Tuesday, January 06, 2009

That Mattress is Looking Pretty Good Right Now...

I was just pulling some info for my December 2008 wrap-up and happened to notice this summary info on my 401k statement:

Contribution Summary, inception to date as of 12/31:
Employee deferral $89,450.67 (deductions from my paycheck at my current job)
Employer match $17,218.23
Discretionary employer contributions $13,437.97
Rollover $52,335.81 (from 401ks at previous jobs)
TOTAL: $172,442.68

Current market value as of 12/31: $133,657.16

I'm 40 years old and my entire lifetime of retirement savings amounts to a net loss of almost $40,000 (or about $8,000 lost if you only count my own contributions)!

Not that I'm arguing against participating in 401ks. The market value of this account should recover someday, hopefully, and I do have over $30,000 worth of employer contribution money that I would not have received if I hadn't used the 401k. It's not like I have nothing to show for my diligence in trying to save.

But still... how depressing.


Miss M said...

Yes, it is depressing. You think you are doing everything right and still you get burned. I'm a few years younger so I have more time to make it up. I was talking with a co-worker who had retired but needed her money to last for 40 years. She had to stay more heavily invested in stocks and has lost a lot, she is now back to working indefinitely.

Anonymous said...

The game isn't over until you started cashing in! The market will pick up again. You still got 20 years!

Optioned Unarmed said...

It is high time for people to question the "conventional wisdom" behind investing.

And why oh why is perpetual growth considered such a good thing? Why should a "successful" economy depend upon a company getting bigger and bigger and bigger ad infinitum?

shaki said...

Depressing, yes! Worry gets you nowhere fast, however. I always recommend that people take a trip to a country where the majority of the people live in poverty... then live in that environment for a month or so (it won't be that expensive). People with nothing can still be happy, and people with much can be EXTREMELY unhappy, pessimistic people. I know it's no newsflash, but sometimes it's a good reminder. PS.. my thoughts are with your family and all they've been through. -shaki (faithful blog reader!)

Middle Class Hick said...

I agree with you Optioned Unarmed about the existing markets. I wish more people would look at a company for what a company is and not look at how this quarter did compared to last quarter. Maybe at the end of the day - you would have less corruption and swindling going on if people could have an "off" quarter without loosing 50% of the companies value.

As for the main article - yup .. it happens. I am surprised you did not get hit in 2000-2003. My 401k was below water the ENTIRE time. I quit the company and it finally went above water. My son's college account is now below water, as well as my Roth. I think we would have to go a lot further to get my taxable accounts under water, I have had them for 30+ years.

Timothy Gill said...

The market will definitely come back. Also, look on the bright side. How great it is that you have this much money saved up. Most people don't have a penny saved to their retirement.

Gord said...

Well......maybe you can make some adjustments to what you have in the 401k. I assume it's mutual funds . Perhaps a different fund, different types of companies. Some analysts suggest a fund of dividend paying companies. There may be some dogs in there you can trade for stars. But in the end, quality stuff always comes back.

Single Ma said...

I feel your pain. Everyday, I keep trying to tell myself - you have 25 yrs, you have 25 yrs, you have 25 yrs. But umm...it only works for about 25 minutes. LOL Then I'm depressed all over again. *sigh* So here's my coping strategy:

1) a more conservative allocation (for now);
2) keep investing the max; and

So far, I can manage without my Prozac. LOL

Anonymous said...

Nice blog. Thank you for sharing your stories and financial status.

Here is my 2 cents. Markets will not come back. It may take five to ten years for it to come back. Look at Japan. They have crashed after a real estate bubble and they are still in trouble after 10+ years.

If you are going to invest in the market, I would suggest selling all the mutual funds in 401K. Convert them into money market positions. Unfortunately, 401K's are very limitted in terms of investment options. Sell all the stocks within a month - there will an Obama rally. We may hit S&P 1000, maybe alittle bit more. This will be the last stop before the crash.

For regular investment accounts, I would suggest two strategies. 1- Sell covered call options for all the stocks that you have. 2- Invest in commodities (GLD, SLV, GDX etc.) and agricultural/energy (DBA, DBE, MOO) etf's.

Good luck.

Optioned Unarmed said...

Madame X:
This may not be of huge solace, but your total loss may be less than the 40K you think it is. It is possible that your $52,335.81 rollover contribution includes investment gains earned during your previous job. To know your total lifetime gain/loss, you'd need to look at rollover amount and determine what portion of it (if any) is from earnings.

Anonymous said...

Seems to me its not the fault of the 401K but rather your investment choices. Unfortunately, most plans have both lousy choices and high and/or hidden fees. If it makes you feel any better perhaps you can consider matching contributions to your prior rollover amount and most importantly your tax savings as these contributions as offsets.

Doctor S said...

Im only 25 and have been working a mere 2.5 years, but even though retirement is a ways off for me, it was still extremely depressing to see my return for 2008 being -55.5%. It will be bounce back but just will take time.

bugbear said...

Someone please correct me if I'm wrong, but it should be possible to transfer fully vested 401(K) funds to qualified self-directed account at a brokerage? 401(K) refers to a line in the tax code, not to an investment plan that your company supplies. In most cases, your company contracts out the 401(k) administration to an outside financial firm, anyway--so you transferring the cash to your own self-directed account should be no problem. (Just do it correctly to avoid negative tax consequences--probably you want your brokerage to contact your 401(k) fund provider to initiate this transfer).

Look into transferring your funds into a qualified account that you open at Schwab or Ameritrade or Etrade. Then you will have some funds at managed through your company's plan, (until you transfer them out) and the majority under your own control.

I realize this doesn't address the question of the most advantageous asset allocation, but it does address the issue of control.

Someone please let me know if I'm incorrect about this.

bugbear said...

The fact is that you put aside all that money. That is an accomplishment and the fact that the markets have taken some away is not a blemish on the assets that remain (175,000 is a good amount) or an your accomplishment.

Optioned Unarmed said...


NO - 401(k) plans can only be provided by your employer (though you are correct that they frequently farm the administration out to outside financial companies). Typically you cannot move your money elsewhere without penalty until you quit your job.

A lot of 401k plans do offer a self-directed brokerage... But if yours doesn't, you are out of luck.

Anonymous said...

Hello Madame X,

Am I the only one to notice that you are no longer a "thirty-something" but a 40-year old? You must have sneaked a birthday in there somewhere! Congrats or very belated congrats!

I think that your frugality will serve you well in life. It doesn't matter how much money you have - you will never outspend your income because that is not who you are. Good for you!

Best of luck in the New Year.

Anonymous said...

Everyone I know who has a 401(K)or 403(b) has lost as a percentage as much as you have. So, if it makes you feel any better, you are not alone!

Madame X said...

You got me, Anon 11:30!

An iMperfect wIfe said...

I'm 30 but my husband and I have only half of what we've put in there from the last 18 months even considering the employer match.

We sheltered nearly half of our after tax income in retirement accounts between the 401k and IRAs.

THAT is disheartening... Hang in there.