401k bailout

OK, so I'm considering jumping off of the 401k bandwagon. Wait wait, just hold of your knee jerk reaction, let me explain my rationale. I don't think it is a easy, obvious decision either way, and if you do I venture that you're just not thinking hard enough.

I understand the concept is that I should just put money in and not worry about negative returns in the short run, and that this may be a golden opportunity to "buy low." I also get that the earlier I start saving the easier it is to accumulate a lot, and that it would be silly not to take advantage of a company match.

But those things are not without risks of their own, and I think an intelligent decision weighs the risks and does not blindly hold to the conventional wisdom. If somebody would have told you a year ago that AIG or Bear Stearns would fail you would have reasonably told them they are nuts, and we see where that is now. Therefore I see every reason to question the assumptions that the 401k system is built on.

The concept of "buy low" is the most compelling to me, and it would be the reason that I would stay. But the concept of not being concerned about negative returns seems to advocating ignorance. I admit that I probably wouldn't be having these doubts if the system wasn't having the difficulty that it is having, but I am glad that I am being forced to think this through more thoroughly. I am absolutely seeking to have the longest term view possible, which for me is about 40-60 years. I am not confident that the systems that are in place now will remain for that amount of time, and I think that is a relevant risk that should factor in the equation. I'm not saying the sky is falling, but it sure seems like a possibility.

I am not convinced that essentially locking up $110 every two weeks into a somewhat mystical account somewhere in the nether regions of the financial system that I cannot access without penalty for at least 38 years is the best decision for me right now. For many it may be, but I am not many, I am me. I think that a good argument could be made that before worrying about investing in equitys and bonds I should have all credit card debt paid, a six month emergency fund in cash (in some kind of savings account that I haven't had reason to research the best kind for yet), and a home purchased (yeah with a mortgage, the 100% down plan is probably too hardcore). Those investments have much more tangible intrinsic value than stocks.

While real estate isn't necessarily a slam dunk investment either, at least you get to live in the place. The most a 401k statement can give me is to be a piece of kindling on a cold night. And as for the company match, I don't think I'll be around long enough to become fully vested, so that 3% is more like .6% or 1.2%. Which is $11 or $22 every two weeks. La di fricken da. Over a year or two that is 286-572 bucks, which is not worth making a decision over.

I wish that I was in a position that a 6% deduction from my check for a 401k was just gravy, but $110 is actually a significant amount. I'm trying to seek balance and diversification, but bothering with stocks now really seems like putting the cart before the horse. I also just don't like the traditional IRA with early withdrawl penalty, I'd much rather do a Roth. But the match should make the traditional worth the additional risk for most. Ramsey suggests saving 15% towards retirement, and if I was at a place where that was the right thing to do I would be quite comfortable with 9% in a Roth and 6% in a traditional. But I'd rather save for a house.

I'm also fairly spooked at the long term prospects of this country. The quantity of government bailouts is obscene, and there is not an end in sight. Those expenditures are unsustainable, and eventually it will catch up to us. I'm betting it will within the next 40-60 years, certainly the tax laws and what we regard as normal will be much different then. Everyone says that a 401k is the smart thing to do, I am therefore very suspicious of the idea. It just may be another way to control the masses, something they can threaten us with. Be afraid, or something may happen to your savings. People are already mumbling about how BO will take away private 401k's and socialize them. I think that's a bunch of bologna and won't happen, at least in the next 4 years. I wouldn't bet beyond that.

We've just got to slow down. Hoarding cash probably isn't the answer either, but it does have quite a bit of merit. What may have seemed psycho a short time ago may now have nearly enough positives to outweigh the inherent crazy soundingness. I'm sensing that preparing for doomsday is still crazy, but it's a much closer call. A 401k may still be a good idea for most, but it's a much closer call. And I think I jumped the gun on it.

It is very tempting to buy low, but if the 401k system continues to have a major disruption every 6-8 years, then it may be broken. When conventional wisdom claims anything is a no brainer, I am insulted and challenged that I am expected to not use my brain. I would not bet on the system sustaining itself for 60 years. Pay off your debts, all of them.