I can only think of three major financial mistakes.
I went with IRA investments for my wife and myself for the first three or four years of my working career because 401k's were portrayed as "salary deferral," and I was worried that if I left the company the money might be lost. So, I missed out on several years of matching money in my 401k--65% matched on up to 10% of income contributed. Luckily, I got clued in eventually.
Looking for the "ideal portfolio," I added things like REITs (worked out OK), a Biotech ETF (a dud after 2015) and a commodities fund (did well in 2022, but that didn't make up for years of underperformance prior).
Held a little too much company stock in my 401k. The company match, plus half of the employee contribution was in stock, and I should have been more aggressive in selling it after the vesting period. When the company went bankrupt, I lost a significant portion (painful but not catastrophic) of my 401k.
Sticking to one wife, driving older cars and not panic-selling during the 2000-2002 and 2008-2009 crashes probably more than compensated for the mistakes.
A couple years ago, I was obligated to file my federal taxes on paper. Because my company had its pension plan turned over to the PBGC, I was eligible for the Health Coverage Tax Credit (partially refunded health insurance premiums between separation and Medicare) for one year. Unfortunately, the HCTC wasn't renewed in successive years so I got to pay in full myself in subsequent years. But that one year the form for HCTC credit was only on paper. It also required documentation of each and every premium payment and proof that the health insurance plan was eligible for the HCTC (more pages).
Also, we had an optional part of the pension program which I paid into with after-tax dollars. So, a portion of my PBGC payment is free from tax, but requires a (paper only) worksheet. A small part of my (greatly reduced) pension is tax-free until 2050. Therefore, money I started contributing in 1984 will have earned 0% interest, but be tax-free.
My paper federal taxes were nearly an inch thick that year.
Besides the number of investors needed to keep markets functioning, is the number of dollars. That is, one foundation or hedge fund could have the same effect as many many individual investors as far as the effects discussed in this article.
It seems like people are caught up in the percent return they're going to get, or having a "smooth ride," and not focusing on having the most money at whatever future point they need it (e.g., retirement). Most people invest every paycheck, so the money is there every two weeks, or twice a month or whatever cadence, regardless of what the stock market is doing. If you think you're going to "time the market," your competition is fund managers with a research staff behind them. If you just invest in whatever your target asset allocation is each paycheck, and the stock market goes up--hooray, your portfolio goes up. If the market goes down, future investments will be made at a lower price, increasing your return when the market finally does go up. There is certainly a case for not being 100% in the S&P500 or US Total Market depending on one's age and temperament. But, trying to time the market requires one to be correct at least *twice*--once to know when to get out, and again to know when to get back in.
When I used to run, I passed by a mailbox whose contents were dumped in front of it. It appeared that someone had gone through the mail waiting for the postal carrier to pick up, taken what they wanted, and dumped the rest on the ground. After that, I made sure to never leave outgoing mail in the mailbox over night. We put the mail in the box the morning we want it to go out. That doesn't provide ironclad security, but it removes one of the easiest avenues to theft.
Well, the accrued pensions were "paid," but at a fraction of what had been earned over decades or work (like 40%). The fact that a well-funded pension plan was forced by the federal government to be turned over to the PBGC has been the subject of 14 years of the Delphi Salaried Retirees Association petitioning the government for redress. It was unprecedented for the government to force that action outside the accounting rules that would normally have justified it.
At Delphi Automotive, our 401k match was given in company stock, and a portion of our own contribution had to be in company stock (with a certain holding period before transferring to other investments). When the company went bankrupt in 2005, that stock's value went to zero, so in that case, it really was the company's fault when our 401k's took a hit. But, we salaried employees still had our pensions, which we retained when Delphi was spun off from GM in 1999. Those hired prior to 1992 also had the promise of health insurance during retirement, but that was taken away.
Then, when GM went bankrupt in 2009, the federal government swooped in to save GM's salaried pension, GM's hourly pension, and Delphi's hourly pension, with only the Delphi Salaried employees left to twist in the wind. The salaried pension plan was turned over to the PBGC even though it was 85%-funded and much better off than plans that weren't confiscated. One weird thing about the stock going to zero...many of us held on to the nearly worthless stock thinking that there was a small chance it could bounce back, and for "a penny on the dollar" it wasn't worth cashing in. However, in our 401ks, we discovered that we didn't really own the stock but a "comingled fund which contained the stock plus some cash. The plan cashed out all our almost worthless stock as their "fiduciary duty," so we got some pocket change but lost out on any recovery (although it did not).
When Delphi finally came out of bankruptcy after four years, their 401k included a "brokerage window" where one could invest in any of various assets--EXCEPT Delphi stock.
Luckily for some of us, we learned from authors like (then "Wall Street Journal") Jonathan Clements, and putting money into an SP500 Index fund every paycheck, through its ups and downs, worked out pretty well over a 30+ year career. That's in spite of losing a big chunk in company stock.
I no longer subscribe to the couple magazines that educated and informed me ~25 years ago. I do continue to get daily EMail articles and summaries. However, it's tough to distinguish between actual content and ads masquerading as unbiased content. Luckily, I'm old enough (or have the scars and bruises) to recognize the bias in come-ons for annuities (from annuity salesmen) and precious metals (from a company that happens to facilitate your purchases of them).
My employer, Delphi, had a decent match for our 401k. However, the matching money was in company stock, and we had to put half of *our* contribution into company stock (up to the amount that got matched). The holding period was for two years from the end of each year, so effectively between three and two years (for contributions in January through December). So, people could get out from owning excessive amounts of DPH stock, but inertia kept many from doing so. Although there was a match, other companies had more of a match; what we got seemed pretty good on top of the pension included in our benefits package.
Then in 2005, Delphi went bankrupt. The price of the stock went to a few pennies. It seemed worthwhile to hold on to the stock "just in case" it could be rescued from worthlessness, But, it turned out we didn't own stock--we owned a "comingled fund" whose assets were only in DPH stock. So, that "fund" sold the stock for next to nothing without any fund holders' agreement. Even those who tried to minimize how much company stock they owned were hurt pretty bad. When GM went into bankruptcy in 2009, the federal government stepped in to save the pensions of both the salaried employees and the hourly employees. They used that opportunity to also save the pensions of the Delphi hourly employees, leaving only the Delphi salaried employees to have their well-funded pension turned over to the PBGC. The Delphi Salaried Retirees Association is still fighting--14 years later--to get their earned benefits restored.
One thing that's happened to my emergency fund: It sits untapped for a year or two, then the well pump fails after 40 years the same week one of the cars needed a transmission repair, then the next week the dishwasher fails.
Comments
I can only think of three major financial mistakes.
- I went with IRA investments for my wife and myself for the first three or four years of my working career because 401k's were portrayed as "salary deferral," and I was worried that if I left the company the money might be lost. So, I missed out on several years of matching money in my 401k--65% matched on up to 10% of income contributed. Luckily, I got clued in eventually.
- Looking for the "ideal portfolio," I added things like REITs (worked out OK), a Biotech ETF (a dud after 2015) and a commodities fund (did well in 2022, but that didn't make up for years of underperformance prior).
- Held a little too much company stock in my 401k. The company match, plus half of the employee contribution was in stock, and I should have been more aggressive in selling it after the vesting period. When the company went bankrupt, I lost a significant portion (painful but not catastrophic) of my 401k.
Sticking to one wife, driving older cars and not panic-selling during the 2000-2002 and 2008-2009 crashes probably more than compensated for the mistakes.Post: My Mistakes by Jonathan Clements
Link to comment from February 22, 2025
A couple years ago, I was obligated to file my federal taxes on paper. Because my company had its pension plan turned over to the PBGC, I was eligible for the Health Coverage Tax Credit (partially refunded health insurance premiums between separation and Medicare) for one year. Unfortunately, the HCTC wasn't renewed in successive years so I got to pay in full myself in subsequent years. But that one year the form for HCTC credit was only on paper. It also required documentation of each and every premium payment and proof that the health insurance plan was eligible for the HCTC (more pages). Also, we had an optional part of the pension program which I paid into with after-tax dollars. So, a portion of my PBGC payment is free from tax, but requires a (paper only) worksheet. A small part of my (greatly reduced) pension is tax-free until 2050. Therefore, money I started contributing in 1984 will have earned 0% interest, but be tax-free. My paper federal taxes were nearly an inch thick that year.
Post: A tax filing conundrum by Marjorie Kondrack
Link to comment from February 22, 2025
Besides the number of investors needed to keep markets functioning, is the number of dollars. That is, one foundation or hedge fund could have the same effect as many many individual investors as far as the effects discussed in this article.
Post: Blame Game
Link to comment from February 9, 2025
It seems like people are caught up in the percent return they're going to get, or having a "smooth ride," and not focusing on having the most money at whatever future point they need it (e.g., retirement). Most people invest every paycheck, so the money is there every two weeks, or twice a month or whatever cadence, regardless of what the stock market is doing. If you think you're going to "time the market," your competition is fund managers with a research staff behind them. If you just invest in whatever your target asset allocation is each paycheck, and the stock market goes up--hooray, your portfolio goes up. If the market goes down, future investments will be made at a lower price, increasing your return when the market finally does go up. There is certainly a case for not being 100% in the S&P500 or US Total Market depending on one's age and temperament. But, trying to time the market requires one to be correct at least *twice*--once to know when to get out, and again to know when to get back in.
Post: Fear of Heights
Link to comment from February 11, 2024
When I used to run, I passed by a mailbox whose contents were dumped in front of it. It appeared that someone had gone through the mail waiting for the postal carrier to pick up, taken what they wanted, and dumped the rest on the ground. After that, I made sure to never leave outgoing mail in the mailbox over night. We put the mail in the box the morning we want it to go out. That doesn't provide ironclad security, but it removes one of the easiest avenues to theft.
Post: Forget the Check
Link to comment from December 10, 2023
Well, the accrued pensions were "paid," but at a fraction of what had been earned over decades or work (like 40%). The fact that a well-funded pension plan was forced by the federal government to be turned over to the PBGC has been the subject of 14 years of the Delphi Salaried Retirees Association petitioning the government for redress. It was unprecedented for the government to force that action outside the accounting rules that would normally have justified it.
Post: Faulty Perceptions
Link to comment from November 29, 2023
At Delphi Automotive, our 401k match was given in company stock, and a portion of our own contribution had to be in company stock (with a certain holding period before transferring to other investments). When the company went bankrupt in 2005, that stock's value went to zero, so in that case, it really was the company's fault when our 401k's took a hit. But, we salaried employees still had our pensions, which we retained when Delphi was spun off from GM in 1999. Those hired prior to 1992 also had the promise of health insurance during retirement, but that was taken away. Then, when GM went bankrupt in 2009, the federal government swooped in to save GM's salaried pension, GM's hourly pension, and Delphi's hourly pension, with only the Delphi Salaried employees left to twist in the wind. The salaried pension plan was turned over to the PBGC even though it was 85%-funded and much better off than plans that weren't confiscated. One weird thing about the stock going to zero...many of us held on to the nearly worthless stock thinking that there was a small chance it could bounce back, and for "a penny on the dollar" it wasn't worth cashing in. However, in our 401ks, we discovered that we didn't really own the stock but a "comingled fund which contained the stock plus some cash. The plan cashed out all our almost worthless stock as their "fiduciary duty," so we got some pocket change but lost out on any recovery (although it did not). When Delphi finally came out of bankruptcy after four years, their 401k included a "brokerage window" where one could invest in any of various assets--EXCEPT Delphi stock. Luckily for some of us, we learned from authors like (then "Wall Street Journal") Jonathan Clements, and putting money into an SP500 Index fund every paycheck, through its ups and downs, worked out pretty well over a 30+ year career. That's in spite of losing a big chunk in company stock.
Post: Faulty Perceptions
Link to comment from November 28, 2023
I no longer subscribe to the couple magazines that educated and informed me ~25 years ago. I do continue to get daily EMail articles and summaries. However, it's tough to distinguish between actual content and ads masquerading as unbiased content. Luckily, I'm old enough (or have the scars and bruises) to recognize the bias in come-ons for annuities (from annuity salesmen) and precious metals (from a company that happens to facilitate your purchases of them).
Post: Reader Beware
Link to comment from September 28, 2023
My employer, Delphi, had a decent match for our 401k. However, the matching money was in company stock, and we had to put half of *our* contribution into company stock (up to the amount that got matched). The holding period was for two years from the end of each year, so effectively between three and two years (for contributions in January through December). So, people could get out from owning excessive amounts of DPH stock, but inertia kept many from doing so. Although there was a match, other companies had more of a match; what we got seemed pretty good on top of the pension included in our benefits package. Then in 2005, Delphi went bankrupt. The price of the stock went to a few pennies. It seemed worthwhile to hold on to the stock "just in case" it could be rescued from worthlessness, But, it turned out we didn't own stock--we owned a "comingled fund" whose assets were only in DPH stock. So, that "fund" sold the stock for next to nothing without any fund holders' agreement. Even those who tried to minimize how much company stock they owned were hurt pretty bad. When GM went into bankruptcy in 2009, the federal government stepped in to save the pensions of both the salaried employees and the hourly employees. They used that opportunity to also save the pensions of the Delphi hourly employees, leaving only the Delphi salaried employees to have their well-funded pension turned over to the PBGC. The Delphi Salaried Retirees Association is still fighting--14 years later--to get their earned benefits restored.
Post: The Company You Keep
Link to comment from July 18, 2023
One thing that's happened to my emergency fund: It sits untapped for a year or two, then the well pump fails after 40 years the same week one of the cars needed a transmission repair, then the next week the dishwasher fails.
Post: Fluid Situations
Link to comment from May 8, 2023