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401 and the down turn
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davpal
Posted 2/22/2009 18:28 (#618938 - in reply to #618842)
Subject: RE: 401 and the down turn


Mid Michigan
Not at all the way it works with your example. You can end up with WAY less than you put in there to begin with. If you put $60,000 dollars in there why would you assume that it would be even close to $90,000 right now? You are buying stocks in companies and sometimes those companies go out of business and your stock goes to 0. So if you invested $60,000 in the stock market in Federal Mogal stock your 401k would now have a balance of zero because Federal Mogul filed for bankruptcy and their shares became worthless. In fact you may have a bill for a balance. Most people would never invest all their eggs in one basket,(Federal Mogul) example so the losses usually don't go to zero. But many people have. Enron is one example as is MCI Worldcom. Every company in the S&P 500 would have to go out of business for most of us to go to zero on our accounts as most are invested in mutual funds and in my case also some bonds. The losses people are feeling is real thats for sure. I recently sold some Microsoft stock, one of the best companies in the world and very profitable. Bought it for $46 a share in the year 2000 and sold it in winter of 2008 for $20. If I had bought $60,000 of it in my 401 k back in the year 2000 I would now have $26000 dollars in my 401k to retire on. See how that can work against a person. You would expect a great company like Microsoft to make big dividends (which they do pay) and you would think your $60,000 should grow every year for the last 8 years right? Maybe 10-12% gains like all these big talking Wal street brokers yak about all the time? So you would think it would be worth much more Figuring a 12% gain over 8 years on $60,000 dollars would put you at about $144,000. Only the 12% gains didn't happen and now its worth $26,000. The losses are real. I have always had a steady job and have been faithfully investing heavily in a 401 k for 26 years and this recent market conditions had just made it a reality that my retirement wont be happening for at least 23 more years. That is if I make it that long and the social security isn't out of money by then, which I'm quite certain it will be.

Edited by davpal 2/22/2009 18:34
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