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Many Americans Are Confused By 401(k) Retirement Plans

Friday, August 16, 2013 - 8:48 AM
Americans rely heavily on 401(k)s to fund their hoped-for retirements, but many people find the plans bewildering and aren’t sure they’re making the right investment choices.

Nearly half of people surveyed said they don’t know if they’re making wise investment decisions, while more than one-third reported feeling a lot of stress over it.

Many Americans are confused by 401(k) retirement plans - latimes.com
7
ShorebreakShorebreak2,375 posts since
Apr 6, 2010
Rep Points: 12,681
1. Saturday, August 17, 2013 - 7:42 AM
When many professional money managers working for companies cannot make a pension profitable, how can anyone expect each of us workers  to be able to make our 401K fund our retirement? When will we learn? Like I have said for 40 years if these money managers are so knowledgeable why aren't they independently wealthy? 
5
AllyAlly783 posts since
Jan 16, 2010
Rep Points: 2,278
2. Saturday, August 17, 2013 - 8:48 AM
Rosie:  What makes you think these professional money managers aren't "independently wealthy" making their wealth off of people who aren't wealthy.    As I have posted before, the best way to make a pension profitable is to avoid the professionals, do your own research,  and find what works for you.  It worked for me and I have a feeling from your other posts, it is working for you, too.
3
paoli2paoli21,142 posts since
Aug 10, 2011
Rep Points: 5,102
3. Saturday, August 17, 2013 - 9:22 AM
If the money managers were wealthy I would assume most of them would not be working, anf they would be living off  their investments. I am going to be fine but it was not because of investments. It was because I worked 2 jobs for 23 years and we lived below our earnings. We were in the market only form June 1996 to Dec of 2000 and I could not sleep at night because there was no reason for the market to expand as it did. I thought it was momentum buying. 

Investors now cannot compete with the high frequency trading of computers that can make thousands of trades per second for a fraction of a penny profit per share. This is not investing. Trades like this control the market. Our savings were in savings and loans then in credit union or banks and some in the market for a short period and then back to banks and credit unions and in CD's only. Even though the high frequency traders have gone from averaging 1/10 of a penny profit per share to 1/20 of a penny per share you cannot compete with a computer. This is not investing. It is following an algorithm. 
5
AllyAlly783 posts since
Jan 16, 2010
Rep Points: 2,278
4. Saturday, August 17, 2013 - 12:27 PM
"The befuddlement runs so deep that more people say they’re confused by their 401(k)s than by their health plans. Yes, people apparently find it easier to understand why their health insurer refused to pay a bill than whether they should own a certain stock or bond fund."

The confusion is due to lack of education and learning from investors.  If one invested some time/money on educating themselves on 401K and how to invest/manage 401K, they would not be so confused and ignorant on selecting funds. 

Like everything else in life, one cannot get something for free.  I find that the time/money (mainly on book purchases) spent on 401K investing is well-spent.  It is even more important than the job education/training.  Some of the money lost in 401K can sustain years of salary. 

I will say it again: Learning about investing (especially on 401K) is not optional.  It is a necessary path to safe and joyful retirement. 

To those who put zero money in the stock market, I fully understand the concerns.  But to put all savings/401K in cash, earning near-zero interest, it does not work out mathematically that one can retire sufficiently and richly (Rosie43, with extreme savings techniques, is an exception, not a commonality).   
2
51hh51hh1,462 posts since
Jan 16, 2010
Rep Points: 6,352
5. Saturday, August 17, 2013 - 8:46 PM
Most 401K plans had (when I was working) a guaranteed account. In 2008 it was a little over 5%. Can't remember what it was called. It also had a money market that paid little. The rate changed every Jan. but we knew in Nov or Dec what it would pay for the next year. 
3
AllyAlly783 posts since
Jan 16, 2010
Rep Points: 2,278
6. Saturday, August 17, 2013 - 9:04 PM
Most 401K plans had (when I was working) a guaranteed account. In 2008 it was a little over 5%. Can't remember what it was called. It also had a money market that paid little. The rate changed every Jan. but we knew in Nov or Dec what it would pay for the next year. 

Stable value fund: typically at 3%; but they are not risk free cash.  It is not available for all 401K portfolios.  MM is at near zero percent.

1
51hh51hh1,462 posts since
Jan 16, 2010
Rep Points: 6,352
7. Sunday, August 18, 2013 - 7:54 AM
Ok, let's get down to real facts with these company 401Ks.  We had a choice of risky stocks or putting it in a MM at a very small interest rate (high nowadays).  It dawned on me that since the company was matching it, it was more important to put as much in as allowed and keep it SAFE than it was to worry about where we were putting it.  So for all those years , I kept it in the MM!!  Well when they early retired him without giving people warning, WE had our funds safe and secure ready to be withdrawn.  Guess what happened to some who had it in the stock market?  They didn't have a chance to decide whether it was the right time to cash in or not.  They were suddenly out of a job and needed their money as we were.  My new motto "Forget about the interest rate, just concentrate on keeping it SAFE!"    Works for me!
3
paoli2paoli21,142 posts since
Aug 10, 2011
Rep Points: 5,102
8. Sunday, August 18, 2013 - 8:20 PM
The match by the company I worked for was in company stock only. Our company allowed us to take it out the same day it was put in. I found a way to go on line and look how many shares was going in the next morning (day before payday) and the amount it was worth and that night we could take it out and put it in the high interest rate savings account. It showed going in and out the same day. 
2
AllyAlly783 posts since
Jan 16, 2010
Rep Points: 2,278
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