Hello everyone! I'm hoping your various expertise can help me understand some basic things about my 401K.

I am 35 and just started contributing to my company 401K last November. I contribute $759 per pay period (every two weeks), with my YTD contributions being $14,283. My employer contributes $91 per pay period, YTD $1,714. I also contributed these same amounts thru out November & December of last year. My current account value is at $16K. The 401K fund is managed by Prudential.

Here is my question/confusion. I've been in this just about a year now and I know NOTHING about investing, nothing about stocks ...etc. I didn't/don't pick the stocks or securities or what ever it is they buy with my money, I just picked investor goals and time until retirement. They have me listed as a moderate risk investor and 10-15 years until retirement (which I just switched to 5-10 years in hopes that would make them purchase safer investments for my fund).... ANYWAYS.... almost a year now and EVERY single quarter I have lost money, every quarter! Why wouldn't they just throw the money into something completely safe at a 2-3% interest rate rather than losing the 3-6% each quarter they are losing? They show a pie chart of where my money is "invested" and it appears to be pretty diversified to me... but these guys that manage these funds, isn't it their job to switch around investments within the funds in order to not get a loss? I looked and looked and couldn't even find a way to switch my money from this type of investment to something completely safe (like government bonds at 2% interest)... I mean 2% interst is better than 3-6% loss evrey single quarter... and I worry about what this market crisis is going to do to my money now. I feel like I'm just throwing my money away, the whole idea here is to save for retirement, not gamble. It just doesn't seem right that in order to participate in a 401K that I have to gamble my money away.

What would you do if you were me and remember, I have no understanding of how all the funds/stocks/etc... work... I don't care about making tons of money, and I can understand a loss here and there, but one year strait of losses, and now probably a huge loss with the market crisis... I'd be better off buying bonds, but that can't come out of my checks pre-tax and my employer wouldn't match that...

any ideas/suggestions?
Thanks in advance!
Kathy

If you are with Prudential then there is probably a salesperson making a commission on your investments. You need to go through your literature and/or ask your employer and figure out who that person is and make him or her earn those commissions by asking him or her these questions.

Having said that, I will comment...if you said that your goal is to retire in 10-15 years, then the manager's job is not to make sure you don't lose money each quarter. It's to maximize your return in 10-15 years. And if you earn 2% over the next 15 years then s/he did a crappy job. You have to take some short-term risk, which means that sometimes you will have short-term losses, in order to make money over the long run. That's just a general investing concept that isn't very comforting when you are losing money. But it's not like they are making decisions each quarter and saying "mmm, should we buy this investment that is going to lose 6%, or this one that is going to make 2%...I'll take the 6% loss, thank you." They are looking at some investments that should average more than 2% versus some that guarantee 2%. Whether they made wise decisions or not, unfortunately, can only be answered in 10-15 years.

This doesn't mean that all is well. You might want to ask about the expenses that you are paying, in particular indirect expenses, on the funds and possibly in "wrap fees" or "asset charges" (or similar names). If the investment manager is doing a decent job, which in this market might be breaking even (actually that would be a great job) but your expenses are 2%, then you're going to have a 2% loss.

See note above about someone getting paid - if they didn't explain this, then you're getting lousy service.

(Edited to fix typo)

Keep in mind that the stock market overall has gone down for the period you mentioned. Hence Bird's comment that breaking even would be doing a great job.

Maybe a good thing to do is put your future contributions into a money market fund while the bears are in the market. When you get the all clear or when we hit the bottom, which should be soon. Transfer the funds into a balanced target retirement date fund (i.e. xFund 2030) that automatically balances from stocks to mutual funds to bonds over time.

As Bird said, ask the Prudential person or the company's employee contact for the 401(k) what options you have for directing your investments.

If the 401(k) does not offer something that specifically allows you to limit investments to low risk options, you could consider again reducing the "time to retirement." Instead of being in the 5 to 10 year range, select 0-5 years (if it is available). This should increase the fraction of your contributions that goes into (less risky) money market and bond funds and less in the (more risky) stock funds.

Also ask the 401(k) person if you can be listed as a low risk investor instead of a medium risk investor, and find out if you can have the money that is already in your account moved to a less risky allocation (lower percentage in stocks).

These kinds of steps should put you in the lower risk mode you would like at this time.

These changes will help reduce losses while the market drops, but they will also limit your gains when the market recovers. When the stock market begins its come back, you might want to consider returning to being a medium risk investor with 5-10 years or 10-15 years to retirement, in order to have more invested in stocks. Or you might find that you are satisfied with the earnings you are getting on your 401(k) contributions. No one knows when the market recovery will start or how long it will take. In addition, there can be big ups and downs during the market's recovery.

Hope this works out for you.

Most, if not all, the plans serviced by Pru have a Financial Advisor or Agent assigned tot he plan. Check your statement for his or her number. Give them a call and see what they have to say.

Many (not all) experts say not to mess with your retirement assets by trying to time the market to squeeze the ultimate performance out of the funds. One or two bad trades can wreak havoc on the account for years.

Talk to an investment professionsal (either the one assigned to the plan or your own) and see what type of investment mix is best for you in the long run.

Did you get your questions answered - some support?