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You think the stock market will be around when you are old enough to need your 401k? I max my contributions but I have no faith they won't be wiped out in some

You think the stock market will be around when you are old enough to need your 401k? I max my contributions but I have no faith they won't be wiped out in some future crash.

pwthornton 10y ago
You buy shares in the stock market, not dollars, so a crash shouldn't hamper your ability to retire, unless you want to retire during the crash itself (although diversity of assets would help with this). The stock market recovered years ago from the Great Depression and is doing really well again.
- SEJeff 10y ago
  If you want to correct someone, please correct them properly. You buy shares or instruments traded on Exchanges, which make up the "Stock Market". However, you don't always buy on Exchanges (OTC/Over the Counter Trading). Those instruments can be equities (shares of a company) aka stocks, securities, futures, options, etc. The Dow Jones Industrial Average (a common benchmark index such as the Standard and Poor's 500) is literally at an all time high and is on the cusp of 20,000: https://www.google.com/finance?cid=983582 https://www.google.com/finance?cid=983582 Edit: Changes "shares in instruments to shares or instruments". It was a bit ambiguous and I was originally trying to make it more obvious that shares are considered instruments (along with several other things traded).
  - pwthornton 10y ago
    The point of my post is that you are buying shares of something, and that crashes and downturns don't permanently harm your 401k. Also, crashes when you are young are good because you get to buy cheap shares. I could have gone into more detail, as you have done here, but that's not the point. The point is that downturns like the Great Recession do not permanently harm someone's retirement.
  - JumpCrisscross 10y ago
    > If you want to correct someone, please correct them properly. You buy shares in instruments traded on Exchanges, which make up the "Stock Market" Shares are instruments [1]. (You say this later, but nobody buys "shares in instruments"). Exchanges, together with ECNs, OTC markets, broker-dealers, other market makers, buyers, sellers, arbitrageurs, investment banks, et cetera make up the stock market. [1] https://en.m.wikipedia.org/wiki/Financial_instrument https://en.m.wikipedia.org/wiki/Financial_instrument
    - SEJeff 10y ago
      Totally correct. I had to reword that a few times but figured less people would understand it otherwise :)
- thraway2016 10y ago
  I'm not sure if "crash" is the problem. Crashes happen in markets, it's part of the business cycle. OP is discussing a 30+ year time horizon, though. I can think of a few potential things that would precipitate not just a crash, but a long-term economic malaise: - Climate change - Political/social unrest (extrapolate Brexit, Trump, etc) - Mass unemployment caused by automation (you can't "retrain" 5MM 50yo truck drivers) - Empire collapse (has happened with every single empire in history - what makes the U.S. exempt?) - Nuclear exchange (tensions with Russia steadily increasing) - Grey goo / UFAI (I know, crazy, but still, 30+ year time horizon) While I'm sympathetic to the view that alarmist "the crash is coming" thinking is likely incorrect, whenever one discusses decades-long time horizon in an era of accelerating technology and political uncertainty, I don't think it's unreasonable to suggest that the VIX is not considering tail risk of unlikely, but highly impactful events.
  - Naga 10y ago
    I choose to ignore serious but unlikely events like that in my planning. A nuclear exchange or grey goo scenario is going to ruin my retirement plans no matter if I keep my investments in cash or in stocks. I'll have bigger problems than if I can sell my investments or not.
  - tzs 10y ago
    > OP is discussing a 30+ year time horizon, though. I can think of a few potential things that would precipitate not just a crash, but a long-term economic malaise ... > Climate change The climate change consequences big enough to cause a long-term economic malaise are far enough out to not affect most of today's workers. We'll mostly just get things that cause short term disruption, like more large storms, more weather variability, more record high tides, and similar things. The big things, like sufficient sea level rise to require abandoning significant parts of many major cities, long term changes in water availability that significantly change agriculture for whole regions, and so on are usually forecast to be in the 100+ year timeframe. This is one of the frustrating things about climate change. Over the long term it likely has disastrous consequences for humanity, but it can be largely averted or at least limited if action is taken early enough. But "early enough" puts you a time when the consequences are still localized and intermittent, and so it is easy for people to overlook it (especially when they can make more money by doing so).
- thesimpsons1022 10y ago
  it took 30 years for people's stocks to recover that bought them right before the great depression.
  - pwthornton 10y ago
    The very nature of saving in a 401k is that you never at one time put in a high percentage of your balance into it. The max individual contribution is $18,000 a year. Let's say you have been doing around $10,000 the first 10 years of your career and the economy tanks. You now have 30-40 years until retirement, and you start doing $15,000 or so a year. That money that you put in before this huge crash may not grow that much before retirement, but the money you put in after the crash will be bought at low rates and will grow for a long time. You will also have put in a lot more money post crash anyway.
    - seanmcdirmid 10y ago
      You can contribute more after a certain age as a way of catching up.
      - pwthornton 10y ago
        True. And you can also do other savings vehicles outside of your 401k to save even more money. I just wanted to illustrate that it's not like people put all of their money into their retirement account on one day and if a crash happens the next they are screwed.
        seanmcdirmid 10y ago
        True, I haven't been 401k eligible h(or even Roth), so I have a lot of savings in post tax cash. I just got my Chinese pension contributions refunded, at least, but I'm way behind even on my social security contributions.
  - jedbrown 10y ago
    How do you define "recover"? Stocks were ahead of 10-year T.Bonds by 1945. http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/...
- mywittyname 10y ago
  I actually worry about a large-scale "privatization" of the stock market in the distant future. I believe that the concentration of wealth will get so bad that small groups of people will be able to create private equity firms capable taking all the largest companies private. We are already to the point where there's so much private equity that startups don't need IPOs. So it's entirely possible that the next Google, Facebook, Amazon, Apple and Microsoft will never be exchanged on open markets.
user837387 10y ago
Forget the stock market, will you still be around. I'd plan accordingly (tongue in cheek)
jgalt212 10y ago
fair enough, but if there's a broad based and persistent market crash then there will be broad based and persistent deflation. Ergo, you won't need to have saved all that much money to retire.
DesiLurker 10y ago
then how about you invest in gold, its traditionally been a good fear hedge. or more appropriately adjust the weighting between gold & market based on your perception of risk. Note that I am not actually recommending investing in gold just making your abstract fearful thesis into something real. IMO unless you are talking about some civilization hurting disaster (like yellowstone .. not even then perhaps) markets recover from crashes. in a way they are a measure of optimism for future. so I'd factor than into my plans.

You think the stock market will be around when you are old enough to need your 401k? I max my contributions but I have no faith they won't be wiped out in some future crash.

pwthornton 10y ago

You buy shares in the stock market, not dollars, so a crash shouldn't hamper your ability to retire, unless you want to retire during the crash itself (although diversity of assets would help with this). The stock market recovered years ago from the Great Depression and is doing really well again.

SEJeff 10y ago
If you want to correct someone, please correct them properly. You buy shares or instruments traded on Exchanges, which make up the "Stock Market". However, you don't always buy on Exchanges (OTC/Over the Counter Trading). Those instruments can be equities (shares of a company) aka stocks, securities, futures, options, etc. The Dow Jones Industrial Average (a common benchmark index such as the Standard and Poor's 500) is literally at an all time high and is on the cusp of 20,000: https://www.google.com/finance?cid=983582 https://www.google.com/finance?cid=983582 Edit: Changes "shares in instruments to shares or instruments". It was a bit ambiguous and I was originally trying to make it more obvious that shares are considered instruments (along with several other things traded).
- pwthornton 10y ago
  The point of my post is that you are buying shares of something, and that crashes and downturns don't permanently harm your 401k. Also, crashes when you are young are good because you get to buy cheap shares. I could have gone into more detail, as you have done here, but that's not the point. The point is that downturns like the Great Recession do not permanently harm someone's retirement.
- JumpCrisscross 10y ago
  > If you want to correct someone, please correct them properly. You buy shares in instruments traded on Exchanges, which make up the "Stock Market" Shares are instruments [1]. (You say this later, but nobody buys "shares in instruments"). Exchanges, together with ECNs, OTC markets, broker-dealers, other market makers, buyers, sellers, arbitrageurs, investment banks, et cetera make up the stock market. [1] https://en.m.wikipedia.org/wiki/Financial_instrument https://en.m.wikipedia.org/wiki/Financial_instrument
  - SEJeff 10y ago
    Totally correct. I had to reword that a few times but figured less people would understand it otherwise :)
thraway2016 10y ago
I'm not sure if "crash" is the problem. Crashes happen in markets, it's part of the business cycle. OP is discussing a 30+ year time horizon, though. I can think of a few potential things that would precipitate not just a crash, but a long-term economic malaise: - Climate change - Political/social unrest (extrapolate Brexit, Trump, etc) - Mass unemployment caused by automation (you can't "retrain" 5MM 50yo truck drivers) - Empire collapse (has happened with every single empire in history - what makes the U.S. exempt?) - Nuclear exchange (tensions with Russia steadily increasing) - Grey goo / UFAI (I know, crazy, but still, 30+ year time horizon) While I'm sympathetic to the view that alarmist "the crash is coming" thinking is likely incorrect, whenever one discusses decades-long time horizon in an era of accelerating technology and political uncertainty, I don't think it's unreasonable to suggest that the VIX is not considering tail risk of unlikely, but highly impactful events.
- Naga 10y ago
  I choose to ignore serious but unlikely events like that in my planning. A nuclear exchange or grey goo scenario is going to ruin my retirement plans no matter if I keep my investments in cash or in stocks. I'll have bigger problems than if I can sell my investments or not.
- tzs 10y ago
  > OP is discussing a 30+ year time horizon, though. I can think of a few potential things that would precipitate not just a crash, but a long-term economic malaise ... > Climate change The climate change consequences big enough to cause a long-term economic malaise are far enough out to not affect most of today's workers. We'll mostly just get things that cause short term disruption, like more large storms, more weather variability, more record high tides, and similar things. The big things, like sufficient sea level rise to require abandoning significant parts of many major cities, long term changes in water availability that significantly change agriculture for whole regions, and so on are usually forecast to be in the 100+ year timeframe. This is one of the frustrating things about climate change. Over the long term it likely has disastrous consequences for humanity, but it can be largely averted or at least limited if action is taken early enough. But "early enough" puts you a time when the consequences are still localized and intermittent, and so it is easy for people to overlook it (especially when they can make more money by doing so).
thesimpsons1022 10y ago
it took 30 years for people's stocks to recover that bought them right before the great depression.
- pwthornton 10y ago
  The very nature of saving in a 401k is that you never at one time put in a high percentage of your balance into it. The max individual contribution is $18,000 a year. Let's say you have been doing around $10,000 the first 10 years of your career and the economy tanks. You now have 30-40 years until retirement, and you start doing $15,000 or so a year. That money that you put in before this huge crash may not grow that much before retirement, but the money you put in after the crash will be bought at low rates and will grow for a long time. You will also have put in a lot more money post crash anyway.
  - seanmcdirmid 10y ago
    You can contribute more after a certain age as a way of catching up.
    - pwthornton 10y ago
      True. And you can also do other savings vehicles outside of your 401k to save even more money. I just wanted to illustrate that it's not like people put all of their money into their retirement account on one day and if a crash happens the next they are screwed.
      - seanmcdirmid 10y ago
        True, I haven't been 401k eligible h(or even Roth), so I have a lot of savings in post tax cash. I just got my Chinese pension contributions refunded, at least, but I'm way behind even on my social security contributions.
- jedbrown 10y ago
  How do you define "recover"? Stocks were ahead of 10-year T.Bonds by 1945. http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/...
mywittyname 10y ago
I actually worry about a large-scale "privatization" of the stock market in the distant future. I believe that the concentration of wealth will get so bad that small groups of people will be able to create private equity firms capable taking all the largest companies private. We are already to the point where there's so much private equity that startups don't need IPOs. So it's entirely possible that the next Google, Facebook, Amazon, Apple and Microsoft will never be exchanged on open markets.

user837387 10y ago

Forget the stock market, will you still be around. I'd plan accordingly (tongue in cheek)

jgalt212 10y ago

fair enough, but if there's a broad based and persistent market crash then there will be broad based and persistent deflation. Ergo, you won't need to have saved all that much money to retire.

DesiLurker 10y ago

then how about you invest in gold, its traditionally been a good fear hedge. or more appropriately adjust the weighting between gold & market based on your perception of risk. Note that I am not actually recommending investing in gold just making your abstract fearful thesis into something real. IMO unless you are talking about some civilization hurting disaster (like yellowstone .. not even then perhaps) markets recover from crashes. in a way they are a measure of optimism for future. so I'd factor than into my plans.