Is keeping a 401k worth it right now?

Okay, I know this is initially going to sound like a stupid question, but hear me out. I am in my early 30's and don't have much in my 401k (under $15k). I have no problem keeping the money in the account, but I am not confident in the future of the economy and 'paper' assets such as investment vehicles in the short-term.

In other words, I don't think this little money I have in my 401k will be there by the time I am 50-60 so I am not sure if I should bother keep it there in the first place. Even if I do keep it in there, will it be sufficiently protected from inflation?

In my eyes, we are going to enter into a 'double dip' recession / depression by the end of the year and the US will not be able to maintain itself as a financial stronghold much after a year or so. If that is indeed the case, why not cash out the 401k while the markets are toward the high end of the 'W' recession and use that money to buy things that will maintain value? Sure, 50% of it would go 'poof' to taxes and penalties, but the remaining is cold hard cash that has not been strung out on inflation yet. If I could use that cash to either short the market or buy durable things that will last, would that maybe be a better use of my "retirement" account?

Besides, with Moore's Law / advancing technology and everything else going on in the world, isn't it a bit naive to think that "retirement" and "retirement accounts" will still be relevant in 20 to 30 years?

I am using this thread as a thought exercise. I welcome opinions from all of you and I am posting this question on ATS instead of financial forums because I want to hear the ideas from people that think outside of the box counter to conventional wisdom. I am full aware that any financial planner would say "DON'T DO IT!" and I probably won't but I am entertaining the thought anyway.

What are your ideas - and do you think "retirement" as we know it will still be something people do when they are 60yrs old in 2035?

I would certainly look into shifting the investments of the 401k into more stable avenues and away from volatile stocks. Let that percolate for at least a few years still things either crash or stabilize then move it back to where ever is appropriate at the time. Generally it seems the penalties for pulling out of a 401k are steep, even on only 15k so I would suggest letting it ride but perhaps reducing your contribution and investing the difference in something a bit more suitable to the current economic climate.

reply to post by Helig


Wow!! You still have something IN a 401K? I would have thought they would have bled you out by now.

It's worth it for THEM to keep you in it, if you have anything left. They obviously haven't fished with you yet.

I suppose it would matter in WHAT your 401K is invested, and by whom. I don't want to know, or anything, just saying.

I would look for something that exposed you to less risk. It's a given that you would probably have to take it in the shorts to do anything else with it, but I think it's definitely worth doing some research.

It's hard to have a lot of confidence in the economy for me right now. Others not so much.

When I look around, it's hard to have confidence in ANYTHING. If your 401 K dollar is worth ten cents in two years, how much do you stand to lose? (rhetorical) If the dollar is replaced? If the management company goes under? If the bottom falls out of what they are invested in?

'Under someone else's control' is the last place I want my money today, so I would try to lessen that as much as possible. I don't think you can eliminate it, but maybe take a couple steps to shield a little better.

It's a good thing we don't have to be experts to post. I can't wait until someone with some REAL knowledge gives us some real insight.

reply to post by KSPigpen


I don't have much in it, not even 2k mainly because I just got enrolled in it as part of the benefits package with the company I was hired by. Still I completely agree that its hard to have confidence in such things; the market was still in a free fall when I started so I didn't even bother checking the monthly statements send by the company about how much I had. Considering I only contribute 5% of each paycheck I don't let it keep me up at night, I still have the bulk of my money to work with in other more stable fashions.

As for a collapse of the USD or other such things I don't really worry about that either because I already know that the dollar is nothing more than colored paper with no real value even for the paper its printed on. As long as I keep reminding myself that it makes it a lot easier to stomach the kinds of things going on which make my meager pay worth even less.

If you had a time machine available to you it would have been wise to put the money you previously put into your 401K into some other investment. However, what is done is done.

Right now, however, is a great time to put into your 401K IMHO. Buy low, sell high is the objective, and those Market Funds can't go much lower than right now. When they do get an upswing, even if it is 10 years from now, then the money you have invested will pay off in spades.

But it comes down to how close you are to retirement too. If you are planning on cashing out your 401K within the next 10 years, then you might be better off cutting your losses now and looking elsewhere. However, if your retirement is over 10 years away, then I say keep contributing to your 401K, especially if your employer matches your contribution.

Of course, if SHTF before your retirement, then it's not going to help you. However, Economic Depression won't make your 401K go away...but it will make it worth more in the long haul (assuming some Market Manager doesn't embezzle the funds deposited into that Market Fund away before then).

Originally posted by nydsdan
Besides, with Moore's Law / advancing technology and everything else going on in the world, isn't it a bit naive to think that "retirement" and "retirement accounts" will still be relevant in 20 to 30 years?

Interesting point that most people don't think about. Right now, it's projected that AI will reach "human" levels by ~2029. Advances in robotics are also staggering (as seen in this video).

I think that it's entirely possible that jobs (as we know them) will be almost completely obsolete by the time we reach retirement. If this happens; then obviously, retirement as we know it will also have come to an end.

As for the question of inflation-protection; that goes in cycles. Here's a page showing the inflation-adjusted S&P:

Inflation Adjusted Chart of S&P 500

From this, it looks like we could be due for an upswing, but it seems much more likely that we go into the type of funk that we saw from '75-85.

Didn't a lot of people lose a lot of money from their 401k's last year?

I would never have one. I do not even understand how they work, but I don't trust them after last year anyway.

Sure I lost some money, but mine is still worth waaaay more than I have put into it. Plus my company matches 6%. If you are going to have it for 10 more years I'm sure every financial advisor would recommend keeping it.

reply to post by nydsdan


here's a good series of articles on how retirement will cease to be a viable option in the near future. life is getting too expensive to even consider retiring.

The end of retirement
www.economist.com...
www.futurist.com...
motleyfool.com...



[edit on 14-8-2009 by warrenb]

Good points in the thread, yet somehow I am still on the fence over the issue. I guess it comes down to two main points:
1. The state of economics and society in the US will remain the same or similar to the previous 20 years as they will for the next 20 years:

    If this is the case, then it is wise to keep the investment but allocate it into some low-risk/low-yield funds right now until the storm clears and then make some good money.

2. The state of economics and society in the US is undergoing a transformation due to (technology/global economics/large cycle) and things over the course of the next 20 years will be radically different than they were during the previous 20 years:

    If this is the case, then keeping the funds in will likely only be money lost and these funds minus penalties/fees may help me afford some things that may help me get through the next few years. If TSHTF then I may have some protection against total poverty until the next paradigm begins and I am able to rebuild myself according to what the future holds for humanity.

Now, I'll admit that I am a believer in cycle theory and I believe that the US is undergoing a bit of a transition nowadays. What that transition is, or what it will be, are not exactly clear to me but it seems that a lot of cycles in economics, society, technology are all changing over the next few years which will usher in some radical change.

Quite frankly, this idea that in 2040 I will be this man in his early 60's, retired with a house and a sailboat and a barn with some hobbies/projects in it while I live off of this investment fund is ridiculous to me. I just don't see the world being like that then, and I don't see myself living like that. I see myself as a man that will always 'work' but by doing things I love in return for other things that I need. I sometimes get the feeling that 'retirement accounts' are mostly a tool used to help people cope with being trapped in a cubicle all day long. Working as a drone in a cubicle is enough to make a person insane unless you offer them some hope that they are busing ass now in order to "retire" later. Sure, I want to have my freedom from the workforce when I have to pee every 5 minutes and a late night out is a 6pm dinner at Denny's.

aaand then I come back to "if I had a few thousand dollars in an account back in 1980 it would have matured quite nicely by now, so in 2040 that $15k will have added up to a nice chunk of change".

In the end, I am going to leave the account open with the money in safer funds unless/until I absolutely NEED the money. Then I will take it out knowing that it may not matter much in the end anyway.

Carpe diem!

[edit on 14-8-2009 by nydsdan]

I still have money in my 401K, the company is still matching 5%.....so far so good (I am not in the hole). I may change it to some less volatile options in the near future, will just have to keep watching and see what happens. At least it is making me something.....better than nothing at all!