60 Minutes /401 K

[ferco]

How many of you saw the showing last night of 60 minutes (Sunday 4/19)? What's your opinion of the state of the union of American's 401k's.

[MikeD]

I saw it. Sounded like they usually complaining when people with too much equity lost money. They hit the jackpot with the crying woman victim. The paperwork she showed looked like a Vanguard statement to my wife.

I changed the channel when they started airing the animal abuse segment about bull fighting.

Mike D.

[TeeRuh]

actually you missed a pretty good segment on the bull fighting. (don't think they hardly touched upon the animal abuse angle; may have been one comment about the bull's chances on surviving the match) Story was about a couple of 3rd generation bull fighters. One (having spent most of his life in U.S.A) wasn't very good and "lost" a couple of matches ...

[JOHNNIE36]

Quote:

Originally Posted by ferco How many of you saw the showing last night of 60 minutes (Sunday 4/19)? What's your opinion of the state of the union of American's 401k's.

I saw this segment on the 401k's and feel badly for the people that lost a bunch; however, didn't they tell the people that you should never bet more than you can lose ala don't put more into stocks than you can afford to lose? Didn't those people know? Over the years I've made some and lost some in my 401k; but the closer I got to retirement the less I had in stocks. More bonds and CD's, less stocks. Even in retirement I only had 20% stocks and once I reached 70 I was 100% in CD's. In that segment, I don't understand all the fees they were talking about. My 401k was managed by Fidelity and I never saw those fees that were discussed. It tells me you have to read all the fine print.

[Zathras]

I thought it was a pretty good piece.
Yes, many people have lost a lot of money in their portfolio. But I thought it was good that they got both sides of the story.
For those close to retirement, they should have had less exposure to equities. And many, even if they lost 40%-50% still have all the money they invested as many companies match at least 50%.

I found the bull fighting distastful. Seeing the killing with the bull's back and side covered in blood was about all I could take during dinner. If I do ever watch another bull fight I am rooting for the bull

[tmm99]

Quote:

And many, even if they lost 40%-50% still have all the money they invested as many companies match at least 50%.

What?? Match at least 50%

Maybe match 50% of the first 0-5% of your contribution. I've never worked for a company that matched 50% of the max (15%) I've put in. The lowest percentage a company contributed for me was 0% (no match whatsover) and the highest - 100% up to 3% and 50% match for other percentages up to 5%. This is not to say that company match doesn't count. I am just saying if you lost 40%-50% of your total contribution, the loss cannot be sustained by the company match alone. Not even close. But maybe like you say, some companies do give better contribution than I get.

Yeah, I agree, people should reconsider the equity/bond ratio as they near retirement. The fact is that many people probably had the asset allocation etc on auto pilot and half of them probably don't even understand the implication of which fund works in what way. I used to be a little bit like one of those people. Set it and forget it (although I did study the funds and diversified, I never rebalanced). Looking back, I could have done more, but that is only in hindsight. I am now a bit worried that people who lost a lot of money nearing retirement age cannot afford to be conservative at this point in their asset allocation.

I actually called Fidelity a year or so ago asking about administrative and expense fees involved in some of the funds available in one of my 401K's (they look like regular index funds but they look slightly different - they are institutional funds) and Fidelity's response was that they didn't have to publish the fees for those funds (by law), so I still don't know the overhead involved with them.

I also know, reading diehards in the past, some 401K have very lousy funds to choose from (high expense, limited, etc) so that is a big negative for some people.

Yes, I did watch the 401K segment (I sped through bull fighting. I never understood the fascination with any violet sports). The one who cried on TV that were showing the 401K statement had the total balance of about $4000 in the statement (I guess it was double that before the crash.) Any money loss can be painful, but if you don't compare it to the peak, it shouldn't feel so bad.

One of my rolled over 401K money which I stopped contributing to in 1996 doubled in 5 years between 2002-2007, and now it is back to 2003 (25% less than the peak). Do I feel bad? Sure, but not as bad as I feel about my active 401K which I am pumping in the max amount every year. It's like all the money I put in in the last 2 years has evaporated, but that is only because I am looking at the last 2 years only.

You are taking a chance when you invest in equities; otherwise, you should be investing in CD's.

[Poundkey]

I had a 401K at a rinky dink shop in a small town years ago. The trustee was a local bank and the admin. was some accounting firm in Dallas. Not a bad plan. Matched 25% up to 6% and had 3 decent investment choices. We only got one statement per year and when I compared my returns to that of the actual fund I was in there was a pretty big difference, so the hidden fees were significant.
The thing that irked me the most was when I left the job and rolled the 401 into VG. I resigned mid year, but was only credited with what was on the most recent statement which came out in January. In that time my account should have grown several hundred dollars according to my calculations. I called the trustee and the admin. and neither gave me a good explanation of where that money went. I think the best I got was that the money would "probably" be split between the employees still in the plan.

[Zathras]

I had the 100% match up to 3% and 50% match up to 6%. I suppose your overall match drops quickly if you invest more than the company will match.
And I am sure some people don't get any match, but I am also sure some do
I think the most important point out of that section was the need for people to have some education about investments.

[al_bundy]

Quote:

Originally Posted by Poundkey I had a 401K at a rinky dink shop in a small town years ago. The trustee was a local bank and the admin. was some accounting firm in Dallas. Not a bad plan. Matched 25% up to 6% and had 3 decent investment choices. We only got one statement per year and when I compared my returns to that of the actual fund I was in there was a pretty big difference, so the hidden fees were significant. The thing that irked me the most was when I left the job and rolled the 401 into VG. I resigned mid year, but was only credited with what was on the most recent statement which came out in January. In that time my account should have grown several hundred dollars according to my calculations. I called the trustee and the admin. and neither gave me a good explanation of where that money went. I think the best I got was that the money would "probably" be split between the employees still in the plan.

one time i looked at someone's plan that was managed by Blackrock. there were so many fees, i thought it was a merchant credit card agreement at first

[clifp]

Quote:

Originally Posted by Zathras I thought it was a pretty good piece. Yes, many people have lost a lot of money in their portfolio. But I thought it was good that they got both sides of the story. For those close to retirement, they should have had less exposure to equities. And many, even if they lost 40%-50% still have all the money they invested as many companies match at least 50%.

Actually I thought it was a lousy piece, since "other side" consisted of the 401K lobbyist. He sounded like a out of touch netwit with a Scrouge like compassion. How do these highly paid lobbyist sound so bad on 60 Minutes. Are they really this stupid, or are the 60 Minutes editors particularly clever.

The irony is that not too long ago 60 Minutes did a piece about the problems with pensions of bankrupt companies. Something millions of retired GM workers are about learn first hand.

Over the years 60 Minutes has done a number of stories of the funding problems of Social Security. What they also need to do is a story about the massive underfunding of state and local pensions.

In fact they should have 60 Minutes special just about the challenges of retirement, basically all three legs of the stool are wobbly. Then after they had completely depressed everyone, if they were somewhat responsible they do any hour on possible solutions.

The retirement system for Federal workers is actually a pretty good model for both the private and state and local to use. A generous, but not ridiculously so, pension funded partially by employee contributions. The excellent Thrift Savings Program, with extremely low cost. easy to understand funds, plus Social security.

If you are dumb, irresponsible, and/or unlucky you can have an adequate retirement with just Pension+ SS. If you want to have a better retirement or early retirement you'll need to save via the TSP.

[kombat]

Quote:

Originally Posted by TeeRuh Story was about a couple of 3rd generation bull fighters. One (having spent most of his life in U.S.A) wasn't very good and "lost" a couple of matches ...

Was I the only one cheering when the one brother got gored at the end?

I sat through the whole disgusting segment, just stunned that they didn't bother with any mention at all of the whole barbaric cruelty of the spectacle.

[clifp]

Now I liked the bullfight piece. No I was not cheering. I find it remarkable that a family can produce so many talented bullfighters. I was more than bit jealous, how damn handsome the brother are.

Personally, I see little difference between UFC, Boxing, Bullfighting, Hockey, and NASCAR the blood is big part of the attraction.

[tuixiu]

Quote:

Originally Posted by clifp Personally, I see little difference between UFC, Boxing, Bullfighting, Hockey, and NASCAR the blood is big part of the attraction.

People in sports choose to play it and at a high level are motivated by very big reward.

Given a choice I suspect the bull would prefer to be left alone.

[Gone4Good]

Quote:

Originally Posted by TeeRuh One (having spent most of his life in U.S.A) wasn't very good and "lost" a couple of matches ...

If it were up to me these would be fair fights and no one would ever have the opportunity to lose more than once.

[clifp]

Quote:

Originally Posted by tiuxiu People in sports choose to play it and at a high level are motivated by very big reward. Given a choice I suspect the bull would prefer to be left alone.

Given my choice between being reincarnated as bull that goes into ring, or cow or bull that is in factory farm, where they never see sunlight, have sex or graze in a pasture. I'll take the bullfighting option please. I suspect that 95% of farm animals have far worse lives.

[Zathras]

Quote:

Originally Posted by clifp Actually I thought it was a lousy piece, since "other side" consisted of the 401K lobbyist. He sounded like a out of touch netwit with a Scrouge like compassion.

Well I agree he wouldn't win any personality contests. But is there any statement you can point out that you disagree with?
Would you disagree with his comment that people need education about their financial investments? I rather thought that one was at the crux of not only some of the worse 401K losses, but the general financial trouble many people find themselves in.

[tuixiu]

Quote:

Originally Posted by clifp Given my choice between being reincarnated as bull that goes into ring, or cow or bull that is in factory farm, where they never see sunlight, have sex or graze in a pasture. I'll take the bullfighting option please. I suspect that 95% of farm animals have far worse lives.

Picking the lesser of two evils doesn't rationalize approval or support of either one.

Forcing a bull to be harassed or injured for the entertainment of others is not in any way comparable to someone deciding to be a UFC fighter or hockey player.

[CyclingInvestor]

Quote:

Originally Posted by tmm99 What?? Match at least 50% Maybe match 50% of the first 0-5% of your contribution. I've never worked for a company that matched 50% of the max (15%) I've put in. The lowest percentage a company contributed for me was 0% (no match whatsover) and the highest - 100% up to 3% and 50% match for other percentages up to 5%. This is not to say that company match doesn't count. I am just saying if you lost 40%-50% of your total contribution, the loss cannot be sustained by the company match alone. Not even close. But maybe like you say, some companies do give better contribution than I get.

I owe a large part of my retirement at 48 to my 1st 401k, from 1983-1997 at a small aerospace firm. For most of that time they matched 50% of your contribution to 10%, plus 10% in addition. This meant that since I put in the max 10% each year, they added 15% more (=25% of my base salary + overtime). I knew at the time it was a good deal, but I did not realize just how valuable those $$ would be until I closed in on retirement.

[clifp]

Quote:

Originally Posted by Zathras Well I agree he wouldn't win any personality contests. But is there any statement you can point out that you disagree with? Would you disagree with his comment that people need education about their financial investments? I rather thought that one was at the crux of not only some of the worse 401K losses, but the general financial trouble many people find themselves in.

No I didn't think he said anything wrong. He came across as being unsympathetic to the losses people suffered and did a horrible job defending his product.

If I was hired to be the spokesman for the 401K industry, I come to a 60 Minute interview and I want to make 3 points.

1.) If you invest say 10% got a 3% employee match, since you were in your mid 20s worked for 30 years and now are in 55. You still have a lot more money than you put in. A nice little chart showing contributions vs expected value using a life cycle fund or a gradually increasing bond AA using the Vanguard Total Stock Market index and Bond index fund.
2.) Acknowledge that financial education has been crappy, but point out that folks had asset allocations appropriate to there age typical lost in 20-30%. A large a painful blow, but it is entirely possible that this losses would be recovered in a several years.
3. Point out recent improvements in the 401K field, Lifecycle funds, employers providing more education. Finally, let people that unlike with an IRA you can withdraw money penalty free from a 401K at 55 not 59.5, if you were terminated.

[tuixiu]

Lifecycle/target date funds should be huge in 401k plans for automatic enrollment. Use age of new hire to automatically drop 'em into the appropriate lifecycle fund bucket, give them literature explaining how lifecycle funds work and why they were put there.

If person wants to dig in to manage their fund more fine, the rest should be (relatively) okay. Hell maybe even give 'em an option to automatically shift their assets if a birthday makes them more suitable for a different bucket.