The Economy, 401K's, Losses, Thefts, Crimes, Accountability...

You raise a lot of questions and I will try to answer some of them. 1. Where did the money go in your 401K plan go? Like everything your 401K has a value and that value is determined by the number of people who want to buy the stock and securities in that plan. If more people want to sell those stocks than buy them the price goes down and if more want to buy than sell the price goes up. If you continue to invest in you 401K as the market grows and more people want to buy(hopefully to make money) you stock will go up and you will make money on your investment. At this point you only lose if you sell your stock. If you hold it you could make your money back if the company is in good financial shape. 2. You point out that if you had that money you could have done some improvements to you home and helped the economy and this is true. How do you help the economy by investing in Stocks? Lets say I am a man with an idea for disposing of you trash without using a land fill and turning you trash into energy. My problem is that I need $10,000,000. (ten million dollars) to build the machinery necessary to produce the object that will compact the trash into usable bricks to burn in a special oven that will produce no pollution. I tell people that I am investing $1,000,000 in the project and will sell shares of stock in my new company for $10.00 oer share. Nobody is buying the stock at $10.00 a share but Mr. A offers to buy 1000 shares at $9.00 a share and I sell him 1000 shares and now the price is $9.00 a share and a few more people start to buy my stock. I present my idea to a local utility company and they agree to buy and try my system. As word get out that some one is buying my product more investors come to me and want to buy stock but I tell them that I will have to sell each share for $11.00 a share. As more people want to buy into my company they are willing to pay more than $11.00 a share for the stock. The people who bought at $9.00 a share now have stock worth $11.00 or more a share if they want to sell. As my stock price increases some of the early investors decide to sell and make a profit from their investment. If too many decide to sell new investors will not pay the full price and the price drops. If it goes below the price you paid you lose money if you sell. Mr A, who bought at $9.00 sees the price at $8.00 a share but decides not to sell has not lost anything because his stock could still go up in value. My company sells 5 more systems and the stock goes to $20.00 a share but Mr. A still decides not to sell he has not made any money unless he sells. If you apply this to you you will only lose money if you sell you stocks and the price is lower than what you paid for it. In most cases if you have been investing for 10 or more years you will not be in too bad a shape because you have been buying in good times and bad times.

they actually suggest that now. That you don't put money in a 401k, but instead you take that money that you would have put into it and trade it in the stock market instead. Not in long term, but shorter term trades. This way you always have track of where your money is and you have a better chance of it growing bigger than you do just letting it sit in a 401k. You could always withdraw your money from your 401k and start doing what you wish with it now. Might as well use what you can of it now because I'm not so sure it will be there later when you actually need it.

Well it gets worse. You can of course withdraw your 401 k under circumstances, BUT theres that nasty little capitol gains tax. So you must weigh the risk of staying in and risking further looses versus withdrawing and paying the gains tax plus penalties. Itcomes down to, is the loss you suffer staying going to bigger than the hit you take in taxes and penalties incured from a withdrawl? Both are a gamble.

Hey TGWB, I found this discussion from the link you posted on the "Who destroyed American" post. Wow! Where to start. First let me say that I work in the financial services industry. I work to protect people from exactly what you explain here. I am not going to offer any specifics here since we believe that "prescription without diagnosis is malpractice." but we can discuss this offline if you are interested. Let me first recommend a book called, "The Great 401(k) Hoax" by Bill Wolman and Anne Colamosca. I would never, and I mean NEVER place ANY retirement funds in anything even remotely involved in the stock market. It is gambling pure and simple. The whole stock market, CNBC, Wall Street everything involved in the stock markets is gambling. The stock markets were invented so that common people could invest in companies that they believed in. If you felt that Ford Motor company was a solid and growing company, you could buy a share of that company and by a business owner of sorts. The company benefited from your investment and you invested thinking that you would contributing to the future of the company that you believed in. And you would hopefully reap the benefit of the companies success. It has been perverted into this sophisticated gambling arena. It is addictive and destructive just as any other gambling outlet. It is NOT the place for retirement funds. I am not sure there is anyone to blame but ourselves. and our government. The government doesn't care that you lost your retirement. That just makes you more dependent on them and secures their position of power in your life. The stock brokers don't care. They get paid by moving your money around NOT by making you money. They are paid by the transaction, good or bad. There are several long term retirement investment options that will give you a guaranteed return and are insured against loss. They are not mainstream but they are also not new. We train financial planners across the country in these strategies. In one recent training, an adviser from a major company that you would know if I mentioned it, came up to us after the session and said, "These are great strategies. I wish we had these to offer our clients." We looked at him trying to find the right words. The truth was that they DID have these strategies available to them. But they were never made available to them and they were not exposed to them because the commissions to the company are less than half of what IRAs and other investments bring in. That is were the greed is. That is where the problem is. These companies are taking sincere advisers and using them to make available these unsafe retirement vehicles that make the companies a LOT of money. The other problem is that we should really educate ourselves so that we are not taken in by these dangerous strategies. The problem is that most financial planners only know what they have been taught. They are mostly sincere people doing the best that they can. But they are sincerely destroying the retirement of millions of Americans. As Americans we have to let go of our desire to be "big shot" investors with our money in the market. We have to NOT trust our buddy Joe at the water cooler who thinks he has it all figured out. We have to ignore all these people on TV that think they know whats best. We have to understand money and who it works and how to manage it. But instead of teaching that in school. We completely ignore it and hope that they figure it out by themselves. WE don't trust the parents to teach them about birth control so we teach it in school. But we then trust the parents to teach them about finances. Most parents don't balance their check books. That is not an indictment of the parents, but of our overall system of education and our priorities. Sorry for standing so long on my soapbox. I'll step down now. P.S. but I do like you idea of getting a tax write-off for the losses. It'll never fly since you never paid taxes on it or realized the money. But I can see an argument for a deduction on the principle that you invested. That's a good idea.

I agree with you but good luck with that!

I have never participated in a 401K plan, but from what I've heard and read I believe that it would be risky. If you are going to risk your money on the stock market you should at least be able to pick for yourselves which stocks to invest in. Any time you hand your money to someone else to make investment choices for you it is a good opportunity to get ripped off. Oh sure you can probably get a tax credit for your losses but how much money is that going to put back into your pockets. Since you mentioned social security let me get my soap box out. I have been paying into the social security system ever since I was 15 when I got my first public job. When I became disabled some 35 years later I filed for disability. Since the amount I was entitled to was low I also qualified for SSI. So, I must be doing pretty good since I get two checks, right? Wrong! Both checks, even with this years so called raises, come to a little more than 600.00. Now the cheapest rent around here is 450.00 and electricity runs about 250.00. Then you need water and at least a basic phone.... So you see where I'm going with this. If I try to work some, to supplement my income, they will cut my checks so it is a lose, lose situation. People who have to work for a living or those who have worked all their lives are only supporting the fat cats at the top. These fat cats don't care if we have any quality of life or even if we survive because there will always be someone to take our place. That is my opinion.

Amen to that. The government has been taking from us all of our lives for this tax and that tax. It is time that they do what is right for us now.

I couldn't agree more, anyone who lost money due to these CROOKS should absolutely get a tax credit, not just a deduction but an actual straight, fully refundable CREDIT. All the crooks that put us into the shape we're in should be put in jail but I guess we all know that isn't going to happen! Annie