Comment by WalterGR | Hacker News Reader

Comment by WalterGR | Hacker News Reader

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Well, that does seem to be the investment strategy the article is about. I'm saying it's not rational.

The average rate of return for a 401k is around 5% - 8% yearly. So in this scenario, you'd be losing 1% - 4% yearly.

$10,000 initial investment after 10 years:

  -1%   -> $9,048.00
  -4    -> $6,698.72
  -8.4  -> $4,304.37

That sucks for sure, but it's better than - to continue with the Titanic metaphor - saying "Screw it" and just dying like DiCaprio rather than climbing onto the door.

From the article:

In fact, a Fidelity retirement planning survey of about 2,600 adults found that 45% of "next gen" — defined as 18 to 35-year-olds — "don't see a point in saving until things return to normal."

Assume net $40,000 income per year and an investment of $500 per month at a 5% rate of return. Assume the person is 22 (just out of college) and retires at 65.

Their retirement account would be worth around $900,000 at retirement.

I understand the fatalistic attitude, but it would be smart to hedge one's bets.

that is not how a 401k works..

You are not at a loss if you don't sell....

Any buying in a down market is ALWAYS better for a younger generation.

S&P500 still has a 10y avg of 11-12%, that means every year that is the avg return. Even if there was 2-3 bad years, the 7-8 good years make up for it... So in 30 years time, it doesn't mater if we had a few bad years of -20% declines. You are still up massively.

Young people have such a lack of understanding when it comes to the stock market and it shows.

If your 401k only avg %5 return per year over a 30y span, you picked the wrong investment methods. Too much in bonds..

Still you should be taking advantage of employer match. Pretty much every employer has a 401k program, use it. SS will be there, but you don't want that to be your life line. Sadly Gen X didn't really understand 401ks, they got them later in life and many didn't fund them correctly. It isn't uncommon to see genXers take money from the 401k later in life with a hit, and it will be on their family to take care of them when SS isn't enough.

> that is not how a 401k works..

Sure it is.

Yep, I agree with your investment advice.

Why would I trade $10,000 of purchasing power today for $6698 of purchasing power in 10 years? What possible upside is there from this?

10 years is an artificial horizon. I chose it because it's the number of fingers and toes we have, and most people won't invest for 100 years.

The article is about retirement and how some generations aren't saving for it. How, then, are you going to use that purchasing power today to help yourself in 40 years, with the caveat that you can't save that money for retirement?

In general, my observation is that retirement is either a fairy tale or for those who are incredibly rich.

I have plenty of savings, but I never expect to be able to retire. There is simply no way I could ever have enough savings for it to amount to anything. The last time I did the math was pre-COVID and I estimated I'd need no less than $4 million to retire.

Unless you count working until I am physically unable to work any longer, then living a very meager existence for a few short years and dying. That I fully expect.

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