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What national % of IRA was lost in this depression?

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eastmn
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What national % of IRA was lost in this depression?  Reply with quote  

Anyone know what average percentage retirement
funds was lost? Many people I know lost 30 to 40%.
As far as average fed, state, and city employees,
does anyone know the numbers there? Can anyone
point me in the right direction?
Post Sat Jul 09, 2011 3:11 am
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coaster
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I don't know how often I've said it, but I'll say it again .... nothing was lost unless it was SOLD while the price was depressed. In terms of actual money, that is. What WAS lost was time and the effect of that lost time on compound growth. That really only begins to hurt if the money is needed now or in the near future. So when you say you know many people lost 30% - 40% .... what exactly do they mean, anyway? 30% of what they would have had? Such a figure is always wildly hypothetical anyway and has no real meaning, so they shouldn't be upset by it. If they lost 30% because they panicked and cashed out, well then, that's their own fault for not following the plan.

That's a long and tortured way of saying that you're not asking the right question and that therefore the question you do ask has no meaningful answer.

I get concerned when people ask questions like that because they seek to find some meaning; someone comes along with a reasonable and rational explanation that has even less meaning than the question, and then they start pointing fingers, shouting "there oughta be a law!!!" and are completely baffled when the whole thing happens all over again 20 years down the road. Because they were snowballed the first time first by the question, then by the answer, then by the finger pointing, then by the senseless reforms that did nothing by blow smoke over the whole issue to keep the angry and clueless voters quiet so the equally clueless politicians could get reelected.
Post Sat Jul 09, 2011 7:29 am
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eastmn
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Thanks Coaster. A large portion of the mortgage and credit card/loan derivatives became worthless; where many large (corp and govt) IRA funds were exposed.
Post Sat Jul 09, 2011 11:17 am
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oldguy
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quote:
where many large IRA funds were exposed.


Depends on what you mean by 'many'. Yes, some billions of dollars were involved. But as a percentage - no, almost none, over 90% of IRA dollars are in equites, the rest are mostly CDs.

As you say, most IRA's dropped 30% to 40% in the 2008 recession - and they have regained nearly all of it in the last 2 years.
Post Sat Jul 09, 2011 1:15 pm
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eastmn
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I've been goggling this for hours and don't find much of anything. Google what? "Avg IRA spreads"? Just a few articles where certain investment groups were putting clients at high risk strictly to churn commissions.
http://www.traderdaily.com/category/derivatives/
Post Sat Jul 09, 2011 5:20 pm
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oldguy
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quote:
where many large (corp and govt) IRA funds were exposed.


eastmn - where did you get this idea to start with? That story should have some leasds. (I haven't heard it, I have no reason to believe it.)

BTW - 'churning" and "putting clients at high risk" are two different things. A client could be churned back & forth between GE, a bond fund, and index fund, and back again - no high risk, just higher commissions.
Post Sat Jul 09, 2011 8:03 pm
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coaster
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quote:
Originally posted by eastmn
A large portion of the mortgage and credit card/loan derivatives became worthless; where many large (corp and govt) IRA funds were exposed.

That depends on what they were, how they were aquired, and how and when their market value is determined. Assigning a certain loss in either dollar or percentage terms to a derivative at any point before the position either expires or is liquidated is an exercise in bookeeping and has little relationship to actual gain or loss. And keep in mind that if the derivative was aquired to be a hedge, the intent was that it would expire worthless. The term "worthless derivatives" gets thrown around an awful lot by talking heads and others who have no idea what they are or what they're used for.

And here's something else not usually mentioned about derivatives: when the government put in a new rule requiring mark-to-market accounting of financial institution's derivatives holdings, those derivative instantly became worthless on their books not because they were worthless but because there was no market and without a market you have no market price and with no market price your mark-to-market is zero. So suddenly overnight their capitalization suffers a radical change forcing them to scurry about looking to borrow to cover their reserve requirements, and guess what, when they're ALL doing that at the same time, what happens to available capital? There is none.
Post Sun Jul 10, 2011 6:29 am
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eastmn
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I finally found some info to answer my original question
on average losses across retirement accounts. Average
loss was 15% in 2008 alone. 25% in some cases.

Here's a Pension Funding Study (& history) to 2011-12:
http://www.milliman.com/expertise/employee-benefits/products-tools/pension-funding-study/

...
Post Fri Jul 20, 2012 12:20 am
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oldguy
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eastmn - it appears that you are confusing pension plans with IRA plans. Most individuals that contribute to their 401k and/or IRAs invest in stocks, most often an SP500 Index Fund or similar. In general, those plans fell about 40% in the recession. And they have grow about 20%/year each years for the past 3 years. So overall IRA value are up, not down.
Post Fri Jul 20, 2012 3:30 am
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eastmn
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Oldguy,
I had been looking at both. Appears to me that the pension funds were more heavily into derivative products and lost their asses (zero value); and then the pension fees probably didn't help (wolves in the hen house).

...
Post Sat Jul 21, 2012 5:58 am
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coaster
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Re: What national % of IRA was lost in this depression?  Reply with quote  

quote:
Originally posted by eastmn
Anyone know what average percentage retirement
funds was lost?


<coaster mounts soapbox>

I think that the problem with studies like this is that they're asking the wrong question. When the wrong question is asked, the answer is meaningless. I think that the relevant question is how did the recession affect your goal? As I pointed out before, if nothing was sold, nothing was lost. In fact, if one took advantage of the recession and bought more when the price was depressed, one made out fairly well. In terms of my own equity total return curve, my pre-recession peak was the week ending 05/16/2008, it bottomed in the week ending 12/05/2008, and then it recovered and exceeded the previous peak in the week ending 10/08/2010. So ... nothing was lost, but the progression of my gain was set back about two and a half years, plus whatever gain would have been accrued during that time. Without actually doing the math, I estimate reaching my original goal was set back about five years.

Now, that's the right question to ask, and that's what a relevant and meaningful answer is: how much longer will it take for the retirement plan participant to reach the same projected goal?

And that's also a comment on the misuse of statistics to generate emotionally-impacting but pragmatically-irrelevant results.

<coaster steps down off soapbox>

~Tim~
Post Sat Jul 21, 2012 6:02 pm
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littleroc02us
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Wow Coaster that couldn't have been said better. My invesments have recovered also 110%, luckily I continued to buy when prices were depressed. I'm not sure mathematically how that influenced my results but I am optimistic about reaching my own personal goals. The world is ending theory that the social media loves to throw around is falling on my deaf ear.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Mon Jul 23, 2012 2:48 pm
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coaster
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quote:
Originally posted by littleroc02us
... social media loves to throw around...

heh heh ... ya, "social media" ... there was an author once who used the term "groupthink" ...

~Tim~
Post Mon Jul 23, 2012 3:46 pm
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littleroc02us
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quote:
heh heh ... ya, "social media" ... there was an author once who used the term "groupthink" ...


Isn't that an oxymoron when referring to the media. Smile

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Mon Jul 23, 2012 3:57 pm
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coaster
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quote:
Originally posted by littleroc02us
Isn't that an oxymoron when referring to the media.

Hmmmm, well, in another sense, the work "medium" being the singular of "media", and another meaning of that word being "average", I suppose it might be right on target.

A topic for a different thread at another time, perhaps..... Wink

~Tim~
Post Mon Jul 23, 2012 5:28 pm
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