As many other bloggers mention, we often find ourselves having conversations about finances with people we don't usually talk to about finances at occasions like Thanksgiving. And it is always amazing what people don't know. We were talking about looking for other jobs and relocating and someone mentioned: "It's a pity that retirement accounts are set up in America so that it makes it difficult to move jobs". With a bit of prodding it sounds like the guy has a 403(b) defined contribution account with TIAA-CREF just like I do. I told him that it probably isn't a barrier to moving but he should check with his HR people if he is thinking of moving so he knows what to do. I said anyway he could roll it over into an IRA even if he couldn't keep the account or transfer it to his new employer and then he could just start a new account with his new employer. Our host (early 50s, actually with a PhD in economics) then said: "how do you know if you have a defined benefit or defined contribution?" I explained, looks like she has defined benefit with state government and that could be an impediment to moving. If you stay with the state more than 20 years they up the benefit level and she's only been 16 years. That's what she said anyway. Then everyone commented that they hate thinking about this stuff and dealing with money... I didn't investigate why.
The first guy though did know how much was in his 403(b), how much he contributed each month, and had shifted some of the money to more aggressive options in the previous year. The host had an FSA (something I don't do because I think it's too much hassle) and knew all these things came out pre-tax. We also discussed the percentages my employer and I put into my 403(b).
5 comments:
Moomin,
Had a similar experience at a holiday gathering. Folks were talking about staying out of stock market because of the losses they experienced in 2001-2002. Of course, others were advocating being fully invested.
By the way, I enjoy your discussions of the market and your model predictions. I haven't seen an update on the model recently. Are you still using it?
Hi Super Saver
Thanks for your nice comments. Yes I am still using the model but market conditions haven't been good for it and my discipline and focus rather shaky and so I lost most of the profit I made earlier in the summer. I am still trying to get my act together on this though. This market rally has gone on much longer than I imagined possible so I decided not to make any more predictions. Because I am diversified across investing and trading and across currencies etc. though I am up about 14% ytd at this point which about matches the S&P 500. Sure, I could have done the same in an index fund, but I've had more fun this way :P (more importantly learnt a lot).
moom
Moom,
Thanks for the update. I was interested in your assessments because I am expecting a bullish market for the next 6-12 months, barring any unforseen event. My prediction is based on qualitative factors, which I posted earlier this month.
Agree fully with you on index funds. I know the statistics but I prefer to invest using my own approaches. Like you, I am tracking slightly ahead of the S&P, learning, and having fun :-)
Good luck in 2007.
Seems you are assuming that because we didn't see weakness in September-October it's not going to happen. There was weakness in May-July but the Dow and S&P 500 did not make a 10% correction. Therefore, by the standard definitions the bull market that started in 2002 is ongoing and becoming one of the longest ever. The only bull markets longer than this one ended in 1962, 1987, and 1998 (saw this somewhere on Safehaven.com) with sharp crashes. This doesn't mean that this will happen again but that we shouldn't be too bullish just because the correction didn't occur in Presidential Year 2 yet. Another fact is that the yield curve remains inverted and getting more so. The 1987 and 1998 crashes did not result in recessions or major bear markets. The same outcome could occur here... or maybe not.
Friday BTW saw a jump up in the VIX and VXN volatiltiy indices... maybe suggesting that the decline in the US stockmarket wasn't just random noise? The model is very unclear here, so I'm not invoking it.
Moom,
Thanks for the additional perspective. Just shows that the future is never clear:-) I will take a look at the VIX and the VXN indices.
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