Retiring Your Retirement Plan?
These original Kirt's Cogitations™
may be reproduced (no more than 5, please) provided proper credit is given to me, Kirt
– noun: Concerted thought or reflection; meditation; contemplation.
Kirt [kert] – proper noun: RF Cafe webmaster.
How healthy is your retirement account these days? According to stories from the
Wall Street Journal, Forbes, and the financial sections of the major news outlets, ever-increasing numbers of people are finding that the
investments made in their 401k and private retirement accounts are dwindling. As if the very high levels of inflation due to energy cost
increases was not doing enough on its own to devalue the worth of accounts, there is a very strange propensity for the funds associated with
retirement accounts to seemingly always take a hit whenever the markets rise and fall. For a lot of people, if it were not for matching funds
contributed by employers, they would be seeing net negative growth.
Over the last many years of participating in company 401k plans,
I have seen even the "safe" investment part of the portfolio barely make any advance. With inflation factored in, the value is actually less
than when my money from a former employer was rolled into the new one. From what I am hearing, my experience is not unique.
by no means a recent phenomenon. Back in the middle to late 1990s, while working for a very large aerospace/electronics defense contractor,
my 401k actually lost money over a period of about three years. Remember that was an era when the dot-com companies were going platinum overnight
and everybody was making money hand-over-fist. Well, except for the retirement plan participants, that is. Again, I was not alone. Only by
virtue of the matching company contributions did many of us make any profit. If you did not examine your statements carefully, the fact would
be easy to miss.
During that same period, were we being warned of the possible negative effects of stagflation or even negative inflation.
Your money would be worth more tomorrow than it is today. Everything was smoking along so well that we were actually told that the longstanding
business cycle was dead. I have to admit that I never did quite "get" that argument. It did not matter after all, because the tech stock
market and a good portion of those who were invested in it came tumbling down beginning in the spring of 2000. My neighbor at the time, a
real estate agent, had purchased a whole lot of AOL stock for his retirement portfolio earlier in the year, and bragged of how much money
he was making on that one stock alone. About June, his demeanor changed noticeably - probably had something to do with the tanking of AOL
For the rest of 2000 and into 2001, we were served story after story of people coming out of early retirement to return to
work. Concurrently, the $10 per hour burger flipper jobs that employers could not fill were being taken with people glad to get $7 per hour
pay. I think I have told the story of the owner of the music store where Melanie buys her violin supplies, where the proprietor claims to
have lost more than $100,000 (yep, that's five zeros) on RFMD stock alone, and had been on the verge of retirement until the bubble burst.
The euphoria was relatively short-lived, but at least people had learned a good lesson. Right?
Even so, the pundits kept selling the
same bill of goods about how over the long term, the stock market always makes money. They brought out charts of the DOW with arrows pointing
to gains made over 30-years periods and labels showing why now is the time to buy, buy, buy. What they fail to point out, of course, is that
the theory holds true mainly if you were able to invest a huge lump of money at the beginning of the 30-year period. That, of course, is
the period when most people are earning the least they ever will earn and subsequently have the least available for investment. In later
years, when there will be less time remaining to realize any gains, the implications of short-term market fluctuations can - and have been
Largely at the encouragement of, and through the manipulation of the government, the majority of people have been convinced
(or coerced) to be spenders and/or investors in the markets rather than savers - that is if they have the ability and are inclined to make
monetary investments in the future. That makes nearly everyone a "global player" because their fortunes are tied directly to the performance
of stock values in the marketplace. I am old enough to remember a time when most of the people I worked with never even mentioned the stock
market, and certainly did not worry about whether it was going up or down. The overall savings rate for Americans in 2006 was -1%, which
means people are spending more than they make. Still, anyone caught up in the savings & loan debacle in the 1980s is aware of how even
savings are not a guarantee of financial security. At least with that, depositors eventually got their money back - often on the backs of
taxpayer-funded bailouts. There is nobody or no institution to bail out the people who have and/or are losing wealth in stock market based
It seems, however, that many of the corporations are being quietly aided in back-handed ways by the world banks.
Look at the current situation with the sub-prime, and marginal qualification mortgage lenders and related activities. Shareholders are losing
their shirts, while methods are being put in place to provide relief to the institutions themselves (and of course their heads). Who knows
where that money is coming from? A lot is funneled via creative accounting from the Federal Reserve and many never-to-be-discovered sources.
With the initial crisis last fall, we heard news of the high-risk lending policies being halted, and the companies being blamed for predatory
practices (sure would not want to blame the dunderheaded borrowers), and we just assumed that would spell the end of it. Ha! Just three weeks
ago we sold our house to an unmarried couple who were able to borrow not only the full purchase price of the house, but additional money
to cover closing costs and even have a couple thou in their pockets after settlement. The lender's name: Bank of America - sound familiar?
I guarantee there were plenty of people with retirement portfolios filled with BoA stocks.
Am I alone in suspecting that there is
some intentional manipulation of retirement investment funds? How can it be that so many retirement funds are performing so dismally, while
there are obviously many investors actually making good money? Do the investment companies assign retirement accounts to their lowest-performing
employees as the last act before putting them out on the street? Can it really be as simple as professional incompetence, or is something
more devious at work here? I suspect that somewhere along the way, retirement accounts have become the dumping ground for the poor investing
of fund management businesses. They know that most participants are now watching closely, either out of ignorance or empathy. After all,
by now nobody really expects much from the markets, right? Even if people do catch on, what can they really do about it? There has to be
a lot of financial institution boardroom backslapping going on around the world.
How about you? Is your retirement plan suffering?