What a bizarre conundrum those who have IRAs and 401Ks are facing

[NRaleighLiberal]

Talk about something that melts the brain...

Some of us here worked in jobs that encouraged using 401Ks, due to some level of matching. It was sold as a great way to build up retirement funds (especially since most of the companies that did so blew away the concept of a pension).

So we watch the market go bizarrely up (appropriately up during the Obama admimistration, puzzling right now - extremely puzzling).

we know that this can't hold. we know that trump could explode or implode at any moment - that the emperor will show himself as having no clothes (ewww), that the bubble will burst.

So on a daily basis, my wife and I experience sadness and outrage at all things trump, and an expectation that the market has to correct, yet for those of us close to or at needing those funds to live on - it is all just mind bending.

We have a financial adviser we trust - a woman who is as liberal as we are....and just trusting her advice at the moment...but she is watching closely for signs that it will all come crashing down.

Just one more thing to be really nervous about....

How are others in this situation faring? Bailing out? Staying? Watching and cringing????

[cilla4progress]

1. Moving some into cash

MMAs

[SHRED]

2. Perhaps get out of stocks??

[dumbcat]

12. And into what? nt

nt

[Control-Z]

23. Mattress? n/t

[Recursion]

38. Bonds and other fixed income instruments

You should be doing that as you approach retirement anyways (if you have a 401K and just checked the default boxes it's doing it for you)

[flamingdem]

3. Best to take politics and emotions out of it and

look at the history of returns for the market historically. I think it's about 6%

Timing the market is not going to serve you, in general.

[ProfessorGAC]

10. It's Much Better Than 6% FD

Now, i make around an aggregate 6.3% after fees, but i'm in a mix of broad base funds where minimizing risk outweighs maximizing returns. And i still make over 6%. Even during the market burst 12 years ago, i still made a return. Only around 2% instead of 7, but overall didn't lose any money.

But, you don't get rich quick by investing in low volume, low volatility stuff. Now i'm a tier where 25% of my funds are directly managed, and the rest are in 6 or 7 funds out of the 30 or so i can pick. And, the firm that manages my stuff (Fidelity) has a really easy to use set of tools to see why one fund differs from another. Don't have to be an investment expert to figure out how to balance return with low risk.

[flamingdem]

13. Thanks Prof, that's interesting and you've reminded me

to check out those tools at Fidelity.

Index funds seem to be the way to go but I hear the managed funds aren't such a bad deal at Fidelity.

[mopinko]

19. i think index funds are a scam. when the whole economy slips,

so do you, no matter what.

[flamingdem]

24. What is a better choice to guard against that?

Individual stocks?

[mopinko]

32. me, i, prefer to keep things low to the ground. invest in what you

believe in. there are mutual funds that at least have a conscience, and invest in things that are important.
ie- i have some money w calvert. no tobacco, no oil and gas, etc.
they invest in things that support the common good, like they have a water fund, that invests in water infrastructure around the world.

like i mentioned in another reply here, there are also reits, real estate investment trusts. i think that real estate will be more stable than most things should it all go to shit.
another thing i like is muni bonds. tax free, tho that doesnt matter so much if they are in a 401, still, it protects your returns.

my next move, after i see how bad the irs is gonna hit me, will be to take some of the money that is not in the 401 and build a bond ladder. since the city of chicago, and the state of ill, have crappy credit ratings, the yields are high. and tax free. there are plenty of fed bonds, too. but i like to invest where i see the returns in more than dollars.


index funds will never give great returns, even if they dont give the worst returns. imho, they are too sensitive to blips in the markets.

[Sherman A1]

4. Precisely

Just checked mine and while pleased with the growth. I also remember all to well the drop in the 2008 crash. This is very concerning as I look at my nest egg and wonder what is coming and when.

[Dream Girl]

5. I am 58 and have the strong feeling I should get out.

Not sure where yo put it though. I'm very conservative and have most of my assets in index funds. I have a strong feeling it is going to crash late spring (based on nothing at all).

[melm00se]

9. at 58

traditional thought is that you should have far less in equities than you do in lower risk investments (like bonds). 35-40% stocks and 60-65% bonds is a very rough (emphasizing very rough as YMMV) guideline

[Dream Girl]

11. Although I am conservative I started investing fairly late and have almost everything in equities,

I felt I had to take the risk to make up for lost time. It has been a good strategy, but I'm ready to swing the other way. I know almost nothing about investing, so just put everything in basic index funds. I think I will only leave abou 25% in equities. I'm kind of panicking now.

[ProfessorGAC]

17. That's Pretty Aggressive In Bonds

I'm about the opposite and my financial advisor at Fidelity says that is ideal.

[still_one]

15. No one can predict the market, but one strategy, if your assets have doubled, is move half to

to the side lines

[brooklynite]

6. We never try to game the market...

We max out 401(k) and 457 accts and IRAs, and have a regular program of deposits into our taxable account. With the exception of Apple stock (for which I have unique insight), we have an allocation of stock, bond, commodity and currency index funds.

[DFW]

40. Ah, yes, good old AAPL

My idiot broker got bored one day, as my account back in the States mostly remains dormant. I had bought 500 shares of Apple at $38 while Clinton was president. It split twice, so I had 2000 shares. They got some advice from some moron "expert" who said the stock looked shaky, and sell if it went under $190. It went as low as $189, so they sold me out. A few short years later, it went to $700, and then split 7 for one, so my 2000 shares would have become 14000 shares. Today it is at $139, so my initial $19,000 investment of 20 years ago would have been worth $1.9 million today.

Not my favorite subject.

Needless to say, the broker, Smith Barney (Morgan Stanley now), is a Republican outfit. I forbade them to pass on ANY recommendations to me ever again.

[brooklynite]

42. I got my shares through the same splits...I think my effective cost is 65c each.

[DFW]

45. I hope you kept yours!!

Stupid brokerage "experts!"

[brooklynite]

46. I had my own insight...

...I used to run the Macintosh User Group in NYC, knew a number of people at Apple, and had informed opinions about their product line and marketing strategies.

[DFW]

47. Well done!

I did something like that on a smaller scale. At the same time I bought the 500 shares of Apple, my immediate superior begged and pleaded with me to empty my savings and buy a couple of shares of some stock I had never heard of, and cost $33,000 a share, which seemed insane to me. But this guy has always had a Midas touch for this kind of thing, so I risked what I had and bought a couple of shares. This was Warren Buffet's Berkshire Hathaway-A, and, against the advice of the experts at Smith Barney, I kept them.

[SFnomad]

7. There is no need to forgo the matching benefits your company provides

There is always a "safe" plan to park your money in. Typically a Money Market Fund or CD Fund of some sort, which will not lose value in the case of a market downturn or crash (or if it does lose money, it will only be minimal).

The downside of it is those funds typically don't outperform inflation, which means the longer you keep your money in those safe fund the more you're losing purchasing power. Depending on how much you have in the funds and how much you're getting in matching benefits, it might negate even that downside.

[BSdetect]

8. Read about Rennaisance and more

Its a private stockbroker company with really high fees and yet high returns - fast frequency trading of course - just one of their tricks


Exposed how exactly social media is being used to influence elections [View all]

Robert Mercer: the big data billionaire waging war on mainstream media,

This is how they influence elections and even financial markets which has proven very successful



https://www.theguardian.com/politics/2017/feb/26/robert-mercer-breitbart-war-on-media-steve-bannon-donald-trump-nigel-farage

[flamingdem]

14. Do you think this is related to an upcoming

market crash or downturn?

[kimbutgar]

16. In 2006, I sold all my mutual funds because I started reading about an upcoming housing bubble

After that My broker put me in a collateralized mortgage obligation( com) because it had a high yield. After I got the propectus and read it I called him and sold it a week later losing $50. After that I brought a zero coupon muni bond and put the rest in cash. My broker thought I was crazy at the time. Called me after the crash of 2008 and said I was smart to sell the cmo because it would have been worthless. Now I am diversified a 1/3 in cash1/3 in an annuity and the 1/3 in the zero coupon muni. Now I am thinking of selling the muni. Just watching the indicators to decide what I what to do.

[Gabi Hayes]

18. cash, as in putting it under your mattress?

my "cash" is earning about a tenth of a percent, if that.

what amount do you need to have to get any appreciable return, or is it just money-fund-like

I have one stock, which I foolishly hold on to, in hopes it'll come back some day, and recoup a yuge loss I took.

[kimbutgar]

49. Cash is in a CD at a bank that caters to rich people.

[Gabi Hayes]

52. so....how much to you need to plunk down to get any reasonable rate?

brazillions?

not quite there yet

[kimbutgar]

53. They did not have a minimum limit.

You can put $1000 in a cd. And my money is considered probably a pittance.

[skip fox]

20. My financial advisor last week said "Expect up to a 25% correction."

yikes

[NRaleighLiberal]

21. I think it is time for me to have a catch up chat with mine given that...

[jmg257]

22. Take a loan from your account now while the market is high, then put the money back after the crash.

[NRaleighLiberal]

25. no need to take a loan, and from all I've read, one should avoid taking loans from these accounts

We are fine for the next year or so.

Plus - I am 61, so no more loans - the question is when to start drawing.

[jmg257]

27. What's good about these loans is 1)it is your money, 2) you pay yourself back the interest,

And fr now - 3) if I can borrow money when the market is maxed out, put it in the bank, and then put it back the account/market when the market is low, seems like a pretty good deal to get more stock.

[MichMan]

37. What if it goes up ?

I used to think the loan was great because you were paying yourself interest, but learned that if it goes up, you lose out on the gains and ultimately hurt your retirement

[jmg257]

62. Oh I know - just like playing the market! Sooner or later there will be a correction...

but when?


Personally I think I would take the loan soon.

[MichMan]

63. Taking loans with retirement money should be avoided IMO

If you decide to move your investment to something less risky , that is one thing. I think pulling it out as a loan trying to avoid a downturn isn't a good idea

[mopinko]

26. see if you can put some in reits. i had a very good divorce

most of which was a)i got to keep the paid for family home but he got to pay off the heloc, as well as my farm b)a very fat 401k because the ex's employer had a 2 for 1 match, up to 4% of total pay. we always maxed that out no matter what for the last 25 years.

as it happens, i hate the stock market. i still have some money out there, but the returns kinda suck, and the fees eat too much of it.

there will be hell to pay come april 15, but i took almost all of it out.
i had the chance to do some private mortgages for my sister, who is a flipper. she is giving me 10%, which is about half what they had been paying for short term investment money.
i also bought a little house that i am rehabbing as a rental.
i intend to put as much of it as i can into rental property.
bricks and mortar.

i am loving that a whole new career landed on me, something i have always wanted to do. in a partnership w my 2 brothers of choice.

it is a very active process, but there are reits out there that invest in similar projects, as well as big buildings. they are going to remain more stable in the long run, imho. no matter what happens, these are long term investments.

also there are socially progressive funds like calvert, where at least you can feel good about what you are invested in. i think that tho the returns on some of these are not great, they will also be pretty stable.

[uponit7771]

28. WE SHOULD ALL BE ABLE TO DO TRAILING STOPS !!! So there's no "timing" the market at all when it tank

[Hoyt]

29. My experience is when everyone starts looking daily, including me, it's about to tank.

But, right now it keeps going up.

Personally, I believe Obama's economy was a lot firmer than folks thought and Trump has little to do with it. Just hope it translates into better jobs for all and a little better retirement nest egg for those at that point in life.

[greatauntoftriplets]

30. I keep thinking I should cash it out and put it under my mattress.

Except that the tax consequences would kill me. I see it as a rock and hard place situation. All this makes me very uncomfortable.

[Liberal In Texas]

33. Put it in an IRA CD.

That's what we did right after the election. I know the market looks wonderful right now, but the bigger the bubble bulges the bigger the fail.

And just wait until the Fed starts to really raise the interest rates.

[unblock]

31. the challenge is determining *when* the crash is coming.

for now, the economy is doing well, and donnie and the republicans will likely do things that help corporate profits in the short and even medium term.

for example, letting companies pollute more obviously helps corporations cut expenses and therefore make more money. stocks goes up.

in the long run, workers and nearby residents get sick, which costs them and their own employers, and reduces their purchasing power. bad for the economy. stocks go down.

thing is, the up happens first, the down happens only later. for now it is still speculative, certainly in terms of size and timing.


personally, i'm largely hedged at the moment. my 401(k) is basically in buy and hold mode, but i have some triple bear etfs in my (much smaller) regular account, the effect is to be roughly neutral. my short-term timing is clearly off, i figured 12 days of records is enough for a correction; i certainly didn't expect +300 today, lol!

[MichMan]

34. Not too many other options

I combined all my various 401k from a few different jobs into a managed IRA a few years ago. Met with financial advisor a couple months ago, and while I am 6 years away from retirement and things can change, everything is looking pretty good right now.

During the downturn in 2008-9, even though I was unemployed, since I live relatively modestly, I just left everything where it was and of course it rebounded over time. Knew some people that panicked and pulled everything out, so all they did was lock in double digit losses that they never recovered from.

The last place I would take advice from is on DU. I recall after the election, people were predicting that the market would crash and everyone should get out immediately. While a correction will occur eventually, even the "experts" don't seem to have any consensus; usually every month for the last several years there is at least one claiming gloom & doom.

[Johnny2X2X]

35. DO NOT SELL because of politics!!!

The Righties that sold when Obama took off absorbed tremendous opportunity costs, they parked their money in cash and gold and missed out on tripling their investments under Obama.

Obama build a very strong foundation for this economy and he built it from the ground up. IMO it's set to motor along for at least another year no matter what Twitler does. We might hit 25,000 before the fall happens. Listen to your financial advisers, they aren't selling just yet. People go broke using passion and politics to make financial decisions. Twitler will crash the economy IMO, but I'm not going to divest when things are motoring along so well right now.

Personally, I am going to take a big risk for myself eventually though. I started investing too late for my retirement, so I'm going to try to time the market. Maybe pull 75% out if the DOW hits 25K, then buy back in when it drops to 10K like Twitler will probably lead us to.

[Fast Walker 52]

57. I agree on not selling right now-- I think the foundations are reasonably strong

and I think it will be some time before Twitler/GOP policies destroy it... but it WILL come, no doubt. Maybe in a couple years, unless some unexpected disaster happens before then.

[heather blossom]

36. I agree

A crash is coming, hard to determine when. I have moved my 401K funds into bonds and guaranteed funds. Don't earn much interest but when the crash comes, my principal will be about the same. The thing I am concerned about is inflation and rising prices.

[Vinca]

39. Frightening. You know it's going to fall like a house of cards but you don't know when.

[KewlKat]

41. posting so i dont lose the thread

Great info. Ive been stressing since the election.

[brooklynite]

43. I had breakfast with Jack Lew this week...

He does NOT expect an abrupt correction any time soon; in fact, he expects Trump to take credit for a steady and growing economy based largely on Obama's effort.

[wildeyed]

44. Buy low, sell high.

If you can transfer money out without penalty, then it might make sense to do so. Not necessarily because of Trump, but because the market is high right now. It might go up more. Or not. But it WILL go down, regardless who is president. I figure that if I made a good profit, I did well. Some people get caught up in whether they could have made more. And those who sold Apple stocks too early do have regrets.... But most stocks are not Apple.

The flip side, if you are not planning to take your money out soon, it will have time to rebound, even if it does go down soon.

The thing I have been considering, if the USA goes full-facist, it would be smart to have money in off-shore accounts that the US government can't get at. Most who do that do it to avoid paying taxes, but I think you can do it in a way that isn't actually illegal. Then, if the government starts freezing assets, you still have access to that money if you get out of the country. This is a very paranoid line of thinking, but if you want to go there, look at WW2. Getting assets out of Germany early would have been smart.

[workinclasszero]

48. Trump is going to destroy trade

Wait till he slaps a 20% tariff on all goods from Mexico. And he pretty much surrendered the field in the Pacific to China.

Trump's bubble will explode soon. If I had any money in the stock market I'd be worried. Hes taken all restraints off of wall street and we all saw what that did the last time.

[hughee99]

50. If you had money in, you might be able to move it to an Asia/pacific fund that could thrive on

Trump's poor decisions. The safe bet, if you truly believe be a "correction" is to just move it to money market/bonds, and then maybe move it back when you think it's stabilized. Of course, knowing when to do this is the tricky part.

[Gabi Hayes]

54. Disaster Capital LLC

should be lots of money in cleaning up the destruction of society as we know it

not that there's going to be anywhere to put it, anything to do with it, or anywhere safe to go, including one's own little private island, unless it's St. Helena Is., or someplace like that

[workinclasszero]

56. Wouldn't want to live on an island when climate change is out of

control and accelerating.

[workinclasszero]

55. Good point lol

[Gabi Hayes]

61. IOW, gambling, which, of course, all investing is.....unless, again, of course, you

are in a position to rig the game

gee.....who are his top cabinet "advisers?"

knowing when to get out is the biggest gamble of all

I've wanted to put big bucks on various shorts, but never had the guts

as someone said one of the pirates' big ideas is to gut SS and complete the forcing of the rubes completely into the markets, where, uh, anything "can" happen

you can be sure that, unlike the 29 crash, almost none of the big (read "institututional?&quot boys will get hurt, cause they'll be in on the fix this time....kinda like when they pulled it off leading up to the end of dumbo's term

and look how badly they were punished for that?

how long until mad max thunderdome is the way of the world?

[underpants]

51. Marking to read comments 401K

[Adrahil]

58. A major correction is due, but....

IMO, it likely will not hit until the fall, when it becomes clear that Cheeto and the Deplorables have no idea what do with the budget, I think the markets will get nervous and head into a bear market phase.

[Cognitive_Resonance]

59. Maintaining appropriate asset allocation. Taking advantage of the rally to rebalance. Trimming a bit

of the gains that have accrued in stock index funds during the recovery over the past eight years, and adding to short-term bond funds (plus some opportunity cash). Trying to keep emotion out of the decision process.

My personal opinion is that economic conditions are and have been pretty good, but the rally since election day is overdone and based largely on unrealistic expectations (tax reform, infrastructure spending, etc.). I think the biggest near-term "risk" is the fact that Republicans are unable to govern, and unable to agree among themselves (that's mostly a good thing). They may not have the votes in the House, or agreement between the House and Senate to actually move their agenda forward. Procedurally they've put repeal/replace ahead of the business agenda, and it looks like they have nothing even remotely viable to address health care needs. It's likely a matter of time before the investment world loses confidence, and disappointment leads to the wind coming out of the sales (edit: "sails"...no pun intended). Maybe a retracement to pre-election levels.

[workinclasszero]

60. Dump and his party are still coasting on President Obama's

economy, and taking credit for it of course.

Wait till they destroy ACA and replace it with BS. Wait till Dump's trade war with Mexico and China kicks into high gear.

And some useless war somewhere no doubt. Massive tax cuts for the rich and torching what little safety net we have now.

The typical rebublican near depression is on the way. Maybe it will be a full one this time. It would fit the pattern that Trump and Bannon have been following all along.