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article: 401(k) Losses Linger for Young People
Old 04-05-2010, 02:07 AM   #1
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article: 401(k) Losses Linger for Young People

401k-losses-linger-for-young-people: Personal Finance News from Yahoo! Finance

And folks wonder why we Xers are so cynical ...
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Old 04-05-2010, 07:17 AM   #2
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Of course we don't know what will happen for the Xers going forward. The other factor to remember is that for the vast majority of boomers investing didn't exist in the 70s. No IRAs, no 401Ks (Note: these things were developed in the 70s but not ubiquitous or well understood). So the older Boomers started out with no savings just like newbies whacked by the current recession. If you polled the older members of this forum you would find that many (if not most) of us started seriously saving in our 30s or even 40s. Clearly, many of today's youth also fail to invest but they are inundated with reminders of the importance to do so and they have new vehicles available to them that were not there 'Back in the day."
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Old 04-05-2010, 07:32 AM   #3
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Originally Posted by donheff View Post
The other factor to remember is that for the vast majority of boomers investing didn't exist in the 70s. No IRAs, no 401Ks.
Quite true. My/DW respective DB (pension) were eliminated in the early 80's and replaced by 401(k)'s and IRA's, when we were in our mid-30's.

There was no carry-over of benefits from our DB plans (the remaining funds were not ours to use - since we never contributed, and the respective company still had to maintain existing folks at the time currently earning a pension).

Also, remember in those days that even if you had the "right" of a pension or contribution plan, the laws required a 10-year vesting period. I left a company in the 70's (was there eight years) but lost all rights to the pension due to the law at that time.

At least today (after many years), the young folks know that they must plan for their future, and set aside a portion of their income to fund their retirement plan (whether or not if they do that is an entirely different subject). They also have the flexibility/portability of "taking their retirement stash" with them if they change jobs.

Unfortunately articles like this don't necessarily compare apples to apples, including the fact that many early boomers (as I am) have already retired with a limited contribution period, albeit the fact that returns were good for a portion of the period.

They also don't point out that our accumulation years (assuming you're retired) are past, and the generations following us will have many years of accumulation/growth that could affect the outcome in future years, when they become our age.

The end of the story is still to be written and the results will not be known till many years in the future.
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Old 04-05-2010, 09:33 AM   #4
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This is an inequality that must be addressed!

I smell another bailout.
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Old 04-05-2010, 12:54 PM   #5
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Originally Posted by donheff View Post
Of course we don't know what will happen for the Xers going forward. The other factor to remember is that for the vast majority of boomers investing didn't exist in the 70s. No IRAs, no 401Ks (Note: these things were developed in the 70s but not ubiquitous or well understood). So the older Boomers started out with no savings just like newbies whacked by the current recession. If you polled the older members of this forum you would find that many (if not most) of us started seriously saving in our 30s or even 40s. Clearly, many of today's youth also fail to invest but they are inundated with reminders of the importance to do so and they have new vehicles available to them that were not there 'Back in the day."
Not entirely accurate. Back in the 70's, the tax deferred retirement vehicles didn't exist for us, but some of us always saved. I graduated college with 2k in the bank - more than I started with - and that was a fairly substantial sum for those times. There was more of talk about the wisdom of saving back then too. The spend all you have and leverage even more ideas didn't really come about until the 90's. We still had our depression era parents telling us to save.

You really can't tell what the future will bring. Things looked pretty bleak in the 70s but changed a lot in the ensuing years.

What I question is the conventional wisdom of what investment vehicles we should use - told to us by an industry that benefits from scams and frequent trades. I'm also thinking now that all this tax deferred stuff will end up meaning I will pay a lot more in tax than if I had just saved after taxes. I make more money in retirement than I did for most of my earning years so if I add up all the tax I will pay compared to the tax I would have paid if it wasn't tax deferred, I'm not so sure I come out ahead.
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Old 04-05-2010, 01:08 PM   #6
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The article states the obvious. Yes, the times you live in, the years you save and invest, will yield different returns for different periods. Gee, what a surprise.

See the FireCalc instructions and the example of how small differences in retirement timing can mean huge differences in survivabilty as an example.

I can't believe that the authors actually wrote an article pointing out that investmewnt returns vary over time. Sheeesh......
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