Americans are withdrawing their 401k money early - experts are calling it "a flood"

[KingCharlemagne]

12. I must respectfully disagree with you here, at least

on purely financial terms (issues of the morality of stock ownership notwithstanding). Over the long haul domestic stocks return on average about 10% per year, far superior to the returns on bonds or savings accounts (or stashing cash in the mattress). I think the key is for workers participating in 401-K plans to make sure their investment choices match their (true) risk profiles. For example, if they think they might need the money before retirement, workers should dedicate a far greater percentage to money market funds, where safety of principal is almost as good as it is for U.S. FDIC-insured savings accounts. When I was working and contributing, I frequently adjusted the % I was putting into Money Market accounts in a contrary direction to the overall market. That is, if the stock market went up 20% in a single year (as it did a couple times during the first decade of this century), I drastically increased the % I was putting into money market funds, so as to decrease my exposure to risk from bubble-fueled speculation.

I would also note that 'buying stocks' of individual companies tends to be far riskier than investing in mutual funds or exchange traded funds, which hold a basket of a large number of companies. When I did buy shares of stocks in individual companies I liked to buy the stocks of 'socially responsible companies,' i.e., those whose labor and\or environmental practices marked them out as relatively progressive. By the same taken, I tried religiously to avoid socially regressive companies like Halliburton, WalMart and McDonalds. It's not easy when the 401-K plan requires you to invest in mutual funds over whose holdings you have little or no control. But it can be done with sufficient study and planning.

I would finally note that Democratic supporters Warren Buffet and George Soros would never call what they do 'gambling.' They would call it 'investing.'