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Real $$$$ losses or paper$$$$ losses

rnoldh

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I've worked for many home builders and consequently had a few 401Ks.

I thought I had rolled everything into an IRA, but it turns out I missed one.

The statements for that specific 401K are all electronic and were being Emailed to an address I don't check.

Anyway I just realized that I had it. I looked over the past statements and saw that I had contributed about $5100 ( I wasn't there long and it was a while ago ).

It's now worth about $2,800! Since, I'm 59 & 1/2, I won't have to pay a 10% penalty on top of normal taxes, so I just told them to close it out and send me the money ( which I can use these days ).

I like to think that I would have pulled the $5,100 out of the market ( it was all in mutual funds ), and lessened the $2,300 loss. But that's easy to say after the fact.

But what got me annoyed was when I was talking to a buddy and describing the situation. He said the classic, "It's only on paper anyway!". My reaction is Bullshit. If that specific account was worth $5,100 at one point then I lost $2,300 in actual "cash losses". Not in paper!

How do the rest of you feel about the classic, "It's only on paper?" thoughts.

BTW: Though I'm behind on most everything ( including the IRA ), it's not nearly as much % wise as the example above.
 

thekunk07

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^i think if people think of losses any other way, they will blow their brains out. friends's 401k went from 1.6 to .9 in a matter of weeks.
 

Piobaire

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Originally Posted by rnoldh

How do the rest of you feel about the classic, "It's only on paper?" thoughts.


I just ask them, "And what is money printed on?"
 

rnoldh

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Originally Posted by thekunk07
^i think if people think of losses any other way, they will blow their brains out. friends's 401k went from 1.6 to .9 in a matter of weeks.

I hadn't thought of blowing my brains out.


But then my loss is $2,300 and not $700,000.

But I think it would effect someone a lot more to have a net worth of 100K and lose 1/2 of it than it would effect someone worth $10,000,000 that loses 1/2 of his net worth.

Either way, I look at it like real losses and not paper losses!
 

visionology

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I think he's right, you only lose the money when you cash out of the account. This makes sense because if the market went up tomrorrow you'd make money so in essence you wouldn't have lost anything. It's just a risk you take. There are times to leave it in an account, times to rollover, and times to withdraw and they all depend on your own situation.

Also these retirement accounts aren't meant to be used as cash accounts in the short term so I think of my retirement accounts as not even usable money. I'm in a different situation though, I'm only 30 and have 40 years to sit on my accounts before withdrawing.
 

dkzzzz

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Originally Posted by rnoldh
But I think it would effect someone a lot more to have a net worth of 100K and lose 1/2 of it than it would effect someone worth $10,000,000 that loses 1/2 of his net worth.


Wait, wait sir; NOW you are talking up some: Antichrist - Down with Capitalism, redistribution of wealth thingy, aren't you. We in US don't believe in such a thing...

Next thing you will say that if a Billionaire lost half a billion his lifestyle would not change a bit, but if carpenter lost half of 100K it would be a different story....That's Marxism my friend and we are not going to stand for it. In US we say to carpenters : "Work harder", and we give some tax brakes to billionaires. Cause you know without billionaires there would not be any carpenters or life on Earth.
 

montecristo#4

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I'd say you can call a loss a paper loss if you are locked in for the long term and have a defined return. For example, if I buy a 10 year bond at 4%, and interest rates rise to 6%, I have a paper loss. The bond is worth less if I try to sell it today. But if my strategy and intention has always been to hold onto the sucker for 10 years, the loss is on paper and is pretty irrelevant.
 

rnoldh

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Originally Posted by dkzzzz
Wait, wait sir; NOW you are talking up some: Antichrist - Down with Capitalism, redistribution of wealth thingy, aren't you. We in US don't believe in such a thing...

Next thing you will say that if a Billionaire lost half a billion his lifestyle would not change a bit, but if carpenter lost half of 100K it would be a different story....That's Marxism my friend and we are not going to stand for it. In US we say to carpenters : "Work harder", and we give some tax brakes to billionaires. Cause you know without billionaires there would not be any carpenters or life on Earth.


Yeah, I guess I'm just a Marxist.

I hear that times are even tough for the Billionaire Russian Oligarchs.

BTW: Tax breaks are for commoners. "Tax brakes" are for elitists like AF
 

gnatty8

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I put it in the same category as this,

I could have bought Google for $102 a share back in August of 2004.

I could have sold Google at $302 a share today.

Does the fact that I didn't anticipate Google stock to appreciate to this extent mean I have actually lost that $200 potential gain?
 

itsstillmatt

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Some things are permanent losses of capital even if you don't sell them. Sun at a split adjusted 250 (now 3 and change) probably falls into that category. Some things are just paper losses. Only by correctly predicting the future can you know which one you have on your hands.
 

dkzzzz

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Originally Posted by gnatty8
I put it in the same category as this,

I could have bought Google for $102 a share back in August of 2004.

I could have sold Google at $302 a share today.

Does the fact that I didn't anticipate Google stock to appreciate to this extent mean I have actually lost that $200 potential gain?


Cute, now imagine it is your social security (Privatized) and imagine you are about to retire. Still nothing? I am trying to hurt you here, but your American spirit is too strong. You are my friend what John McCain calls a "resilient American go-getter” or some such thing. And we all know that reslient american spirit is like mold it keeps growing no matter what.
 

Optimas

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I think paper losses ought to be treated as other losses in most cases. Whatever price one might have bought stocks for historically is irrelevant, and the reductions in value are very real.

The exception would be where there is reasonable reason to believe that the decline in value is temporary, and that you do not intend (or need!) to sell before values are back at their higher, "natural" levels. However, all standard assumptions off well functioning markets would of course rule out options like this, and Keynes' old saying still has some value - the market can stay irrational longer than you can stay solvent.

Your loss was very real, and any gain you might have gotten if you kept the money in the account would have been just as real. As long as the two events really are unrelated, I think it makes most sense to talk about the losses as real.
 

gnatty8

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Originally Posted by dkzzzz
Cute, now imagine it is your social security (Privatized) and imagine you are about to retire. Still nothing? I am trying to hurt you here, but your American spirit is too strong. You are my friend what John McCain calls a "resilient American go-getter" or some such thing. And we all know that reslient american spirit is like mold it keeps growing no matter what.

I think any type of retirement plan, whether private or public, that overweights equities anywhere within 5 years of a planned retirement date is jusy sheer stupidity. I am weighed 100% to equities in my 401k and IRA because I am at least 20 years from my planned retirement date. Within 5 years of that date, I plan to be closer to 50/50 equities/fixed income.

One is akin to an opportunity cost. The other is foolishness.

Why thank you for the compliment, I am indeed, a real American go-getter.
 

gnatty8

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Originally Posted by Optimas
I think paper losses ought to be treated as other losses in most cases. Whatever price one might have bought stocks for historically is irrelevant, and the reductions in value are very real.

I discern no difference at all. One involves not "seeing" a top and selling and crystalizing a gain. The other involves not seeing a "bottom" and buying, locking in a gain. To me, these are one and the same.
 

AintDatRite

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For my 401k, I'm not really concerned with 'losses'. For me, they are on paper - I am 20+ years from retirement and have no intention of withdrawing this money. If the market doesnt recover within the next 20 years and my losses turn into gains, then it doesnt really matter anyway - the American way of life wouldve been over long before I retired.

I increased the amount I an contributing to my 401k - I am treating this as a 'buying opportunity'. I only wish that I could 'trade' within my 401 - there are many ETFs and individual stocks that I wouldve bought (sold) if I could. However, that account is limited to various mutual funds. For my personal investment account - which I manage all trades - I've done very well in this economy.
 

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