My retirement fund that I just started was worth $15k in December of 2021. Then, May of 2022, our area was hit really hard. My retirement plan went down to $7k. Today, it’s worth $11k. I lost $4k on my retirement plan. It’s invested in total market funds, some tech, some big cap companies, and healthcare. But every sector has been ravaged by the stock market changes.
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Not saying that’s not frustrating, but don’t fixate too much on the ups and downs of it if you’re not set to retire soon. What the stock market is doing now is barely going to impact the value of your retirement fund in 20, 30, etc years.
Retiring on $15k is a scary fucking thought.
$11k
Even scarier.
$7K a year ago
I thought you need $401k to retire.
Oh man I have some bad news for you…
The OP is missing something. The two specific funds of his 5 holdings that he said he bought are both up. The 3 he didn’t provide specifics are up too.
$15k should be all in Vanguard total market index. Smaller funds are riskier and could take decades to show their greater returns.
Also, if they are look at the ups and downs, hopefully they invested when it hit the dip.
What kind of fees are you paying? That chart does not reflect the market. For instance, if you had invested in a low management fee S&P 500 index find you would expect to have seen a 50% increase over the same period.
Dude isn’t in index funds…nuff said. Mine has more than doubled since 2021
There is a large portion of the population that doesn’t know anything about how 401ks work. They are told there employer will take 3% or such out of their income and put it into a 401k account, and some part of that money will be matched by the employer (varying).
Those who don’t know the market don’t touch the money, it is invested for them. So it is very possible whoever posted this is among those people. It is not always wise on their end, but if a professional can lose money investing large amounts for companies like that, so could an inexperienced person. The annual report for 2023 for my company’s investments saw loses as well. The little money I had was elsewhere so I lucked out on that part.
This is the actual problem with these types of retirement plans, though. People are expected to know a lot about managing the investments themselves. There’s a whole industry whose job it is to give you bad advice. The real advice is “drop it in a mix of an sp500 index fund it and bonds according to your risk level” and the rest is bullshit.
Check the vanguard target retirement income fund (vtinx) and other similar funds. There was a dip in 2021 that absolutely destroyed a number of retirements, my patents included, despite being low risk options. Total bond index funds also suffered for some reason, and those are as low risk as you can get. Every other fund I have is doing great, but the ones that are supposed to be safe are not doing great.
That drop was when the Fed was raising interest rates to stall inflation. Interest rates up, bond values down. But the drop in VTINX was only 20% over all of 2022, where OP is showing 50% in maybe the first quarter.
Incidentally, the sensitivity to interest rates is why I don’t like bond funds. If you buy actual bonds, you get the face value back at maturity, where bond fund are forced to mark them all to current market prices to calculate NAV. IMO, this negates the main “safe” factor in holding bonds.
Good point.
Would you give some examples of bonds that you’re talking about (rather than bond funds)? I’m thinking you mean something from Treasury Direct: Treasury bonds (T-bonds), Treasury Inflation-Protected Securities (TIPS) and/or I bonds.
https://www.nerdwallet.com/article/investing/how-to-buy-bonds
Treasuries are nice because they’re convenient and low buy-in, but their yields are crap, sometimes a little above inflation, sometimes below. TIPS are a decent way to hedge the inflation risk, but (IMO) it’s still really for people who are more worried about losing their savings than living off it. (i.e.: if you have, say, $1e8, you can live pretty comfortably off $1e6, even $1e5 in a lean year, so your rate of return doesn’t really matter)
For me, personally, the limited bond exposure I have is all corporate and mostly junk, bought through my broker in the secondary market, with maturity 10-20 years out. Until fairly recently, junk bonds were the only way to get yields above 4%, and that’s kind of my mental benchmark for gaining relative to inflation. One downside of corporate bonds is they generally have a $10k minimum.
I like to go a step further and do a target-date retirement fund. I think Vanguard funds are based on index funds, but they will reduce how aggressively they invest as you approach your retirement date. And the fees are very low.
If you’re really hands off these are a good choice. But if you are willing to rebalance a couple of times a year, it’s unnecessary to pay the extra fees associated with these funds.
I do like the automatic set it and forget it. Especially with scheduling transfers into investment accounts. I could probably get into rebalancing short-term, but I think long-term I would get bored and forget.
Yeah it’s not for everyone, but I just have an event on my calendar for every six months, and I just rebalance when it goes off. Only takes a short while, especially if you are using some tool that will tell you what your weights are.
Any tools you recommend? Also, how sure are you that the cost savings actually make it worth the effort? My gross expense ratio is 0.08% (I think I’m looking at the right number?)
The close to retirement ones suffered that year. The 2030 target lost 25% in less than a year recently and hasn’t recovered. Ironically, the high risk ones have been less risky during COVID than the low risk ones.
Interesting. I’m targeting 2065 retirement, so I’ve got a long time. But I guess that fund could suffer from the same issue? Or maybe I should assume the same fate based on past events.
Not sure. I’m guessing interest rate stuff will mess with anything with bond holdings, so that probably had stuff to do with it. Other than that… I don’t know if I can convey a big enough shrug in text form.
My Vanguard roth IRA is up 11% since 2020, and is up 30% just this last year. If you are investing into individual stocks yourself I would probably reconsider that strategy. Buying individual stocks is closer to gambling than investing.
I see you did total market funds now, idk what to tell you. But if you are not retiring soon it doesn’t really matter. Time in the market is better than timing the market.
Yeah idk what they’re doing, it sucks but relatively compared to a full retirement fund this seems more like a lesson than devastation. My retirement is up, and I have a modest risk portfolio. I don’t know what they set as their risk level (if it’s even managed tbh), but the market has generally grown since 2021. The only thing that makes sense with that is individual stocks, and there’s no way my retirement would ever run on individual stocks.
Look at Tesla, 4 years ago everyone said they were stable and a great way to grow money. Now they’re floundering in the EV market now that there’s a ton of competition. You just can’t predict stocks over the course of a retirement. You can predict the market, and essentially the only market bet we make with our retirement is that it will hopefully grow over the next 30 years
They likely were using a full retirement fund, like VTINX or Vanguard Target 2030 or something like that. All of them tanked in the end of 2021 up to target 2060. Even my shares in the Total Bond Index tanked then, and those are supposed to be as low risk as possible, literally.
You need to talk to someone about your risk tolerance. Clearly you’re not willing to accept short term losses and you’re going to be prone to panic selling and holding cash when you could be buying dips. Your risk tolerance does not match your portfolio.
What this graph looks like to me is you made a really shitty bet, lost a bunch, sold at the bottom and then bought index funds and it’s been ticking up since.
Also you didn’t “lose” anything, assuming you didn’t sell. If this is a retirement plan, just keep your head on straight and stick with indexed and dividend funds
I lost $4k on my retirement plan. It’s invested in total market funds, some tech, some big cap companies, and healthcare. But every sector has been ravaged by the stock market changes.
Its not your total market fund killing you, its your individual stocks. I don’t recommend picking specific stocks for your real savings. Save individual stock picks for money you can afford to lose. In your case it cost you $7,000.
I used your same data and here’s what it would have looked like if all of it was in your Total Market fund.
You would have $18,679. This would have been a gain of $3479 or a 22% return on investment in only 2 years. That is crazy good! Retirement isn’t a total scam, but unless you are VERY lucky, picking individual stocks is risky. You can successfully save for retirement with just one, two, or three funds: Total Stock Market fund, Total Bond Fund, and perhaps an International fund. I mainly focus on just the boring Total Stock Market fund and it performs fairly consistently well over time.
EDIT: Just to underscore retirement is possible with saving and investing with boring Total Market investment, if 20 years ago you had that same $15,200 and invested it in a boring Total Market investment and never save another penny, today it would be worth $88,982.
I’m not saying that you can go back in time, but with 20 years of growth (very typical for retirement savings) it can really grow. The best time to plant a tree is 20 years ago. The second best time is right now.
This this this. Op is a shit investor using his 401k to buy individual stocks.
Tldr; he’s doing it wrong.
BBY all in yolo!
Stop. The Vanguard retirement funds all did this if the target is before 2060. And those are invested in index funds by professionals. OP likely had the VTINX or a total bond fund, both of which did this that year and were recommended for during retirement. This is likely the more liquid portion of the portfolio, not the penny stock portion.
Stop. The Vanguard retirement funds all did this if the target is before 2060. And those are invested in index funds by professionals. OP likely had the VTINX
OP’s losses are more exagerated than just the Target Date fund experiencing a dip from bond exposure.
Here’s OP’s same initial investment on the same day but 100% in VTINX:
So instead of a $4k loss that OP showed, it would been a $71 loss. OP went picking individual stocks and got burned (assuming they liquidated their position after seeing their portfolio balance).
Yeah. You’re right. And their recounting of what they invested in makes no sense. I caught that later. So there’s definitely poor choices somewhere they aren’t mentioning.
Stop investing in specific industries.
For real. My 401k went from 40k to 85k in the same time period as OP.
What most of the commenters are missing is that the assumption that one has to know how to gamble in order to have a retirement is a broken and stupid USA thing. Nobody should be forced to learn these things in order to not end up on the street. OP clearly has no idea what they are doing-- and so many comments point this out with varying degrees of rudeness, smugness, and shitty attitude-- but the point should be that we are feeding naive investors like these to the lions and that is morally wrong and collectively shortsighted. We all suffer as a society because people like this are being required to make investment decisions and doing that really poorly.
He didn’t have to know, and he himself knew of the alternatives for people who don’t “know how to gamble”. Nobody in any country can stop you from using your own money in an unwise manner.
3 years is absolutely nothing in stock market terms. Check in a decade.
Also you should really just invest in a super broad index fund instead of your specific tech and healthcare and stuff.
If you had only invested in a broad stock wide index fund, your 15k would be 17k right now. A total market index fund minimises risk nicely.
My brother or sister, invest in index funds, not the stock market. And then forget about it for 30 years or more until you retire. And then, if you invest in index funds, there will be ups and downs.
The trick is to stay the course because it has been proven that the price will always go up from when you started investing. And then, in 30 years or more, you will have a substantial amount of money for retirement.
*Index funds with low management fees
broad market Index fund with low management fees
My brother or sister, invest in index funds, not the stock market.
I mean, while I get what you’re saying and don’t disagree, I’d phrase it as “hold an index fund rather than stock in individual companies”. ETFs themselves are traded on the stock market.
You’re right. I wrote it quickly while on the go.
I wrote this quickly while going on the toilet. Just thought I’d share.
I hope you had a good sense of euphoria after that.
Sp500 vanguard, if you dont do options. Lowest fees.
You can also do target date funds. Each one indicates the projected year you expect to retire. As you get older, it shifts more to safer investments like bonds. The idea is invest in the stock market when you are young and don’t expect to use the money soon. You are able to hold through downturns in the market and returns have historically always trended up despite the occasional drops. When you are near retirement and expect to be using the money you can’t always afford to wait it out so you should invest in things that are more stable but have lower returns like bonds. Target dates have slightly higher fees and you should always check what the fees are before you invest, but they are very set it and forget it.
All target date funds through vanguard tanked that year unless you have 2060 or later as the target. 2030 lost 25% and hasn’t yet recovered.
You should be continually contributing over time allowing you to benefit from the dips by buying low. This offsets the losses and is called dollar cost averaging,
Yep. Much like northbound travelers in the US South, when we see a low price we buy as much as our tank can carry.
Invest in index funds. They are self- cleaning…IOW when a stock stops performing it is removed from the fund and replaced by a better performer.
Use a brokerage that is low fee. Fees steal your money.
Do NOT let someone manage your money that moves stocks around for fees.
Use Dollar cost averaging . Even if the market is down, keep adding regularly. Which is tied to…
Don’t time the market. You can’t win.
Don’t touch it. Don’t touch your money. Don’t incur fees and capital gains taxes. You will lose. Leave it alone.
I am up 8% average yearly over the lifetime of my fund including all the downturns, it has been stellar this year well over 12%. Is this a “get rich quick” way of doing things? Is it exciting? No. Not at all. But it works.
Investing (NOT TRADING) is EasyHard, because it’s really easy to do, but really hard not to mess with and screw it up.
don’t touch it
Don’t even look at it on a regular basis. Looking at it makes some people do self-defeating things like breaking your other great points
The stock market averages are only true if you look at it for a really long time, like 30-40 years. In 10 years, the value can definitely go down a lot, but if you view it for the long-term, it will still be an improvement.
I understand that looking at it like that is unnerving though.
Needing to choose when to retire based on whether the stock market is up or down is a dogshit system.
That’s generally why when you’re younger people tend to put their retirement funds into riskier investments and over time as you get closer to retirement you move portions of your money into less risky things that don’t have the potential volatility of the stock market so that by the time you retire you don’t have to worry about the stock market dipping and blowing out your retirement funds. At least that’s one way to do it; obviously this isn’t investment advice and you should seek your own professional investment advice.
You don’t have to choose, just keep saving and investing for 30 years.
So if the market crashes the year before I want to retire I should just put off retiring for another 30 years.
Like one of the other replies mentioned, when you get closer to retirement, more of the money should get shifted from stocks to more stable but lower return investments like bonds and such that are not affected by a stock market crash. Usually you can set a retirement age in the management portal of your 401k and the management company in charge of your 401k uses it as a guide to move the money into the more stable investments.
Only 32% of people have 401k accounts.
Only 32% of people have 401k accounts.
45% of 18-29 year olds have a retirement account. That number keeps rising to 77% of people 60+ having a retirement account. source
You don’t need a 401k account to save for retirement. You can do this same savings/investing in an IRA or even an brokerage account (but you wouldn’t get the tax benefits). There are ZERO employer requirements to opening an IRA, you just have to be someone that earns money.
you just have to be someone that earns money.
Earns enough money to set some aside for retirement.
You should have a nest egg by then that even in a crash, a year of withdrawal isn’t significant
I’ll let the vast majority of Americans who can’t afford to save up a nest egg because of wealth inequality that they are doing it wrong.
Also the ones who choose to retire because of medical issues who have to spend any money not in a retirement account before insurance pays out that they did it right, but they are fucked anyway.
The system is shit even if there are ways for the well off to work around it.
So if the market crashes the year before I want to retire I should just put off retiring for another 30 years.
Thats not how to do it. As you approach retirement age (5 to 10 years out), you move your money out of riskier (but higher return generating) stocks and into safer (but lower performing) investments like bonds or even cash (actual cash, CDs, Tbills, etc). Generally you also don’t move it ALL out of riskier stock. You don’t need 100% of your savings on day 1 of retirement, so you convert a few years worth (5 maybe?) to safe stuff and let the riskier stuff ride usually gaining more value even after you retire.
I don’t see what’s so difficult to understand. If you can’t retire at 60, try again at 90. At 120, you really should consider an alternative. If you have to wait until 150, retirement will likely be a lower-priority issue. \s
No. If you’ve been saving for 30 years, then you’ll have 30 years of accumulated 10±20% annual gains, which should be something like 16x your start, but could be 100x if you’re lucky or 1x if you’re not. Regardless, an historic crash on retirement day may take that down to 12x your start, which is still pretty good, and will be fixed by the following couple years.
401k is the just liquidity for billionaires, some plebs benefiting from it is an unintended consequence and owners are working pretty hard to ensure it doesnt happent too often.
JFC. Just buy a target date fund. This post makes it clear that you don’t really know what your’re doing so please do yourself a favor and just pick a target date fund like this (or equivalent if Vanguard funds aren’t available to you) and don’t mess with it until retirement.
If you want to take the time to learn more about what you should probably be doing, here are some resources:
Edit: Extras, as I come across them. Candidly, most will probably come from Rob Berger’s newsletter.
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He’s being “rude” because you’re losing faith in your fund for no reason. Thankfully you have a financial advisor. The problem is not US retirement plans, the problem is it’s only been a few years. If the target date is 2050 then assuming capitalism doesn’t collapse entirely, you’ll be fine. Look at it on the larger time scale that it is. A few bad years is normal fluctuation.
Because you’ve come to the conclusion that “retirement in the US is a scam” evidently based on a few years of data in just your portfolio. Retirement savings is built over decades.
I’d be curious about your specific positions contributing to this graph.
If your portfolio was a Fidelity target date fund, it would not be impacted by the local industry you mention in your post.
I also happen to know more about the details of how our retirement fund recommendations to clients works at Fidelity… because I worked there for the last 5 years.
You are showing the results of poor selection on your part.
What’s the difference between Fidelity and vanguard Target date funds, if any? Also, how do you know which year to pick?
How did you manage to lose money on a 3 fund portfolio, if one of its strengths is that it never underperforms the market?
Something doesn’t add up. Sounds and looks like you gambled first and then went with a solid investment.
Maybe it’s time to think about the capabilities of your financial advisor. Is it a friend or a professional?
Because you aren’t invested right. You probably clicked that option to allow them to invest it for you and so it picks all the funds with high expense ratios. Mine jumps 20-30% every year.
Yeah, I was going to say. Not pension, but I put money into two different blended portfolios (I didn’t choose the contents, just the two choices from a list). I started it in Feb 2021 and the overall gain has been over 35%. I have no idea what the pension fund put their money into there, but it seems like some bad choices.
OP should check the options they have.
