Tue 28 Jul 2009
The 401k Is Nearly Dead
Posted by RichSlick under MMO, Slow Wealth
[2] Comments
With the stock market down you’d think it would be the perfect time to invest in the stock market but many companies are cutting their 401k match, changing plan options to save money and in some instances, eliminating the hassle altogether. Many people are also taking pay cuts so in order to make up the difference in take home pay, many will cut back or eliminate the 401k plan contributions. Isn’t a buy and hold strategy predicated on continuously buying into the market? How’s that happening now? Let me guess, companies will re-instate matches when the Dow soars past 14,000 right?
My thesis has been that as soon as the market pops to say 11,000 there’ll be a huge sell off as baby boomers opt to eject from the market to preserve whatever is left of their wealth before they retire and I’ll standby that thesis until I see anything different.
Given the tumultuous returns of the stock market the past 15 years and the mediocre performance of the 401k, I’m going to go ahead and call the 401k terminally ill and near death. If you want to look at one alternative, take a look at because it’s almost time to get back in the market.
July 29th, 2009 at 4:43 am
Thanks for sharing such great post, according to me make a proper analysis of sectors where you want to invest and also see the compatibility and the profitability of that sectors is the perfect way to invest. The professional attitude of investment is like you should invest for long term and don’t follow the crowd. For more details on how to invest in the stock market refer
July 31st, 2009 at 12:34 am
My company recently changed our 401k provider and I was part of the committee doing research and picking the new provider. An interesting new option that we came across in our research, and totally jumped on, is a completely self-directed brokerage account option. Meaning participants get a discount on annual, asset-based, maintenance fees plus they get access to the universe of mutual funds, stocks, ETFs, etc. And, if the plan trustees permit it, even level 1 options trading (the same as an IRA allows.) They do have to pay commissions on trades, but that’s no different than an IRA either. If employees don’t feel comfortable with this, the provider also includes the traditional option to set up an asset allocation between NTF mutual funds they’ve identified. Each employee can pick their option independent of what other employees do.
In our case, we saw participation go up as a result of this plan change, but we’re a young technology company. That being said, I’m convinced a larger number of people would participate in 401k’s if they had a larger universe of investment choices.