401K : The Big Sham.Tuesday, July 28, 2009

Okay I'm on a roll...maybe I should start a finance blog. Breaking the myths for the common man or something to that effect. What I want to do is Discuss. Discuss. Discuss. I do't want to argue a point. I want to state it and stop. Then let others read it, and comment. I don't want to argue it. Everyone has a view, and we're all entitled to it, what I want to do is discuss in a common forum withpeople who may be affected and hope that somewhere, somebody realises they have to look into it more. They find a nugget that makes a difference. Now I know this is a weight loss website, and almost all the posts are about weight loss. And I'm generally good with it. Finance has just been bugging me lately. The economic down turn. The job losses, the havoc it has wrecked in our lives. The constant worry. And then someone posted that they have been unemployed for a while. And it brought back all my fears. And we've all been talking so freely about our weight, and our body issues, and our self image, so why not another taboo topic. Money. I won't be surprised if the moderators take me off though.
This one will be about the 401K. I still invest in it. Enough to get the company match, but I had my eyes rudely opened this past year. Like I said before I'm an immigrant, married into this country. And so when I came I had to learn a lot and fast. Money and the ways it was dealt with was one. 401K was the biggest. I had no clue what it meant. At first I thought it was just a savings plan. you put money in, and it grows and you don't pay tax, but you don't get to use it until you're old and grey. Fair enough. Give and take. And then I read and found that if you were younger you invested in stocks and if you were older in bonds and so on. So I'm on the younger end of the stick, so off goes my money into the few choices of stock funds we have. Can you imagine my horror this year when we lost not just the money we made on it, but even what we put in. Okay so all the gurus will say that's okay you're still young it will grow back. And yes I bought that **** What they forgot to mention was that if you got laid off you were a gonner. Basically it's this. We're young, we maxed out our 401K's thinking we were being oh so wise and saving for our future. Lets say we managed to save $10,000 in 401K. Being young we invested in stock funds. And ofcourse the market crashed, so now our $10,000 which had grown to say 11,000 is now worth about $3000. We lost, not just the 1,000 extra we'd made, but another $7,000 of hard earned cash. Money that we had deprived ourselves of spending and had saved for the future. Still it would not be horrible, because while the stocks were worth less, they were still the same number right. Basically the idea that 100 shares worth 10,000 earlier, were now worth 3000. And it wouldn't matter if you didn't touch it because eventually we all hope that the economy changes, and it becomes worth again. Unfortunately, and here's the kicker, what if you get laid off. You are now told to move you're 401K out of the company. This means that you can roll it over into a rollover ira yes, but guess what during that rollover, you're not rolling the # of shares, you're only rolling their value - so you've just lost it all for real.... Oh well should have listened to my mom and invested in CD's. Atleast we would still have our toil money.