Ah, the perils of basing one’s retirement on double-digit asset-price appreciation … and carrying large debts in the meantime:
WSJ: Retiring Boomers Find 401k Plans Fall Short
Who knew retirement could be so perilous? And who knew it was all the stock market’s fault?
Bad stock market. Bad.
Thoughts on my personal finances, goals, experiences, motivations, and accomplishments (or lack thereof).
My financial life began turning around when I took responsibility for it. — Dave Ramsey
Yes, I'm nuts: I'm usually reading anywhere from 4 to 6 books at a given time, plus watching DVD sets as I can.
Here's what I'm digging into now:
Matt wrote:
“Initially envisioned as a way for management-level people to put aside extra retirement money, the 401(k) was embraced by big companies in the 1980s as a replacement for costly pension funds. Suddenly, they were able to transfer the burden of funding employees’ retirement to the employees themselves.”
There you go. A fixed, guaranteed income is replaced by a retirement plan that is managed by someone who, generally speaking, doesn’t know how to manage it and is subject to the whims of Wall Street banksters.
“She says she lost more than half her savings in the recent financial crisis, then shifted heavily to bonds and missed the stock rebound.”
That pretty much sums it up right there. Of course, this is all her fault for not understanding the stock market.
David C wrote:
Although I agree that most people can’t handle saving for themselves, pensions are not guaranteed either:
“[Prichard] Alabama Town’s Failed Pension Is a Warning to Cities and States” -> http://www.nytimes.com/2010/12/23/business/23prichard.html?_r=1
And of course there are other downsides to pensions (must work at one employer for a long period of time vs. 401/IRA portablity, the fact that even at their peak most workers weren’t covered by them, etc.)
Crashdamage wrote:
I think part of the problem is that for all of the 401 related education and guidance that has been made available, most people ( with perhaps the notable exception of personal finance geeks like us who frequent these boards 😉 ) just get glassy-eyed when faced with arrays of investment choices. Perhaps if 401k contributions , from the beginning, had just been automatically shuttled, say based on a default 15% of salary, into low cost asset allocation funds, most of the participants in those plans would still have decent retirement assets when retirement hits them.
Financial Independence wrote:
Two facts, as food for thought:
– Only 202 of the 500 biggest companies in the United States in 1980 were still in existence 20 years later.
– On December 29, 1989, Tokyo’s Nikkei stock average reached its all-time peak of 38,915.87. Twenty years later, the Nikkei has never again reached that level — and, in 2009, reached a new low of 7,054.98.