What’s up with 401k?

[Felonious Junk]

Admittedly, I am not very knowledgeable about the ways of the stock market. I am one of those people that sets up their 401k at the max employer contribution and then does nothing else to manage it.

Having said that, I looked at my 401k balance with one eye open expecting to see the balance greatly reduced from the economic turmoil we’ve experienced of late. I was shocked at what I actually saw.

My question is this. This isn’t sustainable right? There has to be a long term negative associated with all of the money being pumped into our economy by the fed that will effect the markets right?

TIA

 

[Drebin]

Admittedly, I am not very knowledgeable about the ways of the stock market. I am one of those people that sets up their 401k at the max employer contribution and then does nothing else to manage it.

Having said that, I looked at my 401k balance with one eye open expecting to see the balance greatly reduced from the economic turmoil we’ve experienced of late. I was shocked at what I actually saw.

My question is this. This isn’t sustainable right? There has to be a long term negative associated with all of the money being pumped into our economy by the fed that will effect the markets right?

TIA

The fundamentals are strong, so I do think this is sustainable for a period of time, particularly if we see expected recovery late this year and early next year.

If Biden gets elected, all bets are off.

 

[Willow Grove Dawg]

I think we have to assume that Wall Street has a Biden win priced into the market. Maybe a little bit of the most recent spike has been associated with more optimism about Trump.

 

[turkish]

Relative to your 401k and retirement plans, it is not so important which candidate will drive the market high or low. What is important is their broader 401k policy. I invite anyone to do their own research on that topic. If you intend to retire, the differences are distinct.

 

[Drebin]

I think we have to assume that Wall Street has a Biden win priced into the market. Maybe a little bit of the most recent spike has been associated with more optimism about Trump.

I'm not talking about immediate reaction. I'm talking about a sustained reaction. We all know that Biden has said he would reverse Trump's tax cuts and undo his exec orders that lifted regulations in certain areas. That's absolutely going to kill the economy.

 

[patdog]

Very good point.

 

[Seinfeld]

Coincidentally, I was just reading the other day how part of Biden’s tax plan is actually to kill the 401k model. He wants to eliminate the before tax contribution incentive while replacing it with tax credits that are generally the same for all regardless of contribution level.

Maybe it’s just me, but giving people even less of an incentive to save for retirement in a world where the majority of family’s accounts are already woefully underfunded just doesn’t seem like a great strategy. Not to mention that while people are contributing pre-tax money today, the piper eventually comes calling for 401k distributions. So if you swap some of that out today with tax credits, does that not become less total tax revenue in the long run?

 

[VegasDawg13]

There has to be a long term negative associated with all of the money being pumped into our economy by the fed that will effect the markets right?

You have this part backwards. The pumping of money into the economy is a tool used to, among other things, prop up markets.

 

[GloryDawg]

Contribute the most you can and don't worry about it. If you are young put in highs risk investments. If middle age invest in both highs risk and safe. If older move to safe funds. If close to retirement you might want to freeze it. There is going to be ups and downs in market. Timing the ups with retirement is tricky. If it drop dramatically right before you retire you may have to work longer. Lucky for me I have both Define contribution plan (401K) and a define benefit plan (Company paid pension plan) so the define contribution is only gravy to me. I will use my 401K to pay of debt when I retire and to help my kids pay for college if they decide to go.

 

[fishwater99]

Coincidentally, I was just reading the other day how part of Biden’s tax plan is actually to kill the 401k model. He wants to eliminate the before tax contribution incentive while replacing it with tax credits that are generally the same for all regardless of contribution level.

Maybe it’s just me, but giving people even less of an incentive to save for retirement in a world where the majority of family’s accounts are already woefully underfunded just doesn’t seem like a great strategy. Not to mention that while people are contributing pre-tax money today, the piper eventually comes calling for 401k distributions. So if you swap some of that out today with tax credits, does that not become less total tax revenue in the long run?

This is a horrible idea for the people who are actually working and contributing to their 401k plans.

 

[turkish]

This is a horrible idea for the people who are actually working and contributing to their 401k plans.

You mean “the enemy?” *

 

[horshack.sixpack]

Admittedly, I am not very knowledgeable about the ways of the stock market. I am one of those people that sets up their 401k at the max employer contribution and then does nothing else to manage it.

Having said that, I looked at my 401k balance with one eye open expecting to see the balance greatly reduced from the economic turmoil we’ve experienced of late. I was shocked at what I actually saw.

My question is this. This isn’t sustainable right? There has to be a long term negative associated with all of the money being pumped into our economy by the fed that will effect the markets right?

TIA

As we get close to the election, the market will build in some pre-election adjustment in case Biden wins. If he wins, it will take a dump and recover slowly. If Democrats control enough of the federal landscape to shape business policy, expect to see us pushed backwards quite a bit, but that would be sometime post election. It will correct and still provide decent returns no matter who is president unless we undergo some unprecedented national change/stress.

ETA: unless your retirement horizon is close, dollar cost averaging is your 401k friend whereas market timing will kick your butt

 

[Felonious Junk]

Well that’s kinda my point though. In my experience, things that are “propped up” aren’t very stable in the long run. Whether it be economies or something structural you’re building.

 

[Leeshouldveflanked]

Democrats want to kill 401k’s and make everyone equally poor. Except for elite, who have resources to hide money.

 

[dorndawg]

Democrats want to kill 401k’s and make everyone equally poor. Except for elite, who have resources to hide money.

President

Political Party

Years In Office

S&P Return (%)


William J. Clinton

D

1993-2001

210


Barack H. Obama

D

2009-2017

182


Dwight D. Eisenhower

R

1953-1961

129


Ronald W. Reagan

R

1981-1989

117


Harry S. Truman

D

1945-1953

87


George H. W. Bush

R

1989-1993

51


Lyndon B. Johnson

D

1963-1969

46


Donald J. Trump

R

2017-

43


Jimmy E. Carter

D

1977-1981

28


Gerald R. Ford

R

1974-1977

26


John F. Kennedy

D

1961-1963

16


Richard M. Nixon

R

1969-1974

-20


George W. Bush

R

2001-2009

-40


Note: this is from July 23 so donnie's number's are a bit better

https://www.forbes.com/sites/sergei...eturns-under-every-us-president/#6acc1225faaf
​

 

[VegasDawg13]

Maybe it’s just me, but giving people even less of an incentive to save for retirement in a world where the majority of family’s accounts are already woefully underfunded just doesn’t seem like a great strategy. Not to mention that while people are contributing pre-tax money today, the piper eventually comes calling for 401k distributions. So if you swap some of that out today with tax credits, does that not become less total tax revenue in the long run?

Currently, if I make $200,000 a year, if I contribute $10,000 to my 401(K), I have $10,000 for retirement and have saved ~$3,200 in tax. I.e., I have increased my net worth by $3,200. If you, OTOH, are making $65,000 and contribute that same $10,000, it only increased your net worth by $2,200.

Biden's plan would save both of us $2,600.

Whether it would have unintended consequences, I'm not sure, but I don't see how it disincentivizes saving for retirement.

As for the less revenue in the long run, it just changes the way the current savings happen. You'd still pay income tax on future distributions as you currently would.

ETA: One part of the proposal that I missed: The $2,600 savings would be deposited into your 401(K), so you don't have immediate access to it. Therefore, I agree it would disincentivize savings among people who need their money now, i.e. poorer people. Seems like a horrible idea.

 

[Leeshouldveflanked]

President

Political Party

Years In Office

S&P Return (%)


William J. Clinton

D

1993-2001

210


Barack H. Obama

D

2009-2017

182


Dwight D. Eisenhower

R

1953-1961

129


Ronald W. Reagan

R

1981-1989

117


Harry S. Truman

D

1945-1953

87


George H. W. Bush

R

1989-1993

51


Lyndon B. Johnson

D

1963-1969

46


Donald J. Trump

R

2017-

43


Jimmy E. Carter

D

1977-1981

28


Gerald R. Ford

R

1974-1977

26


John F. Kennedy

D

1961-1963

16


Richard M. Nixon

R

1969-1974

-20


George W. Bush

R

2001-2009

-40


Note: this is from July 23 so donnie's number's are a bit better

https://www.forbes.com/sites/sergei...eturns-under-every-us-president/#6acc1225faaf
​

This is the New Democrat Transition, even Biden said so himself.

 

[horshack.sixpack]

Right. Supports my point that it doesn't much matter who is in office. Macro level issues like the S&L crisis in the early 80's, dotcom bust late 90's and financial crash late 2000's all were years in the making and had a huge negative impact. I'm sure there is something happening now that will cause us some pain a few years from now and it is not a respecter of political affiliation either. If only I knew what it was, I would position myself to retire from it...

 

[VegasDawg13]

Well that’s kinda my point though. In my experience, things that are “propped up” aren’t very stable in the long run. Whether it be economies or something structural you’re building.

If the economy were to never catch up to the propped up market, therefore removing the need to prop it up, sure. The idea is that the economy will come back strong, though.

 

[dorndawg]

Right. Supports my point that it doesn't much matter who is in office. Macro level issues like the S&L crisis in the early 80's, dotcom bust late 90's and financial crash late 2000's all were years in the making and had a huge negative impact. I'm sure there is something happening now that will cause us some pain a few years from now and it is not a respecter of political affiliation either. If only I knew what it was, I would position myself to retire from it...

You're not wrong, merely pointing out the notion that Democrats are bad for Wall St is simply divorced from reality.

 

[SheltonChoked]

This is the New Democrat Transition, even Biden said so himself.

Question for all of you that think the stock market will "collapse" if Dems get in office, despite evidence to the contrary for the last 2 dems elected, Where is that money going to go? What better return will investors find?

 

[horshack.sixpack]

Stupid facts***

 

[mstateglfr]

Well that’s kinda my point though. In my experience, things that are “propped up” aren’t very stable in the long run. Whether it be economies or something structural you’re building.

Those who believe the system works will say that we can grow our way into not being propped up.
It seems that gap continues to expand though.

 

[horshack.sixpack]

Also, bad for the stock market and bad for business are not the same things. Publicly traded companies are acutely aware of market expectations and adjust accordingly (layoffs, etc.) to try to meet those expectations. So, business unfriendly policies by Dems do have real impact, it just may not be seen in the market. Business friendly policies by Republicans also have various impacts that are not always appreciated.

 

[Irondawg]

Yeah unless I misunderstood the article I read on it I got the basic theory behind it but I wasn’t sure the math would work out in the end.

I don’t think most people look at 401k as a tax shelter or way to reduce tax load.

It also mentioned doing this would encourage more lower income people to save which made no sense at all because I didn’t see anything that talked about changing anything in then low end.

Seemed like a stunt to just show they are willing to try and go after higher tax bracket people

 

[dorndawg]

Also, bad for the stock market and bad for business are not the same things. Publicly traded companies are acutely aware of market expectations and adjust accordingly (layoffs, etc.) to try to meet those expectations. So, business unfriendly policies by Dems do have real impact, it just may not be seen in the market. Business friendly policies by Republicans also have various impacts that are not always appreciated.

Yes agree the market isn't the economy. I think we'd agree GDP growth is a not-bad yardstick for measuring the economy, and even then it's a mixed bag. Certainly no clear evidence the gop is somehow better for business. And in the first chart, donnie's number is a LOT lower today.

https://www.thebalance.com/gdp-growth-by-president-highs-lows-averages-4801102

 

[57stratdawg]

Great link. I always tell my Conservative friends when they start talking about economic performance that they sound like a CFB fan defending a 3-9 coach:

"Sure, the results aren't there, but......."

 

[Apoplectic_Objurgator]

Printing money is good for the markets.

Republicans now like printing money as much as dems.

Giving unlimited money to poor people only makes them more poor but grows my 401K.

Pick a Vanguard fund and buy as much as possible. No cash whatsoever!!

 

[TheStateUofMS]

I thought you were one of the folks wanting to go to all cash in the past....

 

[TheStateUofMS]

Lmao the economy is struggling not bc of DT. DT has wanted the economy open. Dem controlled states want folks to feel as miserable as possible so they can blame DT.

Why else would governors tell folks they can't go to their second homes, can't work in their yards, can't go boating, etc? It's all by design.

 

[TheStateUofMS]

Not in all cash anymore? lol

 

[mstateglfr]

Lmao the economy is struggling not bc of DT. DT has wanted the economy open. Dem controlled states want folks to feel as miserable as possible so they can blame DT.

Why else would governors tell folks they can't go to their second homes, can't work in their yards, can't go boating, etc? It's all by design.

"Timothy, what is on my agenda for the morning?"

"Well Mr Governor, you have a 9am with a socialist group that wants to destabilize business and then you have a administration wide idea session to figure out how to make the people who voted for you miserable."

"Oh good because I have some new ideas on how to low key fight with the President by making my constituents miserable."

 

[Joe Schmedlap]

It’s rollin’ baby

 

[Crazy Cotton]

Where else do rich people have to put all their money? Interest rates are basically zero. I guess residential real estate, but that's more complicated than dumping money in the stock market.

 

[Megiddo]

The rich have set the system so it's basically impossible for the S&P to fail long term and usually your 401k is tied to some low-fee fund that's S&P-based..

It is sustainable and it is as designed. Those with money to invest will get richer.

Just check out a graph of the S&P 500 index over the past 50 years or so and you'll see that it's just a near-constant increasing slope.

https://www.forecast-chart.com/historical-sp-500.html

 

[Drebin]

You're not wrong, merely pointing out the notion that Democrats are bad for Wall St is simply divorced from reality.

No, not all democrats are bad for wall street. Clinton was pretty good for wall street.

Democrats who plan to raise 4 trillion dollars in taxes, which will impact over 80% of taxpayers in this country, and roll back regulations that unleashed this economy pre-covid tend to be bad for the markets. Democrats who promise broad-scoped social programs like medicare for all and the green new deal are bad for markets.

Choose wisely. I doubt you will however.

 

[Drebin]

Also, bad for the stock market and bad for business are not the same things.

They are not the same things, but they are tethered to each other. High jobless reports negatively impact markets. Slow GDP growth negatively impacts markets. Consumer confidence impacts markets. They are not mutually exclusive.

 

[Jeffreauxdawg]

Except for that 13 years where it couldn't break through it's previous high....

View attachment 17560

 

[wsjmsu75]

The fundamentals are strong, so I do think this is sustainable for a period of time, particularly if we see expected recovery late this year and early next year.

If Biden gets elected, all bets are off.

Why is there always this assumption by so many people that a Democrat in the White House = stock market downturn? I do not see any historical evidence that the stock market gives a flying flip whether a Democrat or Republican is in office. Matter of fact, the two biggest stock market downturns of this century occurred when Republicans were in office (2008 under Bush), and this year under Trump.

 

[wsjmsu75]

President

Political Party

Years In Office



S&P Return (%)


William J. Clinton

D

1993-2001

210


Barack H. Obama

D

2009-2017

182


Dwight D. Eisenhower

R

1953-1961

129


Ronald W. Reagan

R

1981-1989

117


Harry S. Truman

D

1945-1953

87


George H. W. Bush

R

1989-1993

51


Lyndon B. Johnson

D

1963-1969

46


Donald J. Trump

R

2017-

43


Jimmy E. Carter

D

1977-1981

28


Gerald R. Ford

R

1974-1977

26


John F. Kennedy

D

1961-1963

16


Richard M. Nixon

R

1969-1974

-20


George W. Bush

R

2001-2009

-40


Note: this is from July 23 so donnie's number's are a bit better

https://www.forbes.com/sites/sergei...eturns-under-every-us-president/#6acc1225faaf
​

I rest my case in regards to my previous post regarding stock market performance under Democrat vs. Republican presidents.