It’s 3 Am do you know where your 401k is? |

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It’s 3 Am do you know where your 401k is?

It’s 3AM Do You Know Where Your 401k is?

BLOGGER: ARIN GOLDMAN

I am a professional saver, one of those people who stashes money away whenever possible. Don’t get me wrong, I also have a weakness for designer clothing and shoes but my shopping excesses never came at the expense of funding my retirement accounts. In my first post-college job I contributed to an IRA and when, after graduating from business school, I moved into the world of high finance I began funding my 401 K. I immediately bought into the benefit of pre-tax contributions and caught on quickly to the value of deferring taxes until that very, very distant day when my fund withdrawals would begin. All through the 1980s and 1990s I made those contributions paying scant attention to my balances. Mostly they were growing but despite my so-called financial sophistication I never had any sense for how much of this increase was due to actual investment growth and how much was due to the simple sum of my ongoing contributions. I totally bought into the theory that overtime equities would outperform other more predictable investments such as bonds and money markets so with youth on my side I allocated my 401 K and IRA funds to an assortment of equity mutual funds, nothing concentrated or high risk for me, just run-of-the mill US and International funds. I did not worry much about market dips and economic trends and pretty much ignored the impact of the October 1987 stock-market crash, the meltdown of the technology sector, 9-11, and the ongoing rise and fall of the emerging markets. Nose to the grindstone at work, I managed to ignore my retirement funds as much as possible. Surprising maybe, given my MBA in accounting and finance and chosen investment banking career, yet I suspect fairly typical. After all it is hard to dwell too much on something as mundane as retirement funding when you are sailing through your twenties and thirties.

Not surprisingly, my investment banking career did not last forever. After a 20 year sojourn on Wall Street I hit my wall, exiting in 2002. There I was in my forties, figuring out what to do with the rest of my life and now totally focused on the adequacy of my financial assets. I became fixated on daily movements in those 401 K balances. Always an early riser, I checked my now bookmarked 401 K website daily. Some time around 3 AM the gremlins in benefits land would roll the balances forward to reflect the prior day’s market activity and there I was noting every change. Still years away from 59 ½, the earliest age for penalty-free withdrawals, and even further away from 70 ½, the age when I would have to start withdrawing, I had become keenly aware that only investment growth would contribute to an increase in my retirement funds. Further feeding my neuroses, in 2002 the market was still suffering the effects of the Enron debacle making it a rough year to be both unemployed and pathologically focused on 401 K assets. Nevertheless, time passed, markets steadied and my funds really did grow. Within five years my retirement assets had grown 65%. By then with visions of substantial wealth ahead I had lost my 401 K fixation and gone back to only occasional balance checks.

Then the tsunami of 2008 hit. I tried to shrug off the increasing market volatility, steep declines and the erosion of the whole financial sector. After all hadn’t my strategy of remaining on the sidelines worked well enough during previous market drops? Was this market storm any worse than prior catastrophes? Unfortunately, this time around seems really different. Does anyone really understand a credit derivative or appreciate the finer points of a sub-prime mortgage? These are the true weapons of mass destruction and they seem to have landed right on top of my 401 K, wiping out virtually all the gains of the past six years. Knowing that my pain is widely shared and it is not just my retirement funds that have been hit does not make me feel any better.

What now? I wish I had an answer. I am trying to avoid those 3 AM checks of the benefits website. Still my blind trust in the historical market trends that were supposed to assure my future security seems awfully naïve right now. I know I am still very fortunate. After all I was lucky enough to have a high paying career, and though I have sustained investment losses I have what I hope are still adequate savings. Still those withdrawal dates are a lot closer than they used to be and this major step backwards appears less like a theoretical bump in the road and more like a coordinated attack on my future standard of living. Somehow or other I suspect that my accounts will start to grow again at some point, when that will be I don’t know and I am less confident about that future.

Remember the big debate about moving our social security funds into equities? Now there is an idea that I hope never sees light of day again!

ps. A few things that might help just a little:

1. If you are 50 or over and qualify to make contributions into an IRA, you can contribute an extra $1000 for a total of $6000.

2. Congress passed legislation in late 2008 waiving mandatory withdrawals from IRAs and 401Ks for 2009. This applies to individuals over 70 1/2 and only applies to 2009. Check out the details and applicability with your accountant and/or financial advisor.