Quote:
Originally Posted by the_only_turek_fan
The people I really feel bad for are the older people that are on the cusp or retirement who had 401K's tied into this....brutal. Here is your reward for working hard your whole career.
|
OK, I don't know the ins and outs of a 401k (Slava maybe you can shed light on this) but is it more akin to apension on an RSP? If it's a pension my belief is a pension is essentially a lower risk mutual fund - or more like a diversified fund which helps it avoid wild swings like this. Also can someone not just use part of their 401k or defer it as long as possible by perhaps borrowing against it? There should be other avenues available than converting it all at the worst possible time.
I only really understand the Canadian system the best and in our case we say we have "an RSP" as a blanket term however we typically have a few avenues of registered funds. Also as someone reaches near retirement age they should have converted some of their portfolio to low risk or even guaranteed investments so this sort of volatility doesn't affect them.
I had learned the rule of thumb that whatever your age was, that's the amount of your investments you should have in guaranteed investments. Hence a 25 year old has 25% in certificates or bonds whereas a 60 year old has a lot more locked in.