I suppose that one day the prophecies of the doomers and gloomers will come true but if that happens what makes anyone think they can be anything but screwed?

Your son should be diversified with a healthy portion of equities.

But he (like all children I suppose) doesn't think his Father can judge today's circumstances based on his Father's own life experiences; says things are too different today.

Equities during a good portion of our lifetime benefited from healthy growth in the economy. The growth was shared more equitably than it is now with the result that demand increased, spurring further investment and growth. That virtuous cycle now seems quaint. The recent Fed report detailing the decline in median incomes and household net worth is probably a better guide to the economy's current direction than the generational experience of the baby boomers.

I don't think the assumption of a "steady growth" in equities is a reasonable expectation or the basis for a prudent retirement strategy at this time. Kudos to your son for 1) having a job that still gets an employer contribution to his 401K and 2) paying attention to what's going on around him.

And to that article I posted the following response:

--buying high and selling low is never a good idea. Of course being young, he can affort to look farther out, but buying at the bottom is always better IMO.

practically no benefits of any worth.

Only was able to find work that came and went on jobs since 2008 crash.

Now is in his 40s and has a job as a heavy equipment operator at the local refinery (sorry, but it's work) with real benefits and this 401k plan.

Perhaps that helps explain his reluctance to 'invest' instead of simply saving. He doesn't trust much these days.

Buying at the bottom of the market rather than the top is something he can wait a couple of years for, IMO.

Yeah that was one of the stupidest decisions I've ever made, along with not investing in Google.

Could be solved if all of the retirement investment funds were diverted away from wherever they are going now and invested in successful green energy expansion and local farming operations.

If you think about it; this is the only leverage working people have against corporations. Unions, public employees, 401k plans, IRAs a whole bunch of money that people who don't know anything about investing; turn over to 'chuck' for the latest ponzi scheme.

There should be a law requiring a completely transparent local investment option. Did I mention that the investments should be required to be local. Let's see the bastards on wall street extract $100 million bonuses out of local investments in small communities.

I don't know what you should tell your son, but I'm gardening and raising chickens as my only plan for retirement. The last time the markets crashed; not a single chicken died.

It doesn't make sense that people send all of this money to these funds for all that time, and then when they need it to eat , they don't have the money to buy food, but you can read in the news about huge executive bonuses. You don't eat money; there is no better time than the present to learn how to grow food.

I suppose to a normal person I sound bat shit crazy, but its surprising how much food (including chickens and eggs) can be grown in a small space. The funny thing is that most of our parents and grandparents did it as a way of life.

And wish I lived in a community where I COULD raise chickens. As for gardening --I'm a late bloomer (pun intended). Lived in apartments all my life and have a very small yard at this time.

Local investing makes so much sense it seems absurd that people continue to support national conglomerates because of price. Buy less/support local businesses is so much smarter. So many of us have much more stuff than we need!

When I was little I grew up in a 3 generation home and loved it. Once everyone started 'doing well' and getting all their own stuff and living separate -- well, I think that's when we lost our sense of community in general.

Seems financial times may well force us back that way.

I needed some "real money" due to circumstances, so I've been working, bought a condo (the only affordable house ownership in my area),now pay farmers for my meals, and I keep a small garden.

I have been going back and forth for years, agreeing with the son who's the subject of this thread, but also swing toward the sentiment that if you invest in small companies doing good things, you can grow your money and help people and the environment, too.

It's a conundrum and I just rebalanced my portfolio, but I'm hanging onto some cash - I may need to go back to the chickens, too.

I think his plans, while possibly not optimum in terms of return, seem pretty optimum right now in terms of secrurity and preservation of capital. Interest rates are pretty pathetic right now, but if they ever do go up, money markets will be looking great.

And it never hurts to have some cash you can lay your hands on in a pinch.

That's ok. It's why I hang out here and subscribe to this group and why I came here to throw it out there... It's good to get all sorts of input.

As with most children, they do what they want to do but getting some diverse information can never hurt.

He's becoming so fearful (corporate media working on him no matter what I try to do) I suspect he'd simply put it under his mattress if he thought his home was sufficiently safe but at least he does see the good in getting whatever employer match he can by using the 401k.

That's why you've got to put it to work. Unfortunately, there is risk involved.

If he is not locked into "target funds" in the company's 401k, then he could split his contributions any way he see's fit. What it looks like, from this side of the computer screen, is a 401k that functions more like purchasing an annunity in the present tense, commissions and fees all paid up front, than a 401k investment vehicle with low cost funds. I don't know how its structured, but if there's a re-balancing fee every quarter and he feels he is being shorted by the cost, I'd say the case is he's buying an expensive 401k option when there may be less expensive ways to go.

If the cost is offset by the company's contribution, and the target fund is a balanced fund, stocks-bonds-financial, the question is why would he be invested there if there are other choices that are cheaper cost wise with returns that reflect the market they invest in. Passive mutual funds that follow the general market are normally available in IRA's.

If that's not the case in his company's 401k structure, and he's worried he is losing his base capital as the returns are eaten by fees for a managed fund, he wouldn't be any safer in money markets if the underlying market goes negative.

As with any advice, buyer beware. I don't work for the financial industry. I'm solidly a 99%er with modest means.



* i need a proof reader or more coffee

You are SO right. I was lucky enough to have an actual company pension (that, thank the heavens, is still properly funded) so had little knowledge about 401k plans.

What surprised me most was how little people who actually have them know about them. Not even about taxes due and 10% early withdrawal fees! No one can be bothered to read the paperwork -- they just go to the announcement meeting, sign where they're told and trust it will all work out for them!

A suspicious person would think that was the plan all along, wouldn't they? Or maybe just someone who has always mistrusted the financial industry? Read: me.

4 things that I consider when I'm getting gloomy about stocks:

1. The U.S. stock market has a better than 9% return since 1926 or somesuch. Here is a link to the Vanguard S&P 500 Index Fund, for example
http://www.thestreet.com/quote/VFINX.html
Since its inception in August 31, 1976, it is up 10.67% annualized average, meaning that $10,000 invested back then would be worth $10,000 X 1.1067^35.8 = $376,940 (From 8/1/1976 to 6/22/2012 is about 35.8 years).

I would urge him to put (at least) 20% of his money in index equity funds like this, just in case he is wrong about money market funds (which historically has a horrible return compared to equities and bonds). AND LEAVE IT THERE NO MATTER WHAT, THIS IS THE MOST IMPORTANT ADVICE OF ALL. Don't try to time the market, very few have succeeded at that. Ignore the advice you are getting to wait until the market falls and buy in a few years. (Google "Dalbar studies investor returns" for studies about how most investors do much more poorly than the funds they invest in because of their tendency to buy equities near stock market peaks and to sell near the bottom -- I particularly remember one study in like 2005 or so over the past 25 years -- where U.S. equity mutual funds averaged something like a 13+ % average annual return, but the investors in them only averaged 4+ %. ).

2. Read a bit of "The Death Of Equities" - Business Week's August 13, 1979 cover story. Only 3 years later the U.S. stock market began its ascent from a DOW of 777 in the greatest bull market in history. It is now at 12,641. (and looking at index values considerably understates the total return over such a long period because it leaves out dividends, which if I recall correctly, account for something like 2/3 of the total return of S&P 500 stocks since 1926).

http://www.businessweek.com/investor/content/mar2009/pi20090310_263462.htm

3. I was impressed by a handout in a financial seminar back in 1982 or so about all the reasons given over the past 20 years of why stocks will be a bad investment - (just like today) we're running out of food and oil and all that. I wish I had the handout (I'm sure its somewhere), I'd type it in.

4. The S&P 500 dividend yield (currently about 1.7%) is better than money market funds. I'd rather have a return that is better than money market funds plus the historically great probability of substantial capital gains. Something like Vanguard Dividend Growth (VDIGX) might be more to his liking.

Right now, for instance, property is to be had for a fraction of its worth here in Lake County Calif.

Now I don't think that RE is going to end up in another bubble.

What I do think will happen is that over time, the traditional "good value" buys regarding RE. will pay off, and pay off well.

I live inside a community which provides one of the few Big Recreational Lake areas in the sate of California. It is a 2.5 hour drive from San Francisco.

Given that San Francisco area will always have plenty of rich people, it stands to reason that like similar spots in Europe, this area will continue to attract people who want second homes to house their boats and paraphernalia over the winter and their boats and jet skis over the summer.

So I'm not just saying to run out and buy a lot of property at depressed prices in a place like Stockton Calif. But in a traditional recreational area, there is value that will be forth coming.

My investment co. has a RE equities fund; the investor is buying shares in actual real estate owned, and as long as there are people to lease, rent and buy the properties there are some profits.

Yes, there are RE downturns and you can't always be assured all the properties will be fully leased/rented or sold for a profit. Yes, there is risk, but this is a way to own real estate without the hassle of renters and fixing toilets!

The usual quote is "there is no 30 year period where equities were outperformed by any other investment".

So if your son has 30 years to go, equities seem like a good bet.

If he has fewer, I share his concern. I look at our current cycle where the pendulum has swung to very poor market regulation and enforcement. The crooks are stealing and all of Roosevelt's market reforms have been demolished. The only regulation is on the small potatoes advisors, not on the crooks at the top like JPMorgan and MF Global.

So I don't have an answer, but your son has a legit argument if he's expects to retire in under 30 years.

Full Retirement Age: If You Were Born In 1960 Or Later:
http://www.socialsecurity.gov/retirement/1960.html

Of course, who knows what the government can do to that timeline in the next 26 years claiming that Social Security is going to be bankrupt.

I understand what you've said but neither he nor I believe that the next 30 years will be anything like the last 30 or any period of 30 before. Global politics plus climate change plus population growth plus Corporate control will make his future very different than mine or my parents'.

Thanks for the input.

At this point he's decided to go 50/50 with savings and investments. BTW, his particular 401k plan has limited fund choices, not a single indexed fund!