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this post was submitted on 10 Jan 2024
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This is an important thing to note when someone claims that you should be eager about stock market performance because of your [comparative handful of] shares in your retirement account. Accounts such as the 401k were probably devised to tie up regular people's money into the stock market, injecting more money into it and making it seem more important (and thus worth bailing out).
They were devised to get rid of pensions so companies didn't need to care for their employees, they could just have the option to match input, but retirement was made to be 100% on us.
More bullshit to benefit corporations, but to be honest there are so many scumbags out there and so many pension plans that were stolen from, I don't know how to feel about it.
It was also devised so that when a crash occurs, the lower classes get wiped out, the rich still have piles of cash, and they get to buy up everything at fractions of a penny on the dollar.
You know exactly how to feel about it. Douchebag MBA's who think they're Masters of the Universe gamble with other people's retirement money. And all those sweet sweet fees...
We should invest in guillotines.
That and it artificially inflates stocks by creating regular buy pressure. Stocks are almost completely worthless unless you get a whale that wants to buy out the company or a large controlling share. It's not like you can just cash in your share to the company and they give you a percentage of the current value. You have to find someone else that wants to buy it.
This point is huge and seemingly overlooked by most people? Once a majority of boomers start pulling their 401k money I don't think millennials and gen x will be putting as much money back in.
They really cooked up such a great Ponzi with 401k. I'm sure it'll get rugged right when we come of age to cash out.
Aren't pensions also tied up in the stock market. Yes there's a difference of who manages and how the contributions are made, but both plans put the security of your retirement in the market in some capacity, right?
Pensions also allocate some funds in stocks, but overall they invest conservatively. By default, most 401k funds are set to a target retirement date fund and early on those are mostly stocks. These funds also often have significant annual fees. Instead of a single large fund managed conservatively, you have many individual funds that are managed all over the place. The common advice is to invest more aggressively when you're younger, there has also been a huge push toward ETFs which are their own tangled mess and have a potential for trouble in the future, but that's a different topic.
Are the fees of target funds usually that significant? Vanguard Target Funds have an expense ratio of 0.08%. They say the average comparative fund is 0.44%, which is a bit high for my liking, but not terribel compared to other managed funds. https://investor.vanguard.com/investment-products/mutual-funds/profile/vfifx#performance-fees
Vanguard is good with fees. That 0.44% is an average so there are also funds that charge more. I think fees have come down as 1) more attention was brought to them 2) Such funds became more computerized and straightforward to manage. Still, a 0.44% average fee each year is a significant chunk of change.
I fully agree on .44% being high. I raise an eyebrow on anything over .10%. But if you follow the old reddit personal finance prime directive... You should max out your 401k inso far as you maximize the employer match. Then max out your Roth IRA where you hopefully have access to better expense ratio target funds. I have been trying out the 0% Fidelity index mutual funds as opposed to older S&P500 funds to maximize potential there.
I haven't really looked at the robo brokers though. What are fees like for betterment and the like?
Either way, I think people are shooting themselves in the foot for not investing in index funds or target funds out of moral principle. Unfortunately there isn't much other safety net for your retirement, and you're probably going to be forced to spend cash for everyday goods from major corporations. Might as well try to secure some value of those same corporations at the same time instead of letting your savings constantly depreciate over time.