money. How?? Some were returning nearly 0%, (think .03%). Better than nothing, right? Wrong. Now take away the .05% fund management fee and what are you left with...negative numbers. Money market funds can be safer than stocks, but are not immune to loss and certainly will not likely return anywhere near many other investment choices in the long term.

With the little retun of a Money Market account and the added factor of having someone elses hands on your money, you may be better to cut a hole in your mattress and stuff it full...just don't tell anyone else and you should be safe!

globalexpress

Well, you still may be eligible to contribute to an IRA. A deductible Traditional IRA does the "same job" as most people's deductible 401k plans. A Roth IRA is possibly an option as well. Further, if you're a poor "Cargo Man" and your household income falls within certain limits, the government will pay you to contribute to an IRA or 401k. If you're a young guy starting off in this business, most likely you would be eligible for this tax credit.



The fees deducted for the maintenance of the money market would be reflected in the NAV of the fund. Unless the yield of the money market is actually showing negative, you should be receiving a positive NOMINAL return. With the yields many money markets and short term investments are returning recently, it's likely your REAL return is negative, which takes into account the effects of inflation.

I also wouldn't suggest that investors put large sums of money in a Money Market account simply because these type of investments are not "insured" per se. Granted, no brokerage house, bank, whatever, is going to let their money market "break the buck" if they can avoid it, but this last crisis saw a lot of banks, brokerage houses, etc., having to back their Money Markets in order to prevent the NAV of their respective Money Markets from breaking $1.00. If you're scared and you want to put your money someplace "safe," you're better off with an FDIC/NCUA insured account or perhaps a short term bond fund where the underlying investments are maybe Treasury Bills, insured CD's, or similar. Again, the risk of inflation outpacing your returns become a risk in that case.