Americablog - You just lost 7% of your retirement

[gmudem]

http://www.americablog.com/2008/09/you-just-lost-7-of-your-retirement.html

The market lost over $1 trillion dollars today as a result of the bailout vote fiasco. If you are one of the 62 million Americans who have retirement monies invested in a 401k, for example, you just lost 7% of the total money you had for your retirement. Let me walk you through what that means

- If you had $10,000 in your retirement account this morning, you just lost $700 of it.
- If you had $100,000 this morning, you just lost $7,000 of it.
- And if you had $1,000,000 this morning, you just lost $70,000 of it.

As Charlie Gibson on ABC noted, losing 7% on the market in a year would be a huge story.

What happened today was real. ABC's financial consultant noted the following tonight: "I don't care if you're a big corporation, a small business, an individual trying to send your kid to college, or buy a car or buy a house, it is virtually impossible to get a loan in this country." As a nation, we no longer have loans, for practically anything. I realize people aren't thrilled about the bailout plan - and as someone who didn't buy a house in the past few years because I wasn't willing to gamble with a risky loan, I'm not pleased about bailing out morons who did gamble, and lost -but giving up 7% of your retirement seems like one hell of a bad way to stick it to Wall Street.

--
It saddens me that some House Democrats were so intent on "sticking it to wall street" that they ignored the needs of main street. A bailout is necessary for many Americans, not just CEO's. I hope an improved version of today's bill is passed this week, because the stock market is just blowing up right now and it's going to hurt a lot of people.

[scheming daemons]

1. In one day. with no bailout, today will be remembered as "the good old days"

[PM Martin]

3. The Democrats must retry to pass the bill ASAP.

We cannot wait until January.

[Mojambo]

2. I'm terrible at math. What's 7% of jack shit?

7% in one day.

Brutal.

[Union Thug]

10. DING DING DING!!!! n/t

[democrat2thecore]

4. That's just wrong

Many well-managed funds will not see anything close to a 7% decrease. You make it sound as if it's across the board and will affect every stock and every fund. The Gilded Group has bamboozled you.

[BzaDem]

13. "Well-managed" funds often do worse than indexes that simply mirror the market.

If people are close to retirement, hopefully no more than half of their money is in stocks. But for people who are still 10+ years away, many have 50-100% of their retirement in funds that mostly mirror the market. You are the one that is getting bamboozled. (Though you are correct in the sense that overall, after all is said and done, people probably won't see a 7% decrease provided we get a bailout soon. It will probably rebound once that happens.)

[high density]

18. Go ahead and give us the ticker symbols to some of your "well managed funds"

I'm very curious to see how they have performed long term against my cheap index funds at Vanguard.

[democrat2thecore]

35. Index funds took a major blow today - they mirror the market! -nt

[high density]

36. Yes, you are the master of the obvious

I'm still waiting for the ticker symbols of those great active funds that didn't go down yesterday.

[TexasObserver]

5. Not if you bought bonds, or Euros, or precious metals with your 401K, you didn't.

The problem is a political one. Until the voters demand a bailout, it will not pass, and what's more, it shouldn't.

[NEDem]

6. repeat, over and over

"giving up 7% of your retirement seems like one hell of a bad way to stick it to Wall Street"

[girl gone mad]

30. The stock market is not guaranteed against losses..

and nor should it be.

Stocks are not guaranteed to always go up in value any more than houses are.

This is why people should diversify.

[casus belli]

34. Or master options to hedge their investments. n/t

[treestar]

7. But leaving it there, it can be built back again another day

The stock market goes up and down. And the longer the funds have been in there, the more they grew before the downturn today.

Nobody complains when the stock market goes up, but it's in the nature of it that it's a gamble; it was always possible to lose the gamble as well as win it.

[MercutioATC]

8. ...and passage of the bill would have resulted in a 10% loss...

Wall street would have been fine for a while, but the value of the dollar would have taken another HUGE hit (remember, $700B is 7% of our national debt...if yu include the Bear and Fannie/Freddie bailouts, we're over $1T).

That 10% hit is equal to a 10% loss in the stock market...or a 10% tax hike...or a 10% pay cut. It's 10% of your purchasing power gone.

[scheming daemons]

11. You're misunderstanding the $700B. It is not thrown into a black hole... it is buying assets.

That will pay for themselves within 10 years.

[MercutioATC]

17. On somebody's planet, yes.

We'd be buying the junk...the stuff that's not performing. We'd see an 80% reimbursement rate at best (that's a 20% loss).

We'd also see serious further devaluation of the dollar. That means inflation. Usually, the Fed could just raise interest rates and adjust, but raising rates now would interfere with money movement, which would run counter to the efforts of the bailout.

We KNOW that this would have devalued the dollar. We KNOW that would result in even higher wholesale and retail prices at a time when we can ill afford it. We also know that we'd be buying junk loans...if they had a chance of performing, they'd be viable on the open market.

This was a bad bill. We can do better.

[joeglow3]

39. Even with a 20% loss, that is not the 100% you claim in your prior post.

[Roland99]

19. BWA HA HA HA HA HA !!! Come on...buying assets???

Paulson will buy "assets" whose market values are unknown because institutions are too scared to price them at mark-to-market values as they sliced those mortgages up across so many packages that they are ALL tainted and must ALL be priced horribly low. They are a victim of their own UNREGULATED GAMBLING SCHEME.

Paulson will buy these "assets" at, essentially, retail value (maturity value) and will try to sell those assets on the market at a profit.

Yeah....good luck with that.



Want a bridge in Alaska? I can get you one....cheap.

[girl gone mad]

31. It might be a black hole.

We don't know at this point.

Buying these assets would likely do nothing to fix our liquidity crisis. We appear to be in the midst of a full-fledged, self-feeding panic. People with credit and wealth are unloading assets at greater and greater losses. They want nothing to do with these banks or with the markets.

[Union Thug]

9. Um, what retirement, americablog? I'll never see 'retirement.'

You mean the big 6K that I've managed to pack away over the years? that retirement? Or the SS income that is constantly being attacked by the assholes in suits who for years have been telling us that the best investments are in the stockmarket, and therefore we should privatize SS and invest in in their criminal enterprise? Or better yet, give up the idea of a pension and accept the 401K as the standard? What a joke.

When you have little to lose, you see things in a different light. I'm bitter as hell, but I'm also laughing my ass off.

[BzaDem]

15. Has this really caused people like you to turn into people who don't care about others' misfortunes?

Even if they had nothing to do with the cause?

In other words, you laugh your ass off at people whose life savings total $6001+, because you have $6000?

How are you any different from the corporate executive who doesn't care about people who have less than $150 million, because they have $150 million?

I actually thought the Democratic party stood for principles that went beyond oneself.

[Union Thug]

27. I have no sympathy for anyone who ...

has preached the unregulated free-market bullshit for the last 30 years. Too bad, so sad.

Callous? Yes. But many of us have been harping on the evils of unregulated markets for many years and all we got was labeled COMMUNISTS and were routinely marginalized under Reagan, Bush 1, Clinton and now Bush the lesser.

Oh, how am I different? I don't have a 150million dollars, that's how. That's the only difference that matters.

[NEDem]

28. self delete

figure it's best to just ignore the really bitter ones.

[AZBlue]

12. Mine keeps going up.

I don't invest in the stock market.

[Eric J in MN]

25. What do you invest in? NT

NT

[high density]

14. Huh?

People saving for retirement should be investing a portion of their paycheck regularly. You don't go "all in" on Friday, September 26 and then never add more for the rest of your life. Investments made now buy more shares at these lower prices.

Savers that have money in equities should have an outlook of decades. If you don't have decades to retirement then your exposure to equities should be less to begin with. I hope/expect that the market being down 7% today will have no meaning on my savings when I retire decades from now. I suppose we could run our economy into the crapper for decades, but if that happens then we're all screwed anyway.

[Roland99]

16. You have the proof that "Americablog" is 100% vested in a Dow Jones index?

[NoSheep]

20. 7% of nothing is nothing!!!!!!!!! Does that make me rich????????

Just wait it out. It will 'adjust". Isn't that what we're told all the time?

[NoPasaran]

38. More likely, it makes you a moron

[NoSheep]

21. Awwwwwwwwwww. The "haves" don't have as much as they used to have.

I'm truly sad. Just think! if they'd helped their neighbors with some of that money, at least they'd have been able to spend it!

Sorry. I know there are some good, honest, hard working people out there with investments. I've managed to save about $5000 over the past 45 years. And I have a college degree. Wow.

You know how they always say: "the markets will adjust"? Well, I think they just did.

[ibegurpard]

22. If you're close to retirement

and you had a lot invested in stocks then you invested foolishly.
If you aren't close to retirement then it will most likely rebound by the time you retire...if it doesn't then we're all screwed anyway.

[Yo_Mama_Been_Loggin]

23. I can't touch my 401K for another eight years

By the hopefully this shit will be settled.

[Eric J in MN]

24. Stocks are supposed to go up and down.

The Dow will be different over time than it is today.

[babylonsister]

29. Thanks, Eric. For 'long term' investors, they might have lost nothing.

If people don't freak, they will be fine. Maybe.

[girl gone mad]

33. Exactly.

And if we intervene to keep stocks from ever going down, then stocks will trade no differently than any other treasury-backed asset. Which is to say, expect returns which will not keep pace with inflation.

[MSU_Spartans]

26. Actually, I just got a

7% discount on shares toward my retirement account.

If you're planning on pulling out soon, yeah, it's gonna hurt, and I really feel sorry for you. If not, and you've got some liquid assets, this is the week to pad your contributions a bit :)

[berni_mccoy]

37. There are plenty of people who are retired trying to live off their 401k and IRA right now.

[GoesTo11]

32. Perfect solution!

I'm taking up smoking, so I'll have less retirement to pay for and my 401k will last as long as I need it even though I won't reduce my withdrawals from the pre-crash plan. In fact, I may have to increase withdrawals to cover cigarettes.