From the Wall Street Journal. Select quotes, rearranged for maximum irony:
The average 401(k) balance was $131,700 at the end of 2024.
“What’s more important to me than having a few extra dollars in my retirement is that this country is set up for success,” Paris said.
The couple have lost $70,000 in retirement savings since January.
“He’s doing some hard work, some things that are very difficult for people to understand and difficult for people to accept,” Williams said, “but it’ll be to our long-term benefit.”
Meanwhile, the share of Americans who haven’t retired and are confident in their retirement prospects fell to 67% from 74% the prior year.
She said she takes solace in the fact that Trump is surrounded by a cabinet full of handpicked experts whose advice she thinks could help avoid further losses.
No, its pretty important.
See, 401ks do this thing where they are invested in over time… they slowly accumulate from contributions and the index funds of the broad stock market appreciating over time.
… If you… are not yet retired… and your 401k takes a 10, 20, 30% haircut in a recession/depression…
(which are of course broadly predictable and should be expected every 5 to 10 years)
… well now, you not only have suffered that loss… you also reset the clock on how much your investments will appreciate over time.
Growth from interest is an exponential, not linear process.
This means you now have to massively increase your contributions to be able to afford the same retirement… or work longer, or, more realistically, never be able to truly retire.
… and that is assuming stock market growth reverts to the mean, inflation of primary retirement costs don’t spike, you don’t get laid off or have promotions and expected wage gains postponed in the recession, etc.
Then you are an idiot.
The housing market is crashing, right now, it’s begun, go look.
Something around 1/3 of existing homes are looking to be basically uninsurable in the next decade … insurance companies pay attention to climate change, and they hike rates or pull out of high risk areas.
Unfortunately… a whole lotof US homes are in high risk areas now. And you cannot get a mortgage if you can’t get home insurance.
Everyone’s credit scores are garbage, consumer credit is out of control, 60+% of Americans can’t afford to miss a paycheck, and Americans routinely pay consumer credit rates that are so high they are considered usury almost everywhere else in the developed world. Approximately a third or more of US households have zero to negative net worth, more debt than assets… and their day to day costs are going to go up, and their investment class assets (including homes) are headed downward.
Every major corporation is doing or has recently done massive layoffs.
We’re tariffing imported food, and our domestically produced food is reliant on migrant workers who all stopped working at farms because ICE is raiding them.
We are heavily reliant on imports and exports, and we’ve started a trade war and are threatening multiple new wars.
We are a highly international trade dependant economy … and we’ve decided to isolate and ostracize ourselves… we are a ‘rogue state’ now, using parlance from about a decade ago.
Getting a job is nigh impossible, 30+% of job listings are fake, ghost jobs, no one is hiring, everyone is underpaid other than C suite.
Finally, from a more technical perspective, the most solid predictor of recession/depressions is the inversion of government issued bond yields, ie, when short term lending is viewed as more risky (has a higher interest rate or yield) than long term lending.
Every single time the yield curve inverts, when it uninverts, a downturn rapidly follows.
Except now. Now, we’ve had the yield curve invert, uninvert, then invert again, and then uninvert again, without the massive downturn…
We are Wile Coyote who has ran off the edge of the cliff, and we just looked down.
We are looking at the second Great Depression.
Wow. Way to keep it civil… I suspect it’s people like you that are responsible for the gains republicans have gotten. Keep being an asshole to people and see how well that works for everybody.
As for what you’ve said, you clearly know nothing about how investments work. My 401k is invested in shares. Those shares will go up and down all the time. Sometimes a lot, sometimes a little. But on a long enough timeline they will average to a steady gain.
When shares dropped during covid, do you think that set my 401k back 2 years? No! It recovered the same as the stock market did, and then went up even more.
The only thing that changed was that when the stock market was down, I was able to buy MORE shares than I previously was buying. So when the stock market recovered, I had MORE than I would have if it didn’t drop.
Bro, this is BASIC, and you’re calling me an idiot.
Now as I said, if it turns into a recession and jobs are lost… that’s bad. But looking at 401k values of employed people is a meaningless statistic.
I am not civil with dangerous idiots.
Your 401k is almost certainly invested in a broad indexed market fund, ie, a weighted basket of stock shares, the composition of which basically doesn’t change over time.
In simpler terms… its a way of buying shares in the whole stock market, in its totality.
Unless you have a 401k with an active brokerage window, which you almost certainly don’t, all it is is an ETF that corresponds to whichever particular set basket of shares goes along with your particular 401k.
Again, unless you have issued specific instructions via a brokerage window to your 401k, which again, you almost certainly didn’t… nobody ‘sold high’ and ‘bought low’ to recoup losses or accelerate gains, there’s no active prediction of ‘oh this stock is gonna go down so we’ll sell it and pour that money into a stock that’s gonna go up’.
…
401ks are almost all not actively managed funds, they are almost all index funds. The whole point of a 401k being an indexed fund is that its safer and less risky than an actively traded fund, which is more volatile and can swing further up or down depending on how well those active traders do…
… and active stock traders are statistically as successful at generating stock trading gains as a goldfish randomly swimming to the left side of a tank to issue a sell order or the right side of a tank to issue a buy order.
That is to say, indistinguishable from completely random. They fuck up all the time, and they’re mire risky than some kind of focused, long term approach.
…
Only about 1% of trading volume in 401ks is done by ‘active trading’, 99% of that is just the 401k ETF slightly tweaking the composition of its basket of stocks to reflect (not predict or counteract) broad changes in the market, and 1% of that 1% is done by a very small number of 401k havers who issue specific commands to their financial firms to actually do such an active trade.
You would have to be the one to specifically issue a buy/sell order, and fairly few 401ks even allow people to do this.
401ks are just an index fund, and are not actively traded. You may personally have poured more money into your 401k at the dip, but that doesn’t mean you somehow … didn’t suffer the losses of the dip.
It means you compensated for your investment losses by throwing more of your savings or income at it than you expected to, so that you could tread water instead of sink.
…
The stock market did not have typical recession level losses from COVID, because every possible financial stop was pulled out to prevent that from happening… to keep the easy credit and other forms of investment and wealth flowing into the stock market, which now won’t work, because of all the reasons I listed above.
Technically, the stock market only dropped for 3 months, and because that occured between two quarters, and not fully within one, it doesn’t count as an actual recession, which is at least two solid quarters, 6 solid months of losses.
The last actual major recession we had in the stock market was the 07/08 housing market crash.
That was about a 30 to 35% haircut.
Took a year to get back to where you started.
That’s a year you missed out on accumulating the projected average interest on.
… And that also could only be done by massive intervention in the market, basically fixing up a popped housing bubble by re-blowing the housing bubble, and blowing up many, many other bubbles in the process…
…which are now set to all pop, as Trump is doing everything he can to undo the dollar’s reserve currency status, which is the only real reason our stocks are as high as they are, and why our economy even functions a shittily as it has for the last decade.
If this brewing recession turns into an actual depression, a prolonged period of years, decades of downward and uncertain stock market…
It took 25 years for the stock market to break a new high after the 1929, to fully recover.
25 years untill an investment you made at the peak, before the 1929 crash, would break even and be worth the same amount, in 1954.
You have no concept of how bad a depression like that is in comparison to a serious recession, and you apparently don’t even have a concept of what an actual recession looks like.
…
By the way, I have a degree in Econ, worked as a data analyst for a decade, ‘bro’.
You are in fact an idiot, maybe learn a bit how financial investments actually work before confidently being wrong, bro.
As I said, buddy, a recession would be bad. Everything you’re saying I agree with and agreed with in my original post. Quit being a dick to people.
And I wasn’t talking about the funds actively buying when the price is low or selling when the price is high. I am employed and twice a month I make deposits to my 401k. If the market is high, I get less shares. If the market is low, I get more shares. More shares is better so long as the market recovers.
If the market does not recover, or we hit a recession. That would be bad.
So when you say, “If you think that then you’re an idiot”, you weren’t just being a dick, you were being a smug pretentious dick.
If only I had your education and experience, I wouldn’t be an idiot. Everybody else, though? Dangerous idiots who should be treated with zero respect.
Everything you said could have been said in a much more respectful manner and probably would have made an impact on people that actually need to hear it. Instead you were a dick about it and the only people that are going to listen are already in agreement.
That is blatantly, obviously false.
You said you expected stocks to go up generally under Trump, as they did under Biden.
That was the point where I went from explaining to you how 401ks actually work, without insulting you, to outright calling you an idiot.
You absolutely do not agree with everything I have said.
…
As I said before, I do not engage politely with people who are confidently wrong, and then double down on being wrong after being corrected.
You are the kind of idiot who spreads misinformation and thus exposes other people to danger by giving them false notions about how things actually work.
You… seem to think I am trying to convince you, personally, that you are wrong.
I am not.
I don’t give a damn about trying to change the minds of people who are confidently wrong.
I am dispelling the idiotic misinformation you are spreading on a public forum, that other people may read, in hopes of doing a general public good by laying out and explaining, in detail, why no one should take you seriously on this topic, such that less narcissistic and more curious readers may have a chance at learning something.
You were a dick in your first post, dude. You didn’t “explain politely then I doubled down”. You were a dick from the jump.
My initial post was absolutely not a “confidently incorrect” comment. I am a dude that did not graduate with an economics degree with years of (non social) experience. I told you my interpretation and said what I thought was going to happen and what was happening.
I’m sorry that you felt like my expectations were wrong, but rather than call me an idiot and act like I am spreading lies, you can have a good faith conversation with a person you don’t even know.
Pro tip, don’t be a dick if this is what you hope for. Not everybody you talk to is a hidden maga operative spreading lies.