I apologize if this diary is inappropriate but I cannot help myself.
I tend to be melodramatic, more than I probably should. Like most of you, I have been watching the stock market crash. As you all know, what is happening today is more serious the at any time since the early 1930s.
The problems may or may not be similiar, and I am not an economic expert (despite my MBA), but even though our governments have the lessons of the 1930s to guide their actions to help prevent a total economic collapse, I fear we may have a much larger problem than the 1930s due to how closely linked our economies are globally and how the real-time computer links can allow panic to spread even quicker than the 1930s.
I am well aware that historically, stocks are a good LONG TERM investment. Historiclly speaking, the meltdown occuring now may fully recover itself in time, maybe in years we'll be back at last years 13000+ highs.
I am 51 years old and I have not been good at saving for retirement. I put minimal amounts in 401Ks for years and only recently pumped it up. Ironically, I invested my entire 401K in a targeted managed fund on January 1 of this year - targeted for a retirement year.
I am "scheduled" to retire in 2023, so I chose the 2025 targeted fund. That fund had a roughly 75% stock, 25% bond ratio. (Actually, I invested in three separate targeted funds with three separate investiment firms).
I watched through out the year my 401K balance facing losses, not gains. It would hover between a 6% and 9% loss.
Then came Sepetmebr 15, the beginning of the absolute meltdown. I said, "Steve, remain calm - ride this out". So I tried not to check my 401K balance to often.
At one point in late September, my losses stood at only 14%. Well in a matter of a week or so, my losses now stand at 28% and climbing for the year. That's 28% of hard earned principle! Almost one/third loss in my small 401K fund.
Now, given I do not retire until 2023, even with a current 28% loss and climbing, in order to recoup that loss, I should ride it out. Hope I can recover that loss in 5 years or so.
If I take my current funds at a low price and buy government backed bonds (the only thing earning money right now as well as money market funds) my 28% loss would in effect be "permanent".
But here is the problem - along with all the other cheery news we all have, my company, IBM, is globalizing their work force - hiring people overseas, and slowly replaing US based employees with these cheaper overseas employees.
That has cuaght up with the group I work with and overseas employees are starting to be assigned work my group has worked on. I have not been told I will be laid off, but I feel a sense of foreboding my luck may run out soon and I may face unemployment in 2009.
I'm sorry to say my 401K may end up being emergency living money in 2009. I'd hate to cash it, but I may be forced to. (Some on this list already advised against cashing my 401K because it cannot be liquidated by a bankruptcy court).
So, what do I do? Do I follow Jim Cramer of MSNBC advice from Monday of this week and get out of the stock market this week? Do I transfermy 401K to a safer fund and accept my 28% loss (which basically equals 100% of the principle I added this year) as a "permanent" loss knowing I can at least stem further losses?
Any advice?
I'm sure others on this list face similar dilemas ad would also appreciate advice.
Thank you for your indulgence.