401k sadness

[abelenkpe]

K, is it time to give up on this stupid thing or what?

My future has been robbed! Why contribute? Why not take the money penalty and all before its completely gone? Is it just me? Any advice appreciated.

[glowing]

1. Are you retiring soon? If not, stay in.. it will come back.

[HERVEPA]

2. Don't take it out of 401K unless you desperately need the money now,

If you're scared about losing it, move it to a money market or bond fund withing the 401k.
Don't discontinue contributions.
If you're worried, change so that your contributions will go to a money market fund.

Later you can move back to stocks if you feel more confident in the market

Good Luck

[abelenkpe]

3. K

I'll move what remains to the money market fund. I am down 37% for the year. I do not think the market is going to recover anytime soon. I wanted to quit working in five years and spend the remaining years with my kids before they grow up completely and leave home. Y'know be a stay at home mom for a few years when they might remember me being around. Of course, it looks like the company I work will be laying off people in the summer of 09 so maybe I'll be forced to retire. Still I don't see why I should continue throwing my money away. There is no match. Wouldn't it be better to take that money and stuff it into a short term CD instead. At least I'd have access to it then. Whaddya think? Or am I panicking?

[A HERETIC I AM]

4. That could quite possibly be a serious mistake.

You are down 37% this year because your allocation is obviously heavily weighted in equities. If you are completely comfortable giving up that 37%, then by all means move the money from the stock funds to a money market fund.

I do not think the market is going to recover anytime soon.

Although this sentiment is shared by many, it is important to keep in mind that when the market does begin to recover, it will be without warning and well before you start to hear of unemployment numbers going down and other "good" news. As Warren Buffet said in his piece in the NYT the other day, "if you wait for the robins, spring will be over." He also aptly quoted Hockey great Wayne Gretzky who said "“I skate to where the puck is going to be, not to where it has been.”" Trust me on this: The people over on the Stock Market Watch thread and pundits elsewhere will call every single up day from now till the Dow is at 16,000 a "Dead Cat Bounce". There will be up days and there will be down days, just like we have seen the last few weeks, but the beginning of the next upward trend will not be announced.

I wanted to quit working in five years and spend the remaining years with my kids before they grow up completely and leave home.

This statement indicates that you are most likely still a young woman and quite a few years from being 60 years old anyway. You can't access that 401(K) money without penalty until you are 59 1/2, so what's your rush? Don't shoot yourself in the foot here. You are expressing a perfect Bear sentiment. When the retail investor begins throwing in the towel en masse, it is more often than not a precursor to a market rebound.

Of course, it looks like the company I work will be laying off people in the summer of 09 so maybe I'll be forced to retire.

You won't be "forced to retire". You'll be laid off. Big difference. If you choose to take a few years off and stay at home with your children then great, do it. But considering liquidating a position in a well managed stock fund (assuming you are indeed in a well managed fund or 2 or 3 or whatever) at this point is ill advised.

Still I don't see why I should continue throwing my money away. There is no match.

You won't be throwing it away. Just change the future contributions to a Money Market or Stable Value Fund for a while. What is important is putting as much money in a Tax-Deferred account as you possibly can. The fact that your company does not match any part of your contribution is unfortunate, but remember that a 401(K) allows a much higher annual contribution amount than almost ANY other tax deferred account, up to $15,500 this year and if you are older than 50, you're allowed another $5000.

Wouldn't it be better to take that money and stuff it into a short term CD instead.

Only unless you are willing, as I said above, to realize that 37% loss and only if your 401(K) plan offers CD's, which is unlikely.

At least I'd have access to it then. Whaddya think? Or am I panicking?

In order to do that, you would have to surrender completely the 401(K) account, which will cost you 10% in penalty up front. Then the ENTIRE amount is added to your AGI for the year and you will pay taxes on it at your marginal rate.

I know you weren't asking me, but I think it's a really bad idea and yes, you are panicking.

On edit to add one last thing: Asking for and taking investment advice on a public message board is a horribly bad idea. Please talk to a licensed and registered Financial Advisor or Consultant in your area.

[abelenkpe]

9. Thanks

I didn't have any money in financial companies or anything mortgage related though which is part of why I'm so shocked that it has fallen so much. I have been working for almost 20 years now. (Just turned 40) My 401k took a similar hit during the dot com bust and at the time I did not panic and just moved things around a bit. I've talked to my financial advisor and quite honestly I'm not sure I trust him since he recommended the elections that have lost me so much. I've lost faith in this whole system and while I know taking advice from a board is not a good idea, I do want to get as many responses as possible from a wide range of personalities. Are others going through the same thing? How do they feel? Has anyone else considered doing the same?
I feel robbed. Like my kids future has been robbed. I know it would have been a luxury to be a stay at home mom for a few years but I worked my freakin' ass off for that luxury. How have I not been robbed?
Anyway, I know you're trying to help. I'll prolly find a different advisor.

[bain_sidhe]

12. You haven't really lost anything... yet.

Because you never really had the actual money that you see on your quarterly reports. This is the thing that took me the longest time to understand... you don't have --and never did have-- X amount of dollars in your 401k (although that's how they report it to you), you have X amount of *shares* in one or more mutual funds. You still have all of of those shares. Maybe you could have sold each share for $10 a couple of months ago, and you can only sell them for $6 now, but you still have the same number of shares.

If you built this account over time, then you bought them all at different prices. Some probably cost you more than what they're worth now, some might have cost you less than what they're worth now, but the "value" of your account that you see on your quarterly report is reported in terms of the price right now. You only "lose" that money if you sell them now --and that includes moving the "reported value" to any different fund, money market or other, because, technically, to "move" them to a different fund, you're actually selling them and buying shares in a different fund with the proceeds of the sale. (I think this is what HERETIC meant by "realizing" the loss.)

And in any case, you haven't lost the difference between the value reported on your last quarterly report and the value reported on the current quarterly, you've lost the difference between what you paid for those shares, and what you sell them for.

From this post, it sounds like you don't actually need the money now, and you can't get it out of the 401k for several years. As long as you think the mutual fund(s) you have shares in now have decent stocks in them (or they're an index fund), if it were me, I'd leave it. In five years, I'm willing to bet that those shares will be worth more than what they are now. And probably worth more than they will be six months from now, because I think it'll be at least that long before the stock market picks up, probably more like a year or two. But if you don't need the money before then, it's not your problem.

But I'm not you, and I'm not a professional. Just somebody who's been "managing" our own 403b (like a 401k, but for state employees) for almost 20 years now, and who has learned (and lost money due to my own ignorance until I learned) a few things from the experience. You may be more pessimistic than I am... maybe you think that it will take much, much longer for the market to come back. Or maybe you're not confident in the soundness of the institution managing the funds (I don't mean your company, I mean the actual investment house where your funds are placed).

And, if I *were* you (which again, I'm not), I might consider putting future contributions in a money market fund or interest bearing account (if your plan offers them) rather than sending them to the same funds you're sending them to now. At least until there's a clear sign that the market is recovering. You might lose out on "buying the bottom" but, again, if it were me, I'd sleep better.

[abelenkpe]

14. OK

That actually makes sense. I'll most likely leave it all alone and put future contributions into a mmf. I'm going on a savings rampage though just in case more work doesn't come in at the company I work for. Right now work runs out in May 2009. Thank you!

[sendero]

5. You're going to get lots of answers..

... and nobody really knows what is going to happen.

It all revolves around the simple 2 questions: "is the market going to fall further?" and "when will the markets begin to recover?".

The buy and hold crowd thinks you should stick it out. I don't. For two very simple reasons.

I believe the market will fall a lot more, because all of the fundamentals are negative. 401K liquidations, hedge fund liquidations, corporate profits squeezed for at least years, interest rate shock on the horizon, etc, etc, etc.

I also believe, for the same reasons, that it is ludicrous to think there is going to be a market rally of any duration any time soon.

Right now, there is a nice little calm in the action. I would get out while I could, although had you been paying attention you would have gotten out months ago and not lost 37% to begin with. Recent events have been predicted and expected by many.

I of course have no crystal ball, these are merely my opinions and I wish for you a good outcome whatever you decide to do.

[Warpy]

6. The time to panic and run was months ago, but you know that.

However, there is another way to look at it. Subtract your employer's contribution. That will get you roughly the amount you contributed to it. Not that much of a loss now, is it? It's certainly better than looking at that big number and thinking that's how much you lost, personally. However, when you add the early withdrawal penalty, it will be a bigger hit.

The market hasn't reached its floor, IMO, and will likely keep dropping although I think the big drops are done. It took almost 4 years after the crash of 1929 for the market to hit bottom and stabilize. However, the market isn't being supported on margin (debt) now, so it's not likely to be as grim this go-round.

That's basically the one of the keys to investing: put money in when everybody else is running away in panic. Sit on your hands when you start to get hot tips from cab drivers and delivery men and it seems like everybody's jumping in. Since your 401K represents an employer contribution as well as your own, it's probably a good idea to keep it where it is until and unless you are involuntarily retired to stay home and raise your kids for a few years. Other keys are going for the long term and never risking more than you can afford to lose. Keep a cash cushion in the bank--about 6 months of poverty living--just in case something awful happens, in other words, before you invest anything besides that contribution at work.

I have no idea what will happen in the short term, say 5 years. Nobody does and if they say they do they're lying, run away. However, this is the sort of thing that has worked in the past and I don't see a revolution destroying all our institutions to the point it won't work in the near future.

[abelenkpe]

11. Yeah I know

My old 401k had a matching contribution. I moved it long ago into a mmf and it has been stable through all this craziness. My current 401k does not have a matching contribution which is part of the reason I'm thinking of just putting that same savings into regular boring savings so that I atleast have access to the money should there be an emergency situation like a job loss. I've never been worried about losing a job before but read that California's unemployment could fund would run out soon. G, I wouldn't be worried about even that if I didn't have two small kids to care for.
I hope you're right about the big drops being over.

[TNDemo]

7. Did you read the article on the CNN website today?

It was talking about parallels between then and now but makes a point that the stock market and economy are not necessarily related. Everyone thinks the depression started with the stock market crash but it was actually a good bit later and the market had recovered a good bit by then. What I found interesting was that it was 1954 before the stock market was back up to where it was in 1929. I really don't have 25 years to wait on it to recover if that is any indicator to how long this stock market slump is going to last. I have about 50% on my 401K in stocks and they are really sinking.

[abelenkpe]

13. Saw that article

Which is part of why I'm a bit stressed. 25 years to recover? G, I hope it doesn't take that long. I guess I always thought that I'd have a good career while young and save a bunch of money to retire early and spend time at home with my kids since it took so long for me to have them. I do adore them. I just wish I knew where to put my money so that it was safe. After going through losses with the dot com bubble and now this it's difficult not to feel like I'm on a treadmill running faster getting nowhere.

[Common Sense Party]

8. How have you been robbed, exactly? And how will it be completely gone?

What is it invested in?

[abelenkpe]

15. Well....

markets are crazy and reading about the crash of 29 really has me spooked. I have another old 401k with more at stake that is fine as it was all in a mmf. I'm just shocked at how much this new one says it has lost. I wish pensions were still the norm instead of 401ks. I don't understand why we have to gamble with our ability to retire. It makes a mockery of all ones years of hard work if they don't have the savvy to know how to invest.

Anyway, I'm just freaking out and wondering if others have been feeling the same really. I think you all have talked me off the ledge of despair though so thanks.

I don't recall all my elections off hand but know there is some in health care and energy. I mean health care.....people always need that don't they?

[Common Sense Party]

16. You still have the same number of shares that you had before.

Those shares are just down in value right now. They won't be down forever. If you are invested in diversified mutual funds, the only way you can lose EVERYTHING is if every stock in every mutual fund that you have a balance in were to go to zero. All those companies would have to go bankrupt for you to lose everything. How likely is that?

You own stocks of great companies. Those companies sell products and services that people use the world over--not just energy and health care, but industrials, consumer staples, technology, etc. If people keep buying these companies' products, their shares will be worth much more 15, 20, 25, or 30 years from now. If you have a long time to go until you retire, the smartest thing to do now is buy more shares while they're the cheapest they've been in 5 years. Don't move to cash. Your 401(k) is a LONG-term vehicle. Think long-term with it, act long-term, and you will be fine.

[barb162]

10. If you are risk averse and it seems you are, pull it out and stick it in

non-stock funds. It may take a long, long while (years) for this market to see 14000 again. If it makes you nuts to watch the gyrations every day, pull it out of stocks but keep the 401. You'll lose the money you thought you had, but it may give you peace of mind not to watch the wild swings we have been seeing. A lot depends on your time frame to retirement.