Way OT: investments in 401K

I've been in a 401K since they were introduced in the early eighties. The only thing I regret is that I didn't switch some of my 401K to a fixed-income fund when the market toppped out. I lost over half the value of my 401k in a couple of years.

Anything with a fixed interest rate like that will get a discount/premium to make the interest competetive with current rates.

Say the current rate for long term investments like that is 5%.

And you have Ford preferred with a face value of $100 paying 7.4% interest.

The market will say take that $7.40 and say, "You know, that's 5% on $148..." so the shares will sell for a premium of $48 over face value giving you 5% returns. That's essentially how bonds get priced, and preffered stock is similiar to a bond but with no set redemption time.

If the 7.4% is the actual, market adjusted interest rate then that's what the market figures it's worth comparing the risk to the returns.

As for wiseoldguy and Real Estate...have to say many of my grandparents made good money buying land in my area and down in Florida years ago. Family is still sitting on a large parcel in Florida that's currently appraised at $300,000 but will bring ten times that much once sewers now 1/2 mile away go by it. But they also worked locally and had more time to putter around. I barely have enough time to maintain my own home between 50+ hour work weeks a 45 minute commute away!

They use computer programs to plot likely results and how they affect you over time. They will ask you dozens of questions in order to get the most accurate projections.

Regarding investments... something like 95% of all wealthy people got that way by investing in real estate. The supply of real estate is limited; they aren't making any more of it. The demand increases with population. So prices go up. Given certain tax brackets you can do far better than 7.4%/yr. Unlike stocks, real estate is generally a very safe investment. There are many ways to go about this, in my case, I bought single family homes in middle class neighborhoods, rehabed them, and then sold them at net profit that was never less than 25% annualized. If you look at the real ROI on your 401K I'll bet it's not close to 25%, maybe closer to one tenth of that.

If it were me, I cash in that 401K, pay cash for houses like I described, rehab them, and either rent them out for cash flow or sell them and then reinvest the profits in another rehab. You can make some serious money this way and nothing the government or any company does can hurt you.

Good luck to you!

BTW, I hope you talk to an attorney about 401Ks. They are basically a fraud. The reason is that the Supremes ruled years ago that ALL the money in 401Ks (generally) belongs to the COMPANY (yes, even your contribution).

There are now millions of people who retired thinking they were going going to spend the rest of their lives in semi-luxury many of whom now hand out shopping carts at Wally-World. How did this happen? Very simple. The company just uses the funds for their own purpose and then tells you to eat dirt when you come looking for it. Does the name Enron ring a bell? There are lots of other examples from Mom & Pops to Fortune 100 types and a good attorney should be up to date on this. Note that I"m not giving you legal advice here as there are differences in how 401Ks are set-up. But I will say this. Anybody who is foolish enough to depend on a 401K, social security, or Medicare/Medicaid for retirement is likley to be very disappointed.

TheRealRon

Or the names of the parties involved?

I thought not.

Where you might get in trouble is if a struggling firm using your withholdings to pay the light bill instead of depositing it in your account. they can get away with that for a month or two before someone notices the deposits aren't hitting their account. One phone call and you see the accountant and a few other being lead out in handcuffs. Been there and done that.

Where a person gets in trouble is a DEFINED BENEFIT plan - such as ones offered by companies like Ford Motor and the like. The company has to fund the pension for future liabilities and should pay into the plan every year to build the balance. If there's not enough cash to pay the plan's expenses in a year (health insurance goes through the roof) the company has to contribute more to cover the short fall. If the pension as a huge surplus the company can "borrow" the money out the plan to pay operating costs. Company goes bust, the loan goes bad and the pension people are working at Wally World. Basically you have an agreement with the company to keep paying you after you quit/retire - but if they go under (International Harvester) your pension disappears with them.

Other plans similar to 401(k) involve the employees buying the company's own stock (HUGE MISTAKE IMHO). The company will sell their stock at a discount to the retirement plan on certain conditions, like the stock must be held for 2-5 years before being sold, there will be "blackouts" where the plan can't sell the company's stock (like when it's crashing). Enron is exhibit "A" on the perils of this type of plan.