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> There's something really insidious about tying 401ks and other retirement accounts to the stock market. Insidious? That’s a bit rich. You can allocate money

> There's something really insidious about tying 401ks and other retirement accounts to the stock market. Insidious? That’s a bit rich. You can allocate money in your 401k however you want. It’s self-directed. If you don’t like stocks keep it in bonds or cash.

ask_b123 5y ago
Right! I wish my country's 401k equivalent was self-directed.
discardedrefuse 5y ago
> If you don’t like stocks keep it in bonds or cash. This is disingenuous advice considering all financial vehicles for savers have been gutted. You can't even hedge inflation without the stock market (or real estate, if you can afford the buy-in). Take a look at some historical CD rates. https://www.bankrate.com/banking/cds/historical-cd-interest-rates/ https://www.bankrate.com/banking/cds/historical-cd-interest-...
- imtringued 5y ago
  Well, savings have risen exponentially for a century. Maybe it's time for that to stop? I mean think about all the people that would have to be in debt for you to have savings. The economy clearly has too much debt and therefore too much savings. If this is driven by demographics, e.g. old people saving for retirement while there are no young people willing to provide for them when they are old, then really the problem isn't the fact that the bank doesn't want to lie to you any longer (the bank is currently lying btw), it's the fact that nobody will be there to take care of you.
- jebus989 5y ago
  > You can't even hedge inflation without the stock market (or real estate, if you can afford the buy-in). See also: treasury inflation-protected securities (TIPS).
  - discardedrefuse 5y ago
    The shortest maturing TIPS is 5 years. While you can sell your TIPS early, it has to be through the secondary market. And that involves transferring your TIPS to a 3rd party broker (and fees). I can't imagine its worth the trouble unless you need to get out of a 10 or 30 year TIPS. TIPS doesn't compare at all to a personal savings account.
    - jebus989 5y ago
      Erm, just buy a TIPS fund like VIPSX from Vanguard.
      - discardedrefuse 5y ago
        First, my whole point is to stay out of the markets. Your suggestion to buy VIPSX is the exact opposite. Second, go compare the past year of VIPSX vs inflation you'll see that VIPSX is shit. Inflation has steadily increased by 5%, but VIPSX has been all over the place (it was actually down 2% last month) and is currently only up 1%. This is, again, not what normal people need.
        jebus989 5y ago
        Your points in order were: 1. There's no way to hedge against inflation (you didn't know TIPS existed) 2. Having learned about TIPS you assert they're illiquid and can't be traded easily (you didn't know about TIPS funds) 3. Having learnt about TIPS funds you don't the recent returns of a specific fund (you don't know that TIPS adjustments lag reported inflation numbers)
        discardedrefuse 5y ago
        You conveniently ignored this part of my first sentence: "...all financial vehicles for savers have been gutted." The line about hedging inflation was just a supporting detail for my main idea. And your assertion that TIPS funds lags inflation doesn't hold water. Again, go compare the past year of inflation vs VIPSX. They don't track. By simply being a market traded product, a TIPS fund has speculation built into the price. Which, I'm arguing, is against the best interest of the average person just trying to save for their future.
- everfree 5y ago
  > This is disingenuous advice considering all financial vehicles for savers have been gutted. When you say "all financial vehicles for savers", you're really just referring to liquid savings products tied to the federal funds rate, right? Of course when the government stops handing out money to savings account holders, savings account holders will no longer be making money. Corporate bonds are an alternative way to earn some interest in a low-rate environment without owning stocks. Also, REITs are an affordable way to gain exposure to real estate without a minimum buy-in. For people who need real estate exposure but can't afford to buy a whole building, they are really underrated. Finally, the market is pricing in several rate hikes this year, so your savings account interest rate may actually be revived soon anyways.
  - discardedrefuse 5y ago
    Yes, I am kinda referring to liquid savings products. But it doesn't have to be just that. I think people need simple products that aren't tied to all the shenanigans that go down on wall street. Which is really nothing right now; not even real estate. Someone mentioned TIPS below, but its kinda complicated and not very liquid (5 year maturity, secondary market). I've been watching the rate hikes. The cynic in me says borrowing rates will rise, but consumer savings rates will not rise in step, nor will housing prices fall accordingly. But I guess we'll see.
    - everfree 5y ago
      US savings accounts is a very competitive industry that's traditionally been very responsive to underlying rates changes. All it takes is for a single bank to decide to raise their consumer rates in response to the rates they're turning around and getting from the fed (more accurately the inter-bank lending rates, but the fed has tight control over that market). I agree that it would be great to add more simple savings products, but you have to ask the question of where the yield will come from. If yields don't come from the fed (dictating inter-bank lending rates), and they don't come from the private sector (wall st), then where else can yields come from? What novel yield stream could a new savings product be built on? At the end of the day, people wake up and go to their jobs to produce things, and every penny you earn in value in a savings account (past inflation) has to ultimately come from them, but not until it filters through the wall st machine.
- bleuchase 5y ago
  > This is disingenuous advice It’s not advice. It’s reality. You don’t need to hold stocks in your 401k if you don’t want to. What happens as a result is your responsibility.
dhosek 5y ago
Most 401(k)s have around 20 options at most (of which half or more will be target date funds). My current employer's 401(k) steals $4.33/month from my account for management fees which is on top of the management fees for the individual funds' management fees.
- bleuchase 5y ago
  And what about the other half? Probably options with fewer or no stocks. You can also do in-service rollover to an IRA somewhere else with more options and no custodial fees.
  - dhosek 5y ago
    I don't know that I've ever had the option of an in-service rollover. I googled it and saw: > According to the Profit Sharing Council of America (PSCA), up to 77% of 401K plans include a provision for in-service 401K rollovers. Many of these only allow plan rollovers when a worker reaches a triggering event such as reaching retirement age, disability, plan termination or reaching the age of 59 ½ years. So even many of those who are in the 77% who have in-service rollovers available don't qualify for them.

ask_b123 5y ago

Right! I wish my country's 401k equivalent was self-directed.

discardedrefuse 5y ago

> If you don’t like stocks keep it in bonds or cash. This is disingenuous advice considering all financial vehicles for savers have been gutted. You can't even hedge inflation without the stock market (or real estate, if you can afford the buy-in). Take a look at some historical CD rates. https://www.bankrate.com/banking/cds/historical-cd-interest-rates/ https://www.bankrate.com/banking/cds/historical-cd-interest-...

imtringued 5y ago
Well, savings have risen exponentially for a century. Maybe it's time for that to stop? I mean think about all the people that would have to be in debt for you to have savings. The economy clearly has too much debt and therefore too much savings. If this is driven by demographics, e.g. old people saving for retirement while there are no young people willing to provide for them when they are old, then really the problem isn't the fact that the bank doesn't want to lie to you any longer (the bank is currently lying btw), it's the fact that nobody will be there to take care of you.
jebus989 5y ago
> You can't even hedge inflation without the stock market (or real estate, if you can afford the buy-in). See also: treasury inflation-protected securities (TIPS).
- discardedrefuse 5y ago
  The shortest maturing TIPS is 5 years. While you can sell your TIPS early, it has to be through the secondary market. And that involves transferring your TIPS to a 3rd party broker (and fees). I can't imagine its worth the trouble unless you need to get out of a 10 or 30 year TIPS. TIPS doesn't compare at all to a personal savings account.
  - jebus989 5y ago
    Erm, just buy a TIPS fund like VIPSX from Vanguard.
    - discardedrefuse 5y ago
      First, my whole point is to stay out of the markets. Your suggestion to buy VIPSX is the exact opposite. Second, go compare the past year of VIPSX vs inflation you'll see that VIPSX is shit. Inflation has steadily increased by 5%, but VIPSX has been all over the place (it was actually down 2% last month) and is currently only up 1%. This is, again, not what normal people need.
      - jebus989 5y ago
        Your points in order were: 1. There's no way to hedge against inflation (you didn't know TIPS existed) 2. Having learned about TIPS you assert they're illiquid and can't be traded easily (you didn't know about TIPS funds) 3. Having learnt about TIPS funds you don't the recent returns of a specific fund (you don't know that TIPS adjustments lag reported inflation numbers)
        discardedrefuse 5y ago
        You conveniently ignored this part of my first sentence: "...all financial vehicles for savers have been gutted." The line about hedging inflation was just a supporting detail for my main idea. And your assertion that TIPS funds lags inflation doesn't hold water. Again, go compare the past year of inflation vs VIPSX. They don't track. By simply being a market traded product, a TIPS fund has speculation built into the price. Which, I'm arguing, is against the best interest of the average person just trying to save for their future.
everfree 5y ago
> This is disingenuous advice considering all financial vehicles for savers have been gutted. When you say "all financial vehicles for savers", you're really just referring to liquid savings products tied to the federal funds rate, right? Of course when the government stops handing out money to savings account holders, savings account holders will no longer be making money. Corporate bonds are an alternative way to earn some interest in a low-rate environment without owning stocks. Also, REITs are an affordable way to gain exposure to real estate without a minimum buy-in. For people who need real estate exposure but can't afford to buy a whole building, they are really underrated. Finally, the market is pricing in several rate hikes this year, so your savings account interest rate may actually be revived soon anyways.
- discardedrefuse 5y ago
  Yes, I am kinda referring to liquid savings products. But it doesn't have to be just that. I think people need simple products that aren't tied to all the shenanigans that go down on wall street. Which is really nothing right now; not even real estate. Someone mentioned TIPS below, but its kinda complicated and not very liquid (5 year maturity, secondary market). I've been watching the rate hikes. The cynic in me says borrowing rates will rise, but consumer savings rates will not rise in step, nor will housing prices fall accordingly. But I guess we'll see.
  - everfree 5y ago
    US savings accounts is a very competitive industry that's traditionally been very responsive to underlying rates changes. All it takes is for a single bank to decide to raise their consumer rates in response to the rates they're turning around and getting from the fed (more accurately the inter-bank lending rates, but the fed has tight control over that market). I agree that it would be great to add more simple savings products, but you have to ask the question of where the yield will come from. If yields don't come from the fed (dictating inter-bank lending rates), and they don't come from the private sector (wall st), then where else can yields come from? What novel yield stream could a new savings product be built on? At the end of the day, people wake up and go to their jobs to produce things, and every penny you earn in value in a savings account (past inflation) has to ultimately come from them, but not until it filters through the wall st machine.
bleuchase 5y ago
> This is disingenuous advice It’s not advice. It’s reality. You don’t need to hold stocks in your 401k if you don’t want to. What happens as a result is your responsibility.

dhosek 5y ago

Most 401(k)s have around 20 options at most (of which half or more will be target date funds). My current employer's 401(k) steals $4.33/month from my account for management fees which is on top of the management fees for the individual funds' management fees.

bleuchase 5y ago
And what about the other half? Probably options with fewer or no stocks. You can also do in-service rollover to an IRA somewhere else with more options and no custodial fees.
- dhosek 5y ago
  I don't know that I've ever had the option of an in-service rollover. I googled it and saw: > According to the Profit Sharing Council of America (PSCA), up to 77% of 401K plans include a provision for in-service 401K rollovers. Many of these only allow plan rollovers when a worker reaches a triggering event such as reaching retirement age, disability, plan termination or reaching the age of 59 ½ years. So even many of those who are in the 77% who have in-service rollovers available don't qualify for them.