Retirement funds in danger for millions of Americans

[dcsmart]

For millions of Americans, the deepening recession has meant a dramatic drop in funds put aside for their retirement. While many have seen the value of these accounts slashed in half, the pensions of others have been rendered virtually worthless as their employers file for bankruptcy. For others, a layoff in the family spells disaster, and saving for retirement is out of the question.

Many older workers have been forced to cash out their 401(k)s to cover mortgages and pay credit card debt and other expenses, with the amount withdrawn sharply reduced from their original investment. For other, particularly young, workers, the prospect of putting aside anything out of their weekly paychecks is out of the question.

While there are many 401(k) plan variations, until recently an employer has commonly matched 50 percent of an employee's contributions up to 6 percent of the employee's income. These funds can be set aside tax free, and are most commonly invested in an assortment of mutual funds.

Now, more and more companies have stopped making matching contributions to these funds. Coming on top of wage cuts, this amounts to yet another reduction in real wages for millions of workers.

In an article posted on CFO.com entitled "Stopping 401(k) Matches: The New No-brainer," Alan Vorchheimer of Buck Consultants is quoted as saying, "this is just so easy.... Almost every company is being forced to consider it.... Let's be candid: the CFOs of a lot of these companies are going to their benefits people and saying, ‘Hey, can we get rid of our match?' "

According to a list compiled by the Pension Rights Center, a rapidly increasing number of companies are answering "yes" to that question. While not comprehensive, from June through December of 2008 the list contained the names of 29 companies.

In the first few months of this year the list of those cutting matching contributions has grown to more than 110. Among the most recognizable names are General Motors, Chrysler, Ford, Motorola, FedEx, UPS, Starbucks, NCR, Sears, US Steel, AMD, Reader's Digest, Macy's, Diebold, the New York Daily News, Libbey, and Hewlett-Packard.

This corporate assault on 401(k)s, and the dwindling value of these accounts with the collapse of the stock market, show how the shift over the last few decades from defined benefit plans, often referred to as pensions, to 401(k)s now threatens the retirement of millions of workers.
Text

FULL ARTICLE
http://www.wsws.org/articles/2009/mar2009/reti-m06.shtml

[indepat]

1. No shit: who would have ever figured employers would stop making matching 401(k) contributions?

:P

[CountAllVotes]

2. that is if you have a 401K

many older Americans that are still working don't have and never have had and never have wanted a corrupt 401K. Some of the lucky ones out there saw the light a very long time ago and opted to contribute to insured IRAs located in banks and/or credit unions.

:dem:

[MercutioATC]

3. 401k's aren't "corrupt"...they're investments.

And, like any investment, one has to pay attention to them.

People who got lazy and assumed that the stock market would always go up...despite the signs that have existed for years...kinda deserve what they get.

[CountAllVotes]

4. keep telling yourself that

over and over and over again until you believe it just like Ronnie wanted.

:kick:

[MercutioATC]

5. Ok, what's "corrupt" about 401k's?

You get to invest pretax money which not only gives you more to invest, but lowers your yearly tax liability.

Some employers match funds, which is more free money.

You can borrow against them and pay the interest back to yourself rather than to a bank.


The only requirement for success is that you do what you have to do with ANY investment and actively manage it. How is that corrupt?

[CountAllVotes]

6. how's your 401K doing these days?

figure it out - if the money was in a simple 5% bank acct. you'd be way ahead of the game right now.

Simple really.

[MercutioATC]

7. I'm up 8% over the last two years.

...because I ACTIVELY MANAGED it and went to 100% treasuries in January 2007.

Those with 401k's have the option of sticking their money in non-equity accounts with a guaranteed rate of return (if the actual rate isn't guaranteed, there's at least a guarantee that you won't lose any principle).

They also have the option to invest in equities, which give a higher potential rate of return (or loss). My 401k spent 2003-2006 invested in a fund indexed to the EAFE...and it averaged a 24% rate of return for those four years. I'm happy to have had that option.


...so I'm WAY over the returns I would have received on a 5% bank account....if such a thing even existed these days.

[CountAllVotes]

8. well ...

my IRA is up 14% in the past two years.

:D

:dem:

[MercutioATC]

9. Are you up an annual average of 17.3% over the last 6 years?

My point is that people didn't HAVE to lose money in their 401k's during this downturn. They simply had to manage their money.

I have friends and family who lost a lot of money. Without exception, they either got greedy or they failed to stay informed. That's unfortunate, but it doesn't mean that the concept or practice of investing in 401k's is "corrupt".

[CountAllVotes]

10. yes, I am up almost 35%

I locked it in at a very high rate when it was there in 2006. Will be there for another few years luckily. Three years at approx. 7% = 21%. Prior three years before that average was about 5.5% (another ~15%). Total for six years is over 35%.

It has been lower, yes - lowest was 5% for about 2 years.

It was in the stock market from abt. 1995-2000 and I got out of it after being advised to exit from my financial institution which was the best advice I ever got.

I'd NEVER consider putting any of it back in either. No thanks.

:dem:

[MercutioATC]

11. See? You actively managed your investments and came out ahead.

Congrats and kudos!

My problem is that I get no tax benefits from contributing to an IRA. The 401k both gets me matching funds (they match the first 5%) and allows me to contribute pretax money.

I really believe this is is an education/responsibility issue rather than one of malfeasance. People who look after their investments do better than those who don't, regardless of what they do with their money.


(and that 17.3% was PER YEAR...I'm up a total of 106.5% over the last six as a total)

http://www.tsp.gov/rates/history-summary.html
(sorry, can't link directly to the page..."Returns" on the right side of the page, then "TSP Individual Funds" under "Historical Returns" on the left)

2003-2006 in the "I Fund", 2007-present in the "C Fund".

[GoesTo11]

21. What are the best books you know of? What to do now?

I know looking back that the smart thing to do was get out of stocks before they went down. But I'm not any smarter now than I was then. How do I actively manage my smaller remaining account now?

1) Should I just get out and get into cash now? Or what?
2) If I do that, how will I be able to tell when to jump back in any better than I did at jumping out?
3) If one actively can manage based on a good sense of which way the market is going, then do you just get put options to take extra advantage of drops etc?
4) Gold?

[Po_d Mainiac]

24. Stay focused

The Bond bubble is the next to drop an egg.......Insured MM's don't make squat, but at this stage, a 3% yearly gain beats the shit out of double digit losses........YEAR TO DATE!

The S&P will touch 750 before it slides past its present value to rest in the 400range (if we're lucky) There will more carnage as fools think the bottom is in, and take the head first jump into the shallow end of the pool.

I'm up 6% since the implosion. No pension, 401(K) or 403(b)

[dcsmart]

12. I wish someone told me

i have about 25 years until "retirement" and i am still contributing, so i hope the old logic of long term investing is still valid.

[MercutioATC]

13. With a 25-year horizon, you're doing fine.

I'm only 7 years away, so I have to be more risk-averse. If I had longer, I'd start slowly buying back into equities now.

[CountAllVotes]

14. An 80 year old retired mathematican was a neighbor

We discussed this very briefly. She said over time, there is no difference between having your money in a bank/CD than in the stock market. Sadly, she passed away a couple of years ago but I figured she must know what she was talking about. She had zero money in the stock market and died with a home and money in the bank and a pension as well.

:dem:

[MercutioATC]

15. "Over time" is the caveat. Over WHAT time?

Over the last 6 years, there's certainly been a difference. We're perfect examples. We both kept track of our money. We both gained. The difference was that I had the option of investing in equities.

You're up a very respectable 33% in those six years.

I'm up over 106%...and now my money is back in treasuries, so I'm not risking any of those gains.


"Over time" implies that one is lazy...that they invest in a set vehicle and never adjust it. If one manages their money, one can do a lot better than fixed-rate investments.

[CountAllVotes]

16. likely over the past 50 years

being she was 80 years old this was her framework. So, you invested your money in the DOW in 1950. With all of it ups and downs and STRESS you end up with about the same amount.

Sounds about right to me.

[Wednesdays]

17. Reaganomics, Reaganomics, rah, rah, rah!

Yup, the "smart ones" should get all the money in the universe, and the 95% who are the losers can go fuck themselves.

:sarcasm:

[Joanne98]

19. I'm thinking about getting a bumper sticker that saz "Kill the Winners"

Think that would be too offensive? lol

[GoesTo11]

18. If the whole market goes down 10 trillion, somebody or other has to lose a lot

Are you thinking that everyone should have sold and then no one would have lost their money? Who would they have sold to? Larger suckers? Hedge funds -- nope, the hedge funds had a lot more time to pay attention to their investments. If the market as a whole is back down where it was 15 years ago, it's not that it was a great investment and you just had to pay attention. It was a crappy investment. It was a casino. It was a rigged game. However, since it seems to be a completely rigged game, retirees might do well to avoid stocks in the future. There is no 8$ growth, so just don't plan for it.

[dickthegrouch]

20. NONE of us were taught how

The school system failed us.
The employers failed us
The money managers in the 401K plan administrators failed us
If you don't even know what you're missing, it's very hard to ask for it.

What I want to know, now, is why aren't these investment strategy experts CHANGING their STRATEGIES to help us. I just had a very interesting conversation with the manager of one of my funds (which is showing -39% on the year).

The notion of CHANGING strategy seems completely off the table to him - "We'd need a vote of the fund owners" - WELL FUCKING ASK US FOR IT THEN. I am not holding my breath.

I specifically engaged that manager with comment that I do not know as much as him about how to do this stuff, or I would be doing it myself. He is NOT worth the fees if all he can achieve is -39%.

He has gone away to think about that.

[upi402]

22. zactly. our fund manager said the same. no way to actively manage THAT!

he couldn't even say exactly what vehicles the money was in!!! my god, he gets loads of dough - like the local weatherman or a ceo, he gets paid no matter HOW he fucks up.

[leftofthedial]

23. ha ha ha ha ha ha ha ha ha!

...




ha ha ha ha ha ha ha ha ha ha ha ha ha ha!


ha ha ha ha ha ha ha ha!

ha ha ha ha ha ha ha ha ha ha ha ha!

retirement.

like that's gonna happen.