How Wall Street Wrecked Your Retirement

[one...two...tree 2,762]

People are discovering they have been forced into a system in which others have gambled with their retirement savings and lost it.

By Nicholas von Hoffman, The Nation

Our disfunctional financial system hit a new low last week when Citigroup, the hopeless wreck of Wall Street, announced it had lost $2.5 billion in the past three months -- a cheer went up, and so did the Dow. Only $2.5 billion; people were afraid the losses would be much higher. Happy days are here again.

There are no happy days for the millions of Americans who have been trying to put away some money for their retirement in tax-sheltered entities like IRAs, Roth Accounts and 401(k)s. For them, the market's downward slope has been harrowing and frightening. When will the steady erosion of their savings end? And when it does, what will be left of their future financial security?

Many of the millions suffering through these worrisome months didn't buy a house they could not afford, didn't speculate on their homes, didn't let greedy impulses lead them to the edge of foreclosure or bankruptcy. Nevertheless, the excesses of their neighbors and the criminal folly of American finance is destroying their plans for retirement. It is dragging down much of the value of their homes, on which they have never missed a payment, homes on which they were counting on selling at retirement to help finance their last years in comfort.

For years, the privatization propagandists have been telling people that when the time comes, Social Security will not be there for them. Now many are learning that it's their private savings that may not be there. They are discovering they have been forced into a system in which other people have, in effect, been allowed to gamble with their retirement savings and have lost it.

The way the private, you're-on-your-own retirement system was supposed to work had individuals, during their younger, working years, investing in stock through tax-sheltered accounts. Almost nobody who is not breaking the law can choose among individual stocks and make money, so future retirees have been encouraged to buy mutual funds run by professional managers, who are supposed to be able to pick the winners.

Most of them aren't much better at doing that than are their customers, but in a rising market, a chicken pecking at stock tables can pick winners. In boom times, it doesn't matter that the future retiree must choose among thousands of mutual funds, many of which carry ruinously high fees. The damage to people's savings goes unnoticed until the market begins to go down.

Even as the market falls, future retirees are told not to panic, to keep their money where it is, because in the long run the value of their accounts will go up and they will have many a happy sunset year traveling the globe and showering their grandchildren with presents.

As the retirement date comes near, they are advised to begin selling stocks and buying fixed-income securities -- as bonds are sometimes called -- because these pay the interest they earn on a fixed schedule, providing a regular income.

For this to work, stock prices must be high when the holdings are sold and the bonds purchased must pay high rates of interest. But what happens when the stock market is in a nosedive and interest rates are half of the inflation rate, as is the case right now? Panic and worry, no golden years of travel, no presents for the grandchildren. The energy that was to be expended on leisure activities is spent instead trying to figure out how to make ends meet.

The bright spot is Social Security. That check does come with the regularity of the calendar, whether the market is up or down, whether interest rates be high or low and if, as is the case now, the Greenspan-Bush inflation is destroying family budgets. Social Security adjusts for the rising prices.

But Social Security is too narrow a ledge to stand on through the years between retirement and death. It was designed as the base on which other retirement savings were to be built.

Those savings -- the house and the tax-sheltered retirement accounts -- are shriveling up and blowing away. The persons for whom Americans' savings have been a reliable source of income are the brokers, the lawyers, the account administrators, the whole tribe of Wall Street fee farmers. They get other people's retirement money regardless of the direction the market may be moving in.

You can't call it a broken system because it was a bad one from the start. It is failing, just as its critics said it would. And what lies ahead for those whose retirement savings are gone may be a very unpleasant old age.

Nicholas von Hoffman is the author of A Devil's Dictionary of Business, now in paperback. He is a Pulitzer Prize losing author of thirteen books, including Citizen Cohn, and a columnist for the New York Observer.

http://www.alternet.org/workplace/92658/ho...our_retirement/

[almaty 19]

good article and points.....the 401 k has taken some major hits..so, much for the theory...a gop president boosts the market

[mendeleev 68]

My 401K and IRAs did poorly under Bush I, very well under Clinton, dreadfully under Bush II.

Given that I'm a capitalist inclined to vote my pocket book, McBush (sic?) won't get mine.

[amiquechu 0]

Clinton was president during the tech boom where soooo many people people bought and bought and bought terrible stocks that they shouldn't have been buying and thus mega-overinflating their values. Sure people made a ton of money when Clinton was in office, but Clinton didn't cause the tech craze. While Clinton was still in office, the market started dropping like a rock. The NASDAQ peaked in March 2000 and went into a freefall when people realized all the dotcoms they had invested in were losing their a$$e$. If you ask me, a lot of the performance of the market during Clinton's years was neither his achievement, nor his fault. When Bush II took over, the market didn't move much from Jan. '01 to Sept. '01...then we know what happened...and the market went into another freefall. Not Bush II's fault. Then after the market bottomed out from the 9/11 attack aftermath, the markets surged upward again. In the last 10 months or so, the market has taken another nosedive...many think the credit/mortgage crisis has played a very big part in the downturn. Not Bush II's fault, if you ask me. The market will always go up over the longterm. In my opinion, the oval office doesn't control the stock market. It may have a little effect, but whether the President's a Republican or Democrat isn't going to send the market skyrocketing or freefalling. MANY other factors play into the economy, often out of reach of the President's powers.

So if Bush gets the blame for the mortgage crisis, Clinton gets the blame for people buying stocks they shouldn't have in the 90's...in my humble opinion.

[Steve Y Jessica 1]

Clinton was president during the tech boom where soooo many people people bought and bought and bought terrible stocks that they shouldn't have been buying and thus mega-overinflating their values. Sure people made a ton of money when Clinton was in office, but Clinton didn't cause the tech craze. While Clinton was still in office, the market started dropping like a rock. The NASDAQ peaked in March 2000 and went into a freefall when people realized all the dotcoms they had invested in were losing their a$$e$. If you ask me, a lot of the performance of the market during Clinton's years was neither his achievement, nor his fault. When Bush II took over, the market didn't move much from Jan. '01 to Sept. '01...then we know what happened...and the market went into another freefall. Not Bush II's fault. Then after the market bottomed out from the 9/11 attack aftermath, the markets surged upward again. In the last 10 months or so, the market has taken another nosedive...many think the credit/mortgage crisis has played a very big part in the downturn. Not Bush II's fault, if you ask me. The market will always go up over the longterm. In my opinion, the oval office doesn't control the stock market. It may have a little effect, but whether the President's a Republican or Democrat isn't going to send the market skyrocketing or freefalling. MANY other factors play into the economy, often out of reach of the President's powers.

So if Bush gets the blame for the mortgage crisis, Clinton gets the blame for people buying stocks they shouldn't have in the 90's...in my humble opinion.

And to add. It is something that anyone taking an economics class will learn. Anything that a president does that can have an affect on the economy, will take years to see the results. So when one president something, you usually will not see the effects until the next presidents term.

[one...two...tree 2,762]

And to add. It is something that anyone taking an economics class will learn. Anything that a president does that can have an affect on the economy, will take years to see the results. So when one president something, you usually will not see the effects until the next presidents term.

More importantly, you have to establish what policies were put in place by a particular president and whether those policies played a role in negatively affecting Wall Street. Laissez-faire economics is nothing but pie-in-the-sky thinking...there is no free market.

[Dan J 277]

Clinton was president during the tech boom where soooo many people people bought and bought and bought terrible stocks that they shouldn't have been buying and thus mega-overinflating their values. Sure people made a ton of money when Clinton was in office, but Clinton didn't cause the tech craze. While Clinton was still in office, the market started dropping like a rock. The NASDAQ peaked in March 2000 and went into a freefall when people realized all the dotcoms they had invested in were losing their a$e$. If you ask me, a lot of the performance of the market during Clinton's years was neither his achievement, nor his fault. When Bush II took over, the market didn't move much from Jan. '01 to Sept. '01...then we know what happened...and the market went into another freefall. Not Bush II's fault. Then after the market bottomed out from the 9/11 attack aftermath, the markets surged upward again. In the last 10 months or so, the market has taken another nosedive...many think the credit/mortgage crisis has played a very big part in the downturn. Not Bush II's fault, if you ask me. The market will always go up over the longterm. In my opinion, the oval office doesn't control the stock market. It may have a little effect, but whether the President's a Republican or Democrat isn't going to send the market skyrocketing or freefalling. MANY other factors play into the economy, often out of reach of the President's powers.

So if Bush gets the blame for the mortgage crisis, Clinton gets the blame for people buying stocks they shouldn't have in the 90's...in my humble opinion.

And to add. It is something that anyone taking an economics class will learn. Anything that a president does that can have an affect on the economy, will take years to see the results. So when one president something, you usually will not see the effects until the next presidents term.

Depends what you are talking about. Investing money in education will take years before it produces and economic result. Like wise, opening up other locations for drilling wont produce oil for about 10 years.

However, running the budget at huge deficits for a couple of years can begin to impact the economy in a much shorter time frame.

If this was 2002, you could put a more of the current economic situation on Clinton than Bush. But in 2008, when Bush has been in office for 8 years. For better or worse, he gets the credit for the current economic situation.

[IAMX 3,055]

Clinton was president during the tech boom where soooo many people people bought and bought and bought terrible stocks that they shouldn't have been buying and thus mega-overinflating their values. Sure people made a ton of money when Clinton was in office, but Clinton didn't cause the tech craze. While Clinton was still in office, the market started dropping like a rock. The NASDAQ peaked in March 2000 and went into a freefall when people realized all the dotcoms they had invested in were losing their a$e$. If you ask me, a lot of the performance of the market during Clinton's years was neither his achievement, nor his fault. When Bush II took over, the market didn't move much from Jan. '01 to Sept. '01...then we know what happened...and the market went into another freefall. Not Bush II's fault. Then after the market bottomed out from the 9/11 attack aftermath, the markets surged upward again. In the last 10 months or so, the market has taken another nosedive...many think the credit/mortgage crisis has played a very big part in the downturn. Not Bush II's fault, if you ask me. The market will always go up over the longterm. In my opinion, the oval office doesn't control the stock market. It may have a little effect, but whether the President's a Republican or Democrat isn't going to send the market skyrocketing or freefalling. MANY other factors play into the economy, often out of reach of the President's powers.

So if Bush gets the blame for the mortgage crisis, Clinton gets the blame for people buying stocks they shouldn't have in the 90's...in my humble opinion.

And to add. It is something that anyone taking an economics class will learn. Anything that a president does that can have an affect on the economy, will take years to see the results. So when one president something, you usually will not see the effects until the next presidents term.

Depends what you are talking about. Investing money in education will take years before it produces and economic result. Like wise, opening up other locations for drilling wont produce oil for about 10 years.

However, running the budget at huge deficits for a couple of years can begin to impact the economy in a much shorter time frame.

If this was 2002, you could put a more of the current economic situation on Clinton than Bush. But in 2008, when Bush has been in office for 8 years. For better or worse, he gets the credit for the current economic situation.

The end of the boom was during Bush's term, people, afterwards, still took loans for houses they knew they couldn't afford (sometimes overinflated their income), the oil issue is out of our hands, and Bush has had no plan other than drill in the GD ANWR to make his and Cheney's buddies even more money, so from this view, he's been a trainwreck for the country in countless ways. His branch threw away the SSI surplus, threw us into debt with military costs, know what little drilling in ANWR and offshore would do, considering what little oil that ISN'T exported away to countries like Japan, and doesn't care. It's ridiculous the guy was ever in office this long. Get him the hell out of there asap.

[w¡n9Nµ7 §£@¥€r 123]

My 401K's have done well. I don't know what the authors talking about.

[Dan J 277]

My 401K's have done well. I don't know what the authors talking about.

How much of a role do you take in planning your investments, or do you just put it all into a mutual fund or another?

[w¡n9Nµ7 §£@¥€r 123]

My 401K's have done well. I don't know what the authors talking about.

How much of a role do you take in planning your investments, or do you just put it all into a mutual fund or another?

I am actively involved.

[Dan J 277]

My 401K's have done well. I don't know what the authors talking about.

How much of a role do you take in planning your investments, or do you just put it all into a mutual fund or another?

I am actively involved.

I have a feeling you are probably the exception to the rule. Many people don't have the time or knowledge to be actively involved in their 401k planning and would rather have someone else do it for them.

[w¡n9Nµ7 §£@¥€r 123]

I have a feeling you are probably the exception to the rule. Many people don't have the time or knowledge to be actively involved in their 401k planning and would rather have someone else do it for them.

If people can't be bothered to spend the time for their own retirement money, fukc them.

As for knowledge, rocket science this is not

[one...two...tree 2,762]

I have a feeling you are probably the exception to the rule. Many people don't have the time or knowledge to be actively involved in their 401k planning and would rather have someone else do it for them.

If people can't be bothered to spend the time for their own retirement money, fukc them.

As for knowledge, rocket science this is not

Do you have your 401k plan thru your employer?

[w¡n9Nµ7 §£@¥€r 123]

Do you have your 401k plan thru your employer?

Can one actively defer pre-tax income into a 401k without an employer?