Are 401k's Safe?

Hey everybody i need words of wisdom here. Most guys on this forum seem pretty well established and i know there is a load of experience here for this topic so i have come to you to ask about it. Im 22 years old, and i own my own house. I work for a pretty crappy company right now but im just doing it to get a foot ahead and in the door to somewhere reputable eventually.

In the shape our country is in right now how wise is it to get into a 401k at my age? I know how 401k's work i have a good understanding of the risk and the benefits if everything goes as planned but with the shape of our country and all the crap going on is it really safe? I did the math and my company will match me 25cents on the dollar, so basically 25% interest on the money i invest per year.

What are you experiences/horror stories on this topic?

They're pretty good as long as you don't keep second guessing yourself and re-allocating to different funds, etc. At your age, it's best to put more money in medium to high risk funds. Still, put some of it in low risk so you're at least diversified. I'm 34 and my 401(k) lost $7000 this last quarter. There are always ups and downs so it's best to not worry. It'll go up again eventually.

Another option is an IRA. Google IRA and Roth IRA. Compare the two....Roth IRA is a very good option...something that I definitely need to do as well.

I work as a financial advisor for a Broker/Dealer headquartered in Omaha, NE. I am fairly limited as to what I can say since posting on a public forum is considered advertising and should be pre-approved prior to me displaying it. An employer matching 401(k) is always a good deal. Think of it as free money. I would at least invest the max amount that they will match. For other advice on what funds or other investment accounts available to you please contact me off line at [email protected].

Also, this is a good start; http://www.americanfunds.com/resources/basics/index.htm

Start now Clint. I started when I was about 19 or 20 and if I stop putting money in now and things stay about the same I will have 1 million dollars by the time I'm 65. If I continue (which I am) I will have A LOT more. I started putting 15% in but am now down to 8%.

Always think long term not short term.

Yes 401K's are good as long as they are diversified. Don't put all your eggs in one basket, sort of speak.
It would be very VERY wise for you to start a 401K at your age. Because by the time you retire, who knows what IF any social security will be around for you.
The sooner you start a retirement plan, The more you will have when you retire.
You don't need to go high risk, you not trying to make a lot in a short time. Remember Retirement plans are for the long haul. I would stick with low to medium risk, you'll accumulate more in the long run!
Plus I would put in the max amount that your employer will match, that way your getting the most out of what your company is kicking in. Not to mention the tax break you get.
You won't even notice the money out of your check after the 2nd or 3rd check.

thanks for the replies guys,

i understand the workings of it all, and it sounds like a very good thing to get into at my age.

But what are the odds of me doing this till i am in my 40s or something and the whole thing collapses and im left with nothing? I have a lot of trust issues with all these retirement plans.

My company goes through principal and will match me up to 6% so if i go with it i wont put in more than 6%

Wouldnt investing in gold be wiser i mean gold will always hold some value. With the state our country is in right now is it really safe to put any faith in any of the bullshit systems in place right now?

Back to my tin foil box :biglaugh:

clintard said:

thanks for the replies guys,

i understand the workings of it all, and it sounds like a very good thing to get into at my age.

But what are the odds of me doing this till i am in my 40s or something and the whole thing collapses and im left with nothing? I have a lot of trust issues with all these retirement plans.

My company goes through principal and will match me up to 6% so if i go with it i wont put in more than 6%

Wouldnt investing in gold be wiser i mean gold will always hold some value. With the state our country is in right now is it really safe to put any faith in any of the bullshit systems in place right now?

Back to my tin foil box :biglaugh:

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I think your thinking more on the lines of stock option retirement plans. When the company tanks, so do the stocks, so your retirement investment is gone.
But a diversified 401K is spread out amongst many different stocks and investment companies. So the risk of losing all the money you put in is much much less.

Also, if everybody gets into this and everyone retires pretty wealthy, then where does all this money come from? it just seems too good to be true, and you know what they say about that!

clintard said:

Also, if everybody gets into this and everyone retires pretty wealthy, then where does all this money come from? it just seems too good to be true, and you know what they say about that!

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Well talk to Heretic offline then, he is much wiser than I on this. Or buy gold if you wish.
But 401K's are a much wiser investment than gold in my opinion.

So either you're going to do the 401K or nothing? 401K is a good thing! Just DON'T pull money out of it EVER! NEVER EVER touch a 401K no matter what! You might need it now but you will DEFINITELY need it when you're older.

Max out your 401k NOW!!!!!

At your age you have every advantage.

Consisder the simple " rule of 72"

Your average annual return, divided by 72, equals the number of years it takes for an intial investment to double in value with no further contribution.

I.E. $10,000 earning a 10% return annually, which is the dow jones average over any 20 year period, will double in value in 7.2 years, then double in another 7.2, and so on.

If you chart that out you can see why the investments you make in your 20's are the most important ones you'll ever make since time is on your side, wait 10-12 years till your married, have kids, and strat thinking you oughtta start investing for retiremnet and you wasted some VERY CRITICAL YEARS....

Secondly; don't be to smart for your own good.

People hire someone to roof their house, fix their plumbing, repair a transmssion, mow thier lawn and whatever else...

Yet they take the single most important thing in thier lives, their retirement, and go at it in an ameteur manner, never having enough time to learn enough to do a good job. And none of us will ever have the time to learn the trade like the cream of the crop of fund managers and financial advisors can.

I'm not recommending a brokerage or typical financial advisor because they usually work on fees and commisions paid for by the funds they recommend and not by you, inherently they don't have your best interests at heart and will churn your account in order to generate fees and commisons for themselves.

I'm not recommending you self manage either because emotion inevitably enters your mind and the average investor earns about 4% when the market is earning 10-11% due to panic selling when it's low and opportunistic buying when they hear about the latest hot thing and buy something at it's peak.

If you start hearing about the latest great thing likely it's too late.


Don't fall prey to this.

Do not buy individual company stocks, I know some will disagree but the fund market, managed right is so much safer and can have just as good of returns.

Another thing to keep in mind is that 80% of fund managers don't even stay par with the market sector indexes of the market they work in. WHO manages the fund has alot more to do with the fund than anything else. You want the very best, and even harder is to find these guys who are not in a conflict of interest situation where their pay is dictated by the volume of fund or stock shares they move/sell...

I wish I had have heard about this company years ago

It's

http://www.smart401k.com/



They are geared for the average guy who can't walk in the door and "give" them thier money to invest.

They simply guide you in what to do with your investments and do not control them, it's up to you to follow thier guidance.

They do not accept commisons or fees from any fund or brokerage.

I signed up with them, they run your company profile, find out what options are in your companies 401k plan, and make recommendations for you based on an investor risk profile you fill out through a questionare.

They have sevaral 1000 companies profiles already, and if they don't have yours they will get it.

It's done on a simple flat fee paid quarterly and is not tied to the value of your account. I'm paying a mere $59 a quarter and it's paid me back many, many times over......

The guys names are Rick Edelman and Adam Bold, they are NOT get rich quick guys, you won't see them on late night TV pushing some bullshit plan. They've been in business a very long time (20 plus years) and have an extremely high reputation for honesty and integrity and consistently score in the very top of the industries financial advisor ratings.

I've been in my 401k for 18 years now, have had it maxed out since day one. while I did "ok" for years, I really wasn't satisfied with my returns because I was taking a "do it your self" approach, earning on average about 7-9% return when you consisder that there has never been a 20 year period in the history of the stock market that did not average at least a 10% return per year when averaged over that 20 year period.

Since I figured out that I will never learn enough to manage my money as well as an honest expert that has my best interests at heart and not his, and signed on to smart401k.com, my returns have consistently beat the market average.

Did I mention "START NOW"

And "CONTRIBUTE THE MAXIMUM THEY WILL ALLOW!"

clintard said:

Also, if everybody gets into this and everyone retires pretty wealthy, then where does all this money come from? it just seems too good to be true, and you know what they say about that!

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I promise I'm not being insulting when I say this but that kind of thinking, that it's just "too good to be true" is why most people retire poor......They think it's not possible to be rich so they never even try.....then spend 10% of thier income on lottery tickets:ummm:

Also...

Gold is a HORRIBLE investment, yes it's had a good run but we are not talking about a "good run" were talking about a 20-30 year investment plan, over the years, gold and other precious metals have UNDERPERFORMED THE MARKET, especially when indexed against inflation.

You ask about,

"What if it all collapses?"

That's where diversification and asset allocation in various market sectors comes in (the entire market, every sector, every fund, every bond,simply cannot all fail at one time, it's impossible), and the reason you much better off in well manged funds (which are a collection of individual stocks, and some bonds depending on the fund, inside a managed fund, and can be moved into and out of, and into other stocks by the fund manger) and the same reason that you move away from equities (stocks or stock holding mutual funds) and into bonds etc as you near retirement age, your risk profile is based on the years you have to "make up" a short term market downturn.

Stop listening to all the bullshit in the papers, they have no long term perspective; Economies are ALWAYS cyclical, they have downturns and then upturns but over time our economies and the business values we are investing in go up, not neccearily individual companies but the country in general; which is why you diversify.

Go to Yahoo finance, click on markets, then click on any of the markets indecies, Dow, Nasdaq, S&P, or the Russell indexes.

Once you pull them up, get the chart and click on MAX which will show you the lifetime growth chart of the index since it's inception.

You'll see that given enough time all the indexes grow, despite ups and downs. The more time you have the more aggresive you should be in stock holding mutual funds

The most impotant thing is to find someone who can help you with this, who IS NOT EARNING MONEY FROM THE BROKERAGES AND FUNDS THEMSELVES, if they are recieving money from anyone but you for giving you advice, they cannot and will not always have your best interests at heart.

Rusty McNeil said:

I promise I'm not being insulting when I say this but that kind of thinking, that it's just "too good to be true" is why most people retire poor......They think it's not possible to be rich so they never even try.....then spend 10% of thier income on lottery tickets:ummm:

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:rofl_200::rofl_200::rofl_200::rofl_200:

Or plates to hang on the wall....:clapping:

thanks so much for the replies guys i really appreciate it.

Can anyone answer this simple question? Where does all this free money come from, i must be misunderstanding something somewhere along the lines. If its not coming from the printing of all this fake money and inflation and loss of the value of the dollar, someone somewhere has to be losing money for me to be making it right? whats it boil down to?

if i just made an idiot of myself dont laugh too hard LOL im a noob

4gasem said:

:rofl_200::rofl_200::rofl_200::rofl_200:

Or plates to hang on the wall....:clapping:

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:rofl_200::rofl_200::rofl_200:

OR... Little pills that increase gas millage!

Actually the money comes from you, me and everyone else (basically). A mutual fund buys stocks of a lot of different companies. A blue chip or large cap stock fund will purchase stocks in established companies with good histories (Kraft foods, Microsoft, Union Pacific, etc), that can offer dividends or a piece of their profits to the stock holders. When you buy a stock you literally own a piece of the company, and an equity mutual fund buys stocks. In 1990 you could buy Nike stock for around $18 per share and it closed today at $66.75 per share. The company is worth more today than it was in 1990 because people are buying more of their stuff (in layman terms). The increase in value to the stock basically comes from the loss you sustained purchasing those $130 pair of shoes. (It is actually more complicated than that, but I'm not giving a seminar) If a mutual fund bought Nike at $26.75 and sold it today they would realize a gain of $40 per share. This would be passed on to the mutual fund share holders as a capital gain. The mutual fund will pass these dividends and capital gains on to the shareholders in the form of more shares in their mutual funds. Example: You make a $1,000 single one time investment in a mutual fund at lets say $10 per share you would get 100 shares. Through cap gains and dividends you get 50 shares over X amount of years. Even if the mutual fund value at the end of the X time may only be $9 per share your total account value is still $1350. You can still have an Enron type explosion, but a mutual fund can invest in 100-120 different companies so one company going belly up won't sink the entire ship. Your best bet is to discover what your risk tolerance is and invest in appropriate funds.

Best qoute that I have heard that is credited to Warren Buffett is;
"Investing for the long term is like climbing a flight of stairs with a yo-yo. (flight of stairs is time and yo-yo is investment amount) As you go up the stairs the yo-yo will go up and down, but when you get to the top of the stairs even if the yo-yo is at its lowest point it will still be quite higher than where it started."

Investors should carefully consider the investment objectives, risks, charges and expenses of all investments. This and other important information is contained in the prospectuses, which can be obtained from your financial professional and should be read carefully before investing. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity. The aforementioned comments should not be considered investment advice. Please contact your local financial professional for guidance.

clintard said:

thanks so much for the replies guys i really appreciate it.

Can anyone answer this simple question? Where does all this free money come from, i must be misunderstanding something somewhere along the lines. If its not coming from the printing of all this fake money and inflation and loss of the value of the dollar, someone somewhere has to be losing money for me to be making it right? whats it boil down to?

if i just made an idiot of myself dont laugh too hard LOL im a noob

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Quit listening to the doomsaying anarchists, this countries economy has been running well for over 240 years.

I suggest you do some online research (from non-political sources) on economics in the US since it's way too complex for me to really answer your question.

Here's a link that might help

http://www.investopedia.com/university/economics/

Pretty decent website, you could spend months just learning from this one....

And I commend your interest, I wish I had have even thought about this stuff before I was 28 or so instead of where my next toy, beer, or piece of ass was coming from.

Sorry for the two overly long posts; it's a subject near and dear to my heart, and one I think our school systems are sorley lacking in since they're too busy teaching useless crap.

I would definately invest in your company's 401. I started at the age of 20 and you cannot begin to believe how much the sum of money will begin to add up. As Mark said this last quarter we took a big hit, but in the past month I am back up again past where I was, not including deposits. Like everyone is saying, spread your money out between two or three different funds (at varying risks) and let it ride. I would for sure invest in one high risk fund while you are young. That is what all of the 401k advisors will tell you. You might lose a large amount of that fund quickly, but you can also gain very quickly. Good luck and let us know what you decide.

P.S. you're lucky to work for a company that will match any kind of percent.

When it come to saving, the worst thing that you can do is nothing.

If your company offers any type of matching, it's a no brainer. If they don't offer any matching funds, at your age a Roth IRA is probably a better investment, as it will have many years to grow and will be tax free upon withdrawal.

Our company had the principal 401k but we just switched to T Rowe. Principal also has a self directed brokerage option where you can choose virtually any stock or fund you want. Check to see if it's offered..not saying to do it but gives you a lot more options.

Other thing for investors in general..check out thelion.com..is the BEST site for insights on stocks. Some of the guys are uncanny in their picks. All type of investors there (daytraders, hedge fund managers, mom and pops, etc). When i'm not checking in here I'm over there monitoring the Wall street pit. Please invest wisely