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Post by whoswho on Mar 20, 2008 9:03:56 GMT -6
What we are NOT seeing in all this flurry of reporting is the fate of the 17000 employees whose retirement funds plummeted to 10% of value. It is sad when the big dogs are walking away with the big bucks, and others are getting their lives ruined. From reading around the blogs, they are saying that Bear Sterns employees had an ESOP plan. dealbook.blogs.nytimes.com/2008/03/17/could-bear-stearns-do-better/"What happens to the folks who put a majority of their earnings into the Bear ESOP plan?" According to my understanding, this is NOT just some kind of a thrift plan we are talking about, where you would have an option of whether you would participate at all, or your choice of a variety of investments. We had this same kind of a retirement account at my old employer, and what it was.... was a replacement of a traditional pension plan (defined benefit plan) with a pension plan consisting 100% of company stock. (Can you say "Enron"?) I wonder WHY ESOPs are still legal in this country? ? There have been so many wipeouts (Enron, United Airlines). But, it looks like it WILL be litigated: berenslaw.com/BSC.aspxquote: "DENVER, CO, March 17, 2008 -- Dyer & Berens LLP announced today that it is investigating potential legal claims against The Bear Stearns Companies Inc. ("Bear Stearns") (NYSE: BSC) and others concerning whether the administrators of the Bear Stearns Employee Stock Ownership Plan (the "Plan") have failed to manage Plan assets prudently and invested in BSC stock when it was no longer an appropriate investment for the participants’ retirement savings. The attorneys at Dyer & Berens, LLP believe Plan participants may have legal claims against Bear Stearns, Plan administrators and others for their breaches of fiduciary duties and violations of the Employee Retirement Income Security Act of 1974 ("ERISA")."
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Post by lasher on Mar 20, 2008 10:39:53 GMT -6
Employee Stock Ownership Plans (ESOPs) are a good thing for employees. So are 401(k)s. They are both good supplements to, but not an acceptable substitute for, traditional Defined Benefit Pension Plans (DBPPs) that have become less and less common. 401(k)s were initially called employee savings plans but in a little semantic sleight of hand, employers started calling them Defined Contribution Pension Plans (DCPPs), thinking employees wouldn't notice when they lost their DBPPs. But I digress. In most cases ESOPs consist of company shares that are given to, not purchased by, employees. Under federal law, ESOPs are intended to be invested "primarily" in employer stock. This generally exempts plan fiduciaries from liability if the stock does not perform well. However, this protection does not apply if the fiduciaries know or should have known that the stock was headed for an imminent and very sharp decline, in which case fiduciaries should seek to sell the shares in an orderly way if possible. www.nceo.org/library/bear_stearns.html
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Post by db on Mar 20, 2008 17:39:42 GMT -6
Are you kidding? You wonder why ESOPs are still legal. They are a scheme to bulk employees when things go bad. I worked for a company that pulled this scam 15 years ago. You wonder why they are still legal, because this country is run by a gang of thieves. You still have not figured out that Bush, Cheney, Delay, and Newt's Corrupt Republicans are the biggest gang of thieves to take Washington. Did you forget Newt Gingrich and his Contract on America? Yes, the Corrupt Republicans let Wall Street run wild. Between Wall Street and the Pentagon, the Criminal Republican Party has let them bankrupt America.
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Post by whoswho on Mar 21, 2008 7:35:22 GMT -6
Employee Stock Ownership Plans (ESOPs) are a good thing for employees
So are you a troll just trying to tweak my nose? I don't know how you could possibly reach that conclusion, no matter from what warped angle you look at it.
Do you personally HAVE an ESOP?
It puts the employee in a totally vulnerable position, first because it is never up for a vote whether they will participate or not. "My way or the highway," says the company.
Secondly, the employee can not touch it under any circumstances whatsoever, even when the value of the stock is rapidly plunging from $200 a share to $2 a share. Unlike a 401k, you can't even move it to another investment. Your choices are, company stock, or, company stock.
The retirement savings you thought you had could literally vaporize overnight.
Unless of course the employee could quit the company before the value started to drop, and roll their account over to a 401k somewhere, and sell the stock from there. And what is the likelihood of that happening? That an ordinary employee would even have that sort of inside knowledge? Zero to less than zero, unless he had a crystal ball or knew how to read tea leaves.
So the employee is nothing but a sitting duck in a tsunami. Heck, he would have been money ahead, had he just put the funds in the worst passbook savings account in town.
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Post by lasher on Mar 21, 2008 8:51:54 GMT -6
No, I am not a troll. And I am not just trying to tweak your nose. I think you were already upset without any help from me. I think you might not have understood what I was saying. Please consider this excerpt from the post in question: Employee Stock Ownership Plans (ESOPs) are a good thing for employees. So are 401(k)s. They are both good supplements to, but not an acceptable substitute for, traditional Defined Benefit Pension Plans (DBPPs) that have become less and less common. No, I do not personally have an ESOP. There was a time, however, when I was fortunate enough to have had one, as well as a 401(k) and a DBPP - all at the same time from the same employer. As I said before: In most cases ESOPs consist of company shares that are given to, not purchased by, employees. And so it would usually be wrong to characterize ESOPs as vehicles for "retirement savings". 401(k)s and IRAs fit that description. ESOPs are a good thing, just as I said. The problem is the absence of a DBPP or at least a CBP. As I made clear before, neither ESOPs nor 401(k)s are acceptable substitutes for DBPPs. ESOPs were designed to be incentive plans, not retirement plans, and there's the rub.
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Post by whoswho on Mar 21, 2008 9:39:02 GMT -6
Employee Stock Ownership Plans (ESOPs) are a good thing for employees. So are 401(k)s. They are both good supplements to, but not an acceptable substitute for, traditional Defined Benefit Pension Plans (DBPPs) that have become less and less common.
Interesting that you had BOTH a defined benefit plan AND an ESOP.
Our defined benefit plan was totally replaced by an ESOP, it was never at any time a "supplement". One day we had a tradional pension, the next day it was gone with the wind. It was never up for a vote. We were never consulted until it was a done deal.
They have the ESOP only to this very day, and the company has gone through so many changes that it is almost impossible to determine just what they do anymore. Wall Street has never figured out that they no longer own their biggest cash cow.
And so it would usually be wrong to characterize ESOPs as vehicles for "retirement savings". And yet that is just exactly what they ARE doing. That IS *the* retirement. If it isn't, then they should stop telling us that it is!!
They need to be much more straightforward and honest about what WILL create a retirement for us. I know *I* never had a REALLY clear understanding of what it entailed for YEARS. And I think there are a heck of a lot of people who are even more in the fog than me. How can you plan realistically if you are NEVER given a clear picture of what it is that you need to do?
We went straight from the DBP ("Don't worry about your retirement, WE are taking care of that, and it will be a good one") to "Oops, we're sorry, we had to use your pension money to buy back the company from a hostile takeover.... but we'll pay you back over 10 years. Oh by the way, we will be paying you back in company stock."
Now I am FAR from the most educated person in the world, but this looks like it has many holes in it to me.
I just think we are SEVERELY lacking in regulation of something that is critically important, and that the poorest and dumbest among us has as much right to PROTECTION as the biggest wig in the company.
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Post by lasher on Mar 21, 2008 11:15:37 GMT -6
And I had a 401(k) - By pointing this out I hoped to illustrate that DBPPs, ESOPs, and 401(k)s all all importantly different. They were designed to be pension plans, incentive plans, and employee savings plans, respectively. You might have recourse. Pension plans are primarily regulated by Employee Retirement Income Security Act of 1974 (ERISA). en.wikipedia.org/wiki/Employee_Retirement_Income_Security_ActUnder ERISA, employers can not take away accrued pension benefits. A specific definition of 'accrued benefits' is beyond the scope of what I want to say right now. But you might want to start thinking about that in case your employer was not in compliance with ERISA when they terminated your DBPP and replaced it with an ESOP. In these cases employers have usually found a way to get around ERISA protections, however, substantially because they conspire together to legally steal employees' pensions and benefits through a truly sinister organization called The ERISA Industry Committee. www.eric.org/forms/documents/DocumentFormPublic/Please note that I said upthread: 401(k)s were initially called employee savings plans but in a little semantic sleight of hand, employers started calling them Defined Contribution Pension Plans (DCPPs), thinking employees wouldn't notice when they lost their DBPPs. At one time I had employee medical benefits that cost me nothing. No copay, no deductible, no premiums, nothing. Then my employer changed that to cafeteria benefits, much in the way your employer discontinued your DBPP and replaced it with an ESOP. They told me it was a good thing for me and it was what employees wanted. But I ended up with copays, deductibles, and premiums and this decline has continued ever since. They lied. And when they subjected our DBPP to a CBP conversion they said it was in our interests, that we wouldn't lose anything. They lied again. And if an employer is telling you an ESOP is a retirement plan, they are lying to you. Changing a label from 'incentive plan' to 'retirement plan' is only a word game. They are not going to be more straightforward and honest. They are going to lie, as they have done in the past, as they are doing now, and as they will continue to do in the future. You must arm yourself. I know a lot of people don't understand what they need to do to prepare for a reasonably comfortable retirement. But I do. And I will help you understand that, if you wish, just as long as you're careful not to hurt my feelings by calling me a troll. Here's a start: A couple retiring today at around age 55 or 60 needs a bare minimum of $1 million dollars in a tax-deferred IRA if they have medical benefits, and if they are free of debt. This assumes no other source of income, such as a pension annuity, other than Social Security starting at age 62. I consider the maximum safe annual drawdown from this $1M IRA nest egg to be $50K, or 5%. 2006 US median household income was $48,201. I am deeply concerned about the demise of DBPPs, and worry about what's in store for the average person still working today. It's not as difficult as it might sound to get ready, just so long as you don't wait until late in life to start.
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Post by judes on Mar 21, 2008 12:48:20 GMT -6
Lasher you appear to know more about this stuff than most. I admit I am clueless on most of these things, even after trying to learn. A lot of it seems foreign to me. I too, am in the situation where at one time I had a DBPP and a 401k with a 100% company match, that required a certain percent to be purchased in company stock and held for a period of time before moving it.
First the company widdled down the company match to 0, even though it still kept the requirement of a certain percentage of your contributions to go to company stock. Then the company went bankrupt, and the company stock was worthless. When the company stock went to about 20 cents it was automatically sold by the fund managers. Nothing like waiting till it went to the absolute lowest. So a lot of people who never changed out of the company stock after the time period to hold passed were wiped out. Unfortunately, knowing very little about stocks, bonds or mutual funds for that matter, I had a big chunk though not all.
Anyway, now they have eliminated our DBPP, and say they will replace it with some small percent of a company match type thing in our 401k, after they emerge from bankruptcy. So before we had a defined benefit pension plan and a dollar for dollar company match stock savings plan, and now we don't even have one of those things. It is amazing. What kills me is I was counting on that DBPP, and not saving as much as I should have or would have otherwise, if I didn't think I was getting a DBPP. Now at mid age, it is too late for me to make up the time I lost to save what is needed.
I know there are so many people in this situation. It is truly frightening. I believe 401ks were designed to benefit wall street, by keeping money flowing into their funds and keeping them artificially pumped up. They can rely on a set amount of money flowing into predefined funds at specific time periods as monies are automatically deposited from an employees compensation. I have a feeling there would be a lot of financial funds that would not exist today, were it not for employees feeling forced to contribute to them through very limited 401k options.
Anyway I digress. As I said, I only know enough about this stuff to probably be dangerous. But maybe you can help me understand something. What are the requirements, or process, to go about transferring your money out of a company 401k into the investments of your own choosing? Say for example, I am still employed with the company and I wanted to roll my 401k into US Treasuries, (or some commodities though it may be too late for that now). Is that possible? Thanks for your time.
Oh here is another interesting development I bet most would not be aware of. Even though our DBPP was eliminated, they say we will still get the accrued benefit to the date of the "freeze". I do not trust the company in the least bit to live up to that "promise" , so another option is to take a lump sum payout when you leave the company. I had checked with our plan provider and was given the lump sum amount. A couple weeks later I checked again and it was reduced by over 20%!! I called the plan administrator to find out why the lump sum payout calculation had dropped so much. My phone call was routed to someone in India no less! The person on the phone in an accent very hard to understand told me the lump sum payout was inversely tied to the GATT rate, and adjusted accordingly at their discretion apparantly. Can anyone figure that gem out?
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Post by lasher on Mar 21, 2008 13:38:37 GMT -6
Judes,
I'm not any smarter than anyone else. See, we just know different things, that's all. I just happen to know a boatload about these things.
On the bright side, you are in good company here at this message board, removed from the Saint Ronnie of Reagan trickle down tax cuts no matter what bullshit, and vicious 'entitlement program' rhetoric you will find most other places.
I appreciate your post and I want to give it a response it deserves. But pretty soon my excellent WUMMON will be home from work and she's off all next week. We're gonna head out on the town just about any minute now and she comes first. Please be patient and I'll get back to you as soon as it is practical.
Lasher
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Post by judes on Mar 21, 2008 13:55:00 GMT -6
Thanks Lasher I really appreciate it. Have fun on the town, instead of painting the town me and my man will only be painting Easter eggs tonight with the kids, but it is always a good time.
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Post by db on Mar 21, 2008 17:22:48 GMT -6
Like I said people, don't worry about your company retirement savings; when this gang of thieves gets done, you will not have any. Think Enron, think Bear Sterns, think about companies to small to receive news coverage, and think mostly about companies to be reported. I hate to rain on your parade (retirement planning); but the winds of change are blowing and they are not blowing in your favor. All I can say is try to build your own nest egg and try even harder to protect it.
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Post by unlawflcombatnt on Mar 21, 2008 21:44:09 GMT -6
I believe 401ks were designed to benefit wall street, by keeping money flowing into their funds and keeping them artificially pumped up. They can rely on a set amount of money flowing into predefined funds at specific time periods as monies are automatically deposited from an employees compensation. I have a feeling there would be a lot of financial funds that would not exist today, were it not for employees feeling forced to contribute to them through very limited 401k options. Judes, That's exactly what I've always thought. 401Ks were an invention of Wall Street to pump up the stock market. It's a great scam to force employees to contribute part of their income to Wall Street's bottom line, and impose penalties when 401K holders try to withdraw money. This goal of 401Ks was never to provide a savings or retirement account. It was to function as a government-sanctioned private revenue stream into the pockets of Wall Street financiers, coming directly out of the pockets of working Americans. If it was up to me, we'd recover lost 401K funds from the private, individual wealth of the employers and management of the companies that offered them, and from the private wealth of the Corporate management personnel of the funds. And since even this would not cover the losses, I'd force the responsible individuals to sell all their personal assets to supplement it. The promotion of 401Ks was fraudulent from the outset, and those promoting them should have their personal assets confiscated to compensate those people they defrauded.
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Lost in the Woods and Far Away
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Post by Lost in the Woods and Far Away on Mar 24, 2008 7:52:22 GMT -6
We are in exactly the same boat. And, it is very sad, and very much of an insult. You would think that I had flung my money to the wind, but the truth was just the opposite, I was very cautious with money at all times. And after my downsizing, it was impossible to find a job that paid as much as my old job. So now it is an extremely uphill struggle to try save the money. After contributing 8% to my TSP, the absolute maximum I can save is around $10,000 in a year. I used to be able to save that much in a very short time. We are not even considering here that I will need a new car, the house will need a new roof, etc. For those whose minds are blown with all the lies and magician's tricks of their employers, I have only one simple way to go: assume that "what you see is what you get". When you look at your paycheck, say to yourself, "This is it. This is NOT just my present pay, this is also my future pay." Then operate from that assumption. I don't have any recommendations for how to survive in the world of mutual funds. The further down the road I go, the more I am confused and unsure of what to do, and the more I seem to foul up. It is a shame, because now in all the confusion, I own four 401k's, and I have learned nothing in the ten years since the downsize. If I pick the right mutual fund, it is just a fluke. It is not because I am more capable of managing a 401k. What I am doing is getting down to the old fashioned way, the way I grew up. Just hang on to everything you can, don't buy anything you don't have to buy. I paid my house off before the tsunami. I have been living on around $10,000 a year, by psyching myself out to do it. I don't know what else to do. I feel like some kind of a weirdo, but at least something is being accomplished. Whether it will be enough or not, I must place in God's hands, I am powerless to do more at present. And oh... I apologize on bended knee for saying "troll".
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Post by whoswho on Mar 24, 2008 7:57:02 GMT -6
previous post was from WhosWho, thought I was logged in, but was not
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Post by judes on Mar 25, 2008 16:29:37 GMT -6
whoswho, I can feel your pain. I am entering upon a very similar fate. My company is in bankruptcy and I was supposed to be downsized by the end of the year. Some terminations have been extended until an unspecified time, but most likely near the end of this year. Because the company can not emerge from bankruptcy as planned due to the "credit squeeze" things are in a suspended state of limbo now. There's nothing like going in to work every day watching your friends you've worked with for many years being told they are no longer needed, and just waiting for your turn. I am only holding out now for a severance they said we would get if we stuck it out through the transition, however they recently started back stepping and saying the severance was not guaranteed and could be eliminated at any time. Nothing like being able to plan your future.
Anyway, I have been doing just as you say. Saving everywhere I can, and not buying any non essentials as much as possible. I have actually been stocking up on canned foods believe it or not. I figure buy what I can now while I am still working, as food will probably only get more expensive. I plan to use the severance (if I am lucky enough to get one) to pay off my house. I live in a very depressed job market area, and moving is not an option for my husband at this time. If we get desperate enough he may change his mind though.
I know so many people who are in very similar situations to us. That is why I know things in this economy are not going to get better any time soon. And certainly not unless there are some major over hauls in our trade policies and other socio-economic policies. I'm living it, so whenever Bush and company got on CNN saying all is well, I knew he was lying, as did so many others. I don't think the cat's going back into the bag anytime soon.
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Post by lasher on Mar 27, 2008 11:38:36 GMT -6
Judes, The best you can do is play well the hand we are dealt. You and Whoswho are doing a good job of that IMO. It is a terrible thing that you and others like you are being put in this situation. I worry about those who are still working, on this account. I counted on my employer's DBPP too, even after it was converted to a CBP. I was lucky because I was able to get out before they could (legally) steal any more of it from me than they did. You are correct to say that this is part of the plan, but employees often have an option of putting their money into 'guaranteed interest' accounts like money market funds. Typically you have to invest a part of your 401(k) in company stock but this is usually the 'company match' portion and not your contribution. A 401(k) is not a DBPP, but it is something from which you can benefit and you need to take full advantage of it. A key benefit is that all your contributions are taken off the top of your earnings that are taxable. You pay taxes later on that, but that's better because your taxable income would usually be lower. Yes, it is possible to transfer some of your 401(k) holdings out while you are still employed, without paying a substantial penalty. You can not withdraw your pre-tax 401k contributions, before severance, plan termination, turning 59 1/2, death, disability or hardship (and you can’t roll over hardship withdrawals). But wait, there's more: The law only applies to your pre-tax salary deferrals. You CAN rollover (or otherwise withdraw) employer contributions, or employee (after-tax or rollover) contributions. And you can do so without any required taxes or penalties. You don't pay taxes on your after-tax contribution withdrawals, so you can spend that or, put it into a Roth or some other type investment account, or whatever. To avoid a big tax burden associated with company match withdrawals, you need to roll them into an IRA. Some employer retirement plans have provisions for you to rollover some of the assets while you are still employed by the employer, but you’ll need to check with your employer to see if they allow it, and what penalties may be associated with it. Most 401k prospectuses and companies in general don’t make this common knowledge to employees because they don't want you to know. I did a rollover just like this when I was still employed. Here's how it worked for me: We were able to roll these funds over, but only after we had reached age 50. First I got in touch with my online broker. Brokerage firms are more enthusiastic about advising you in this respect than are 401(k) administrators. They told me just how the check should be made out and I opened a rollover IRA account with them. Next I advised my 401(k) administrators of my intention. One thing they wanted to know my brokerage firm IRA account number, which was one reason why opening that account was step one. They then mailed two separate checks, one to my brokerage firm for the amount of my company match and one to me for my after-tax contributions. After that I had control of the funds in my online account. ERISA prohibits taking away a pension benefit that has already been accrued by the employee. When they froze your DBPP, that applied to future benefits that up to that point had not yet been accrued. Your employer might be trying to make it look like they're doing you a favor but this is not based on their 'promise'. It's the law. It's good that you have an option to take a lump sum instead of an annuity. My advice is to take it and not the annuity. I like a clean break from the people who really don't have a good track record of watching out for your interests. If you wish you can buy an annuity with the lump sum. The value of your lump sum does vary because the calculation is tied to the fluctuating GATT rate. Some plans also use Treasury bonds and other rates in their calculations. What they are required to do is come up with a lump sum value that is approximately equal to the value of the annuity. The assumption is that you would take the lump sum money and invest it in something bearing an interest rate similar to that of the current GATT. And that would leave you with a monthly income of X for whatever number of years you have left to live. If the GATT rate is lower, your lump sum value will be higher. Another thing I want you to know is that if your employer folds and can not pay the accrued DBPP benefit required by ERISA, the Pension Benefit Guaranty Corporation (PBGC) will step in and pay it. But the PBGC payment is not always as much as what you would have received from your employer. And there's nothing but a government bailout to keep the PBGC from going bankrupt if they have to assume responsibility for too many pension plans. Another reason I say to go for the buyout. www.pbgc.gov/
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Post by graybeard on Mar 27, 2008 12:03:19 GMT -6
When I retired in 2000, Lasher, all my 401K was in pre-tax and company matching. I moved them into a Fidelity rollover IRA, and withdrawals are taxed at 100%. Are you saying I shouldn't be taxed at full rate on the co. portion?
Thanks, GB
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Post by lasher on Mar 27, 2008 15:14:51 GMT -6
No, graybeard, I am not saying you shouldn't be taxed at the full rate on company contributions. It is taxed the same as earned income when you withdraw it from your IRA. Taxes are deferred, not eliminated.
One point I was trying to make is about the tax advantages of 401(k) contributions while you are still working. During our peak earning years it comes in handy to be able to reduce our taxable earnings by $10K or so because that comes right off the top and could help keep us out of a higher income tax bracket. In retirement we don't need as much income, so it is best to defer taxes on that $10K or so until then, when we would also hope to stay out of the higher brackets.
Thanks for the question. I'm doing my best to be clear about this and I see I need to work on that some.
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Post by judes on Mar 27, 2008 17:26:23 GMT -6
lasher, thank you, thank you, I could hug you. I have learned more from you in your last post than I have in the last two or so years that I have been asking questions to my employer, fund managers and some financial planners. It is so hard to get clear straight forward answers like that. I do so appreciate your time. You have given me a lot to go over. I am seeing a financial planner next week, now I feel so much more prepared.
You are right about one thing, most companies like to keep the provisions around 401k plans secretive from employees. There are so many people I work with who do not even realize they can cash their pensions out for lump sums. I am definitely planning on doing that, I have severe trust issues with the people in charge of it now.
Unfortunately, there probably isn't much I can roll over if my initial understanding of your post is correct. All my contributions were before taxes, and the company match portion probably isn't that much since it was widdled down to almost nothing, than was completely eliminated for most of the last three or four years, and I have a way to go before the big 5-0. Well I will be looking into it, at least I know what to look for and what to ask now.
Thank you again for your time. It has helped me greatly.
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Post by lasher on Mar 28, 2008 6:17:57 GMT -6
Judes,
I guess a virtual hug will have to do, however that works.
I'm glad you're seeing a financial planner. It's also good that you have a way to go before you're 50. Otherwise you wouldn't have much time left to prepare for retirement.
Please note, I was able to roll some money out of my 401(k) while still on the payroll at age 50 because my employer's plan allowed it. Your employer's plan might not, or there might be some other difference such as a 45 year old threshold.
Network with fellow employees to find out if anyone else has rolled money out of their 401(k), or has at least done some research. Also, call your plan administrator and ask this specific question.
The person answering the phone might not know. Plan administrators like to keep their people on the front lines ignorant of things they don't want you to know. So if you are not satisfied with the answer you get, it would be a good idea to follow up that call with a written request for information. They tend to be more candid when they know their written reply will be retained by you.
And I want to clarify something about pension lump sums. It is not an option for everyone. Some pension plans offer it and some don't. But if it was ever offered while you have been an employee, they can't take the option away from you because that is an accrued benefit.
Please note, Unlawflcombatnt set us up with a brand new 'Employee Pensions & Social Security forum, and moved this thread into it.
I hope you and Whoswho will let us know of any developments. Good luck to you both.
Lasher
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Post by judes on Mar 29, 2008 10:49:28 GMT -6
Thanks again lasher, more good advice. I checked and only about 1/6 th of my 401k is company contribution, and no after tax. So I don't have much I can transfer out, but I am going to try to do that much at least. About two years ago I moved the rest of my 401k into what everyone told me was the safest no risk fund available to us, the Promark income fund. I can not find hardly any specifics of what it invests in, (other than bonds and insurance? sounds scary) but so far it hasn't decreased in value since I moved it all there.
Wow, I just can't imagine what would happen if Social Security was privatized. Here I am with an engineering degree and I have an extremely difficult time understanding this stuff. How is the entire population going to figure this all out. Hopefully the bear stern employees know a little bit more than most how to protect themselves in their current situation being in the field they are in. But I seriously can't imagine how the average person would know how to invest their social security funds to provide for their future. Maybe my engineering background disadvantages me to some degree, because I seek logic. For the life of me, and I've had several discussions with people in the know on this stuff, I can not see how the stock market differs from a Ponzi scheme. Oh well, I guess I still have a lot of learning to do.
But thanks seriously for your advice, and thanks to ulc for the new thread.
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Post by whoswho on Apr 1, 2008 7:31:01 GMT -6
I'm living it, so whenever Bush and company got on CNN saying all is well, I knew he was lying, as did so many others. I don't think the cat's going back into the bag anytime soon.
That is exactly my experience Judes. Neither have I ever had a warm fuzzy feeling of trust for my old company, as far back as when I was hired there in the early 70's. I think a lot of people intuitively know there is something wrong, but they don't have enough technical knowledge to act in their own interests (and it becomes even more confusing when they see others who are seemingly very trustful of the company). When we first got a full blown 401k, I saw degreed engineers who really didn't have a clue about what kind of investments to choose.
When I left the company, there was no one to help me. There were BIG decisions to make, and really no one to give positive direction. I got a copy of a Kiplinger's book and gave myself a crash course in 401k rollovers. And yes, I rolled it ALL over to a 401k. Like Lasher, I [glow=red,2,300] like a clean break from the people who really don't have a good track record of watching out for your interests. [/glow]
Judes, if you were to QUIT your job today.... wouldn't they HAVE to give you ALL the money that is due to you? Maybe that would be better than waiting for the ax to fall?
It sounds like your situation is nearly identical to mine, I live in an economically challenged locale as well. I would NEVER have quit, because really there was nothing for me to go to if I did. The only difference between me and you is that you have a husband and I am on my own. The fact that you do have a mate is invaluable, it means that you have some kind of safety net, economically and psychologically.
If I had a question for Lasher, I think it would be about investments. Does EVERYTHING in mutual funds stink now? Or am I just making lousy choices?
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Post by lasher on Apr 1, 2008 11:57:03 GMT -6
Who, My first rule of investing is to never take advice from someone like me. But then again, how are you going to learn? Now that we've got that behind us I'll tell you what I think. I do not consider myself an expert on investing but I do manage my own investments. First, I want to point out what should be obvious: These are unusual times. I'm sure there must be a mutual fund somewhere that doesn't stink right now but I don't know what one that would be. I was thinking about a gold or silver mutual fund but right now they are high. And I was thinking about getting out of the three stock mutual funds I'm in but they are low. Which brings us to my second rule of investing: Buy low and sell high. Lots of people make big mistakes when they panic and sell low. And they also get excited about something that's been doing well and buy when it's at a peak. This is not to say that you should never dump a loser or that you should never grab onto a rising star. I don't know when to tell which is which but I remember the principle. When buying and selling I try to reverse my emotions. When it looks like we're on the brink of another Great Depression it might be time to buy. When your stock investments are flying high it might be time to sell. I like mutual funds a lot better than individual stocks because it's a good way to spread your risk. In the past I've favored passive S&P 500 Index mutual funds but I like international equity funds a little better because of the decline of the US dollar. Whatever mutual fund you pick, make sure it has a low administrative cost. You don't want your earnings just going to line someone else's pockets. I've noticed a lot of the experts have been saying that cash is king right now. That's good advice. If you really want to run for cover, consider moving into a money market fund. I have about half my money in just such a fund right now. That way I've been getting returns somewhat competitive with bonds, without having to worry about declining principle when interest rates go up in the future (they will). If you're in a 401(k) where that is not an option, look for a guranteed interest fund. These are not good long term investment vehicles but I'm just trying to help you understand. The rest I have in those stock mutual funds. I've lost almost $100K on them so far in the last 6 months but that's no big deal. I've accounted for market fluctuations in my long term plan. One year you gain 20% and the next year you lose 10%. I'm happy if I average 10% gain each year. One more thing for now: Especially since you don't feel comfortable with these things, go talk to a financial advisor. I have friends who have them managing their money and they barely think about it themselves. It might be worth it to you to pay their fees. But keep in mind, no matter what they say, their primary objective is to make money for themselves, not for you. I'm not saying all of them are unethical, but I have had some of them come across like the only thing they care about is making me rich. That's it for now, gotta do some chores. Maybe some of the other folks will chime in on the subject. Good luck, Lasher
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Post by judes on Apr 1, 2008 15:15:22 GMT -6
.. When we first got a full blown 401k, I saw degreed engineers who really didn't have a clue about what kind of investments to choose. You can include me in that statistic, I still feel clueless. I have no trust in the stock market, or financial advisers at all, so that is two whammies against me, which probably makes it harder for me to learn. After seeing a huge chunk of my 401k diminish that was in the company stock, I switched most of it to what everyone told me was the lowest/no risk option available to us. It was late, but better late than never I guess. When I left the company, there was no one to help me. There were BIG decisions to make, and really no one to give positive direction. I got a copy of a Kiplinger's book and gave myself a crash course in 401k rollovers. And yes, I rolled it ALL over to a 401k. Like Lasher, I [glow=red,2,300] like a clean break from the people who really don't have a good track record of watching out for your interests. [/glow] It sounds like you are doing a good job looking out for yourself, and educating yourself. I applaud you. I have read quite a bit on the stock market and 401k stuff, and honestly it is still so confusing to me, I just don't have the aptitude for it I guess. Like I said it all seems so illogical, I could kinda understand the old stock market more I guess, where stocks represented a part ownership, and they were purchased for the dividends paid. But I don't see that happening in todays stock market. But that is a topic for another thread I suppose. Anyway I am finally giving in and going to a financial planner to see what options are available to me. There isn't that much that I will be able to roll over to a IRA but I will check into it. I just don't trust financial planners at all, so this is going to be really hard for me. But I will be asking a lot of questions. Judes, if you were to QUIT your job today.... wouldn't they HAVE to give you ALL the money that is due to you? Maybe that would be better than waiting for the ax to fall? Mentally it would be better, but financially I wouldn't be eligible for the severance pay if I quit. The severance isn't a lot, but it would be enough to help me pay off my house. Even though they came out recently and said the severance is not guaranteed after the company comes out of bankruptcy, so far the people let go have been getting them. So I am hopeful. I will be able to make my bills even with out a job if my house is paid off, so that is my priority. It sounds like your situation is nearly identical to mine, I live in an economically challenged locale as well. I would NEVER have quit, because really there was nothing for me to go to if I did. The only difference between me and you is that you have a husband and I am on my own. The fact that you do have a mate is invaluable, it means that you have some kind of safety net, economically and psychologically. Yes, we are in similar situations, along with many many others unfortunately. There are not any jobs close by in my field (manufacturing engineering) to go to when my job ends, not without a long commute or extensive travel. I intend to draw unemployment (not an option if I quit), and go back to school to get a teaching certificate to teach math. There are government programs available to people who lose their jobs to outsourcing for college tuition assistance. Again these are mostly kept secret and they make it difficult for people to find out about, but that is my goal. I am very fortunate to have a spouse to help through these difficult times. However, we unfortunately have our eggs in the same basket. He was basically forced to retire from the same company I work at because he had enough years in (I married an old man lol). So his pension was still in tact at the time, however if our company should not be able to emerge from bankruptcy or fail there after, his pension and my small accrued benefit to date are in jeopardy of being turned over to the PBGC. If that happened it would be nowhere near enough to cover our bills. All the more reason I want to pay my house off asap. Since my hubby was forced to retire early he hadn't accrued a benefit as much as we needed to live on, so he is working again. He is doing truck deliveries for an auto parts supplier in the area for minimum wage and they don't let anyone work more than 35 hours a week to avoid paying full time benefits! It isn't much but it will help pay the bills when I lose my job. I feel so bad for the next generation of young people. Defined pensions will be gone, health care benefits gone, good paying jobs gone, the list goes on and on. Young people will be saddled with debt before they even enter the work force due to college loans, and how will they ever be able to get ahead? This country is in deep trouble. Most of the jobs left here add no value to society, they merely shift wealth around. This is a huge problem. The solution will only come through fixing our trade laws, and putting some "protection" back where it is sorely needed. I sincerely wish you the best whoswho. You seem to have a lot going for you in that you are intelligent and arming yourself with information. I figure something is going to have to change for the better soon, because things can't get much worse without total collapse.
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Post by whoswho on Apr 2, 2008 6:57:47 GMT -6
You can include me in that statistic, I still feel clueless. I have no trust in the stock market, or financial advisers at all, so that is two whammies against me, which probably makes it harder for me to learn.
Don't feel alone. When they send those brochures in the mail... you know, the ones describing all the fine details of the mutual fund I'm invested in? I throw them in the trash. It doesn't make any sense to me anyway, LOL. (Doesn't it feel GOOD to admit you're a dummy???) No really, I HAVE tried to sit down and read them, and it just totally frustrates me. It's just page after page of stuff that I guess is supposed to have significance to me, and I feel like it's just insurmountable, a mountain.
No, I DON'T trust anybody, I truly do not. My old company still has one of my 401k's through Fidelity, and they send me offers to help me. I can't. My distrust and disrespect for them is so profound that I just can not overcome it. I figure there must be something in it for them or they wouldn't reach out to me. So I throw that in the trash too.
But you gotta trust SOMEBODY, I guess.
I feel so bad for the next generation of young people I do too. They will never know what it feels like to have a REAL career.
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Post by judes on Apr 6, 2008 10:58:11 GMT -6
Well I finally broke down and went and saw a financial planner. I asked all kinds of questions but didn't sign up for anything. He looked at my current 401 k investments. I have 100% of it in what I was told was the safest investment available to us, the Promark Income Fund, it's been there for about the last two years.
When he looked at it he said, well I won't lie ,you are beating our clients by about 11% this year, with how you are invested and where the market is right now. Yikes, that doesn't sound good, I don't even know what I'm doing. I asked him if he had any detailed info on what the Promark income fund invests in, as I have been unable to find any info on it. He said they have tried also and can't get the detail. He said he is sure some of it is invested in the mortgage securities though. WTF? Our company tells us it is a safe sure bet investment, can't lose value, yadda yadda, and it is now the default fund for monies contributed to our plan. So far it has not gone down, but I found out it is actively managed by the former Parent Company of the company I work for. This info should have to be made available to people I would think.
Anyway, I am still confused what to do with my 401k, only a small amount can be rolled out now so I may wait till I am no longer employed, probably at the end of the year. I asked the financial adviser how he got paid, he said they charge yearly fees varying between 1% to 5% depending what the investment was. I asked about a gold mutual fund. He said it was a 1% yearly fee. He said it was 1% of the total regardless of if the fund went up or down. Is that normal? He said it was normal although most advisors won't admit it to you. Huh? He even said I am being charged similar fees right now through my 401k administrator though I just can't see it. Geeze that sounds transparent. It is administered by Fidelity, and after reading the article Lasher posted about Fidelity being sued for the fees they charged, I'm sure he was correct.
I just want to know, how can I invest my money with out having to pay a middle man to do it for me? Is there a way I can roll money into an IRA or treasuries without having to pay a middle man all these trumped up fees? Still confused ugh.
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Post by lasher on Apr 6, 2008 11:45:26 GMT -6
Good, Judes, that is just what I was hoping you would do - learn from the financial planner but not make a commitment.
Fidelity's Promark Income Fund sounds like a guaranteed interest or money market fund. In that case it is not surprising that you would be doing better than most of this planner's customers, since the stock market has been in the crapper for several months now. But I don't like for you to be 100% invested in what is probably the most conservative investment selection available to you in your 401(k).
Safe = low returns and over time you would do much better on average in a stock mutual fund - or at least you should put some of your 401(k) into equities. 'Equities' is just another word for stocks, BTW, but people think you're smart about investing if you say that every now and then. The amount of exposure to stocks and other potentially high return investments depends mainly on how long you have to go until you will be drawing the money out. If you have 10 years or more to go then I would like to see some stock mutual funds in your future at some time.
The 1% to 5% is the amount the financial planner would charge you to actively manage your money. Your employer is almost certainly tacking on a fee like this because they are managing your money. There is controversy afoot in this area, as many employers are soaking their employees with excessive fees associated with administering 401(k)s. Many employees don't know how much these fees are or that they are even being taken out, and that is not by accident on the part of employers.
Once I was able to roll my 401(k) into an IRA that my employer did not control, these fees no longer existed. I use Fidelity for an online account and I do not have them managing my money. So that's why the money management fee no longer applies.
The 1% fee the money manager described is a fee from the mutual fund manager. This is normal. These are called expense ratios. All mutual funds have expense ratios and your 401(k) selections are the same in this respect. Anything at or below 1% is acceptable. Anything above that I would view with skepticism.
Hope this helps, you're on the right track.
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Post by judes on Apr 7, 2008 19:00:11 GMT -6
Thanks Lasher, I know you are right, I'm still kinda in a wait n see mode. This economy has me scared at the moment to break out of my "somewhat" of a safe investment. But when I know more about my fate, I will make a move. After losing a big chunk of my 401k that was in the company stock, I don't know if I can stomach losing anymore at this point. Hopefully things start turning around soon.
The financial guy I talked to at least seemed honest, which I do appreciate, so I will consider his advice too.
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Post by whoswho on Apr 10, 2008 13:33:25 GMT -6
Lasher, I sat down and figured up exactly where I am in my retirement savings, and I am happy to report that it is not too terribly bad.
It is not nearly as high as your recommendation (you said $1,000,000 for a couple, so I am assuming $500,000 for a single) but it is not terribly in the ghetto either. I think it was so confusing because it was so spread out over various 401k's, CD's, and other savings. I have completely abandoned my dreams of retiring at my MRA + 10 though (in two years). After studying all the options presented in our retirement seminar, I think it would be best to work at least another seven years to 62.
Thank you so much for your moral support, I feel that it helped me a great deal to get more into positive focus.
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