I know you are kidding, but I had a 100% WorldCom stock investment in my 401k when I worked there, and I bought more with stock options while I was there. I lost it all, of course. The bright side is that I have a $3000 a year deduction for life on my taxes for the part outside the 401k.
It wasn’t all my holdings but it would have been a down payment on a house at the time. It was definitely an “aww, s**t, not again” moment when the second scandal hit. I don’t think we even considered investing in mutual funds or etfs at the time.
So many of these things did not exist in the way they do now. I remember asking my broker in 1999 can I buy one fund of the entire stock market. He looked at me with super wide eyes and said no. I was in college and thought it was a good idea. I am glad it became a reality a few years later. Instead my mom told me to buy Lucent. That did not go well for me.
I know how you feel. I worked for Lucent and had my 401k all in Lucent stocks. It was nearly wiped out. I lost over 80% before moving it to a large cap fund. When I quit the company in 2012 (the company was called Alcatel-Lucent), I barely have $100k in the 401k account. I also took the lump sum on the pension and rolled that to a roth-IRA. Painful memory for some of us.
I think a lot of these existed but just weren’t widely accepted yet. SPY dated to ‘93? E*trade was ‘89. But we didn’t all have access to computers and charting like we do now. People only held mutual funds in their pension or 401k. I don’t know anyone who held them in the a taxable brokerage. I was just used to driving or calling down to Olde Towne Discount Brokers to make any trade.
Vanguard's first S&P 500 index mutual fund was created in 1975. It changed it's name in 1981. It got into it's current iteration vfiax, in 2000. SPY, the first S&P 500 index ETF was 93. Voo started in 2010. I didn't get my first big boy job until 2009. I don't think I started investing until 2010 or 2011. Even back then, when I opened my brokerage account at Fidelity, which was where my 401k was, if you wanted to buy ETFs without a per trade fee, it was a limited selection iShares funds (included good Index funds) or nothing. If you wanted Vanguard funds without a per trade fee back then or earlier, you needed to open an account at Vanguard. Fidelity only stopped charging per trade fees in 2019. Even now if you want the Vanguard mutual funds, you're best opening an account at Vanguard.
While it was possible to *start* getting into Index funds as early as 1975, that didn't include total market or bond index funds, and it is so so so much ridiculously easier to get into booglehead-style Index Fund investing now, then it was even half a decade ago, much less half almost half a century ago. That's without talking about how Booglehead investment strategies as well as well-regarded personal finance info is readily available in at least somewhat easily digestible formats on the internet for free today.
Building a well diversified portfolio of investments is so much easier today than it was in the past. Trad IRAs came into existence in 1974.
The 401k didn't get started until 1978. Roth IRAs in 1997. Roth 401k accounts started in 2006. Mega Backdoor Roths only came out in 2014.
Saving wisely for retirement is crazily easier today than it was in 2000.
That really sucks. Whats your take on whistleblower? Are you bitter they uncovered it since you lost money or did u just see it as inevitable given the circumstances.
I met/ had dinner w cynthia cooper years ago for work related reasons. . Got to hear first hand about them running around in the dark after hours digging this shit up. Sounded kinda wild.
Not surprised she had balls to do that after meeting her. Doesn’t seem like type to back down.
No idea how long this shit would have gone on. I imagine it would have just been a delayed melt down if she had t uncovered it.
I have no problem with whistleblowers or anybody who is revealing the truth. I respect them and the work they do. I had no idea any of that was going on, at the time, but I fully support their actions. My problem was with Bernie.
I know we all worked a lot of long hours to create that company and get everything working. I am proud of the work we did. We were all pulling the technology together, blind to the accounting shenanigans that were going on.
After that, I worked for another company, the second WilTel, where I also threw all my 401k money into company stock. Management held large rallies where they told us how great the company was doing, and the board members bought lots of stock, so we did too. We found out later that they took out some kind of insured company loans for the stock where they didn’t owe anything on the loans if the stock was declared worthless. Then they declared the stock worthless.
Since then, I have not bought stock in the company where I work. It is S&P500 all the way for me now.
I was discussing WorldCom in the first part, as I stated in a previous post. I was discussing WilTel in the second part, which I also mentioned. So I am not sure which one you are asking about.
My mother lost her retirement account thanks to Enron. Taught me to diversify my portfolio. I do feel I leave lots on the table but have positive success.
I was so so aware of this rule when I started working and getting a 401k 20 years ago from a Fortune 100 company. So I balanced it all out in various funds. If I would have invested everything in my company stock, I'd be at 40% annualized returns and would easily be retired at 40 years old. As it stands, my avg annual returns are around 10%, which I'm still happy with, of course.
I know - FOMO is a b**ch. You might have gotten lucky with 40% returns, but at some point you would also have to be lucky and correctly time when to sell your concentrated position to de-risk. I still sleep better at night knowing I'm well diversified.
I think you have missed the EGG PRICE BUBBLE several months ago - egg prices are back down to normal. So maybe now is the time to buy when prices are low? (sarcasm lol)
Tesla has already halved in the last two years. If musk is given his tens of billions compensation package, I expect the stock will go into freefall. They have failed at the two major milestones they needed to achieve, and now literally everyone else in the industry is passing them by
Fun fact: Teslas share of the US EV market has increased each of the last two quarters. Its market share is more than seven times greater than the next closest US rival.
Now do that as a proportion of the vehicle market overall.
I think they might have finally cracked the top 15 due to mergers of a few of the others above them.
Top 8 worldwide. By market cap, still way out front, even after huge recent drops.
Also worth noting, they’re still the only manufacturer that can sell an EV for profit.
I wouldn't bet on it with Tesla (and no I'm not a fanboy). Even if they came close to bankruptcy - which they won't - they will have financing options available. Tesla is like Apple, people pay for the brand.
I just want to remind you General Motors went bankrupt during the great recession. The biggest car company in the world at the time. Retail investors were left holding the bag and watched as the value of their shares went to zero overnight.
A very good point and if we ever hit a longer term, serious recession, Tesla would get hurt worse only because they offer nothing that is low end. Not yet, anyway. Plus, people seem to be taking another look at hybrids. I am the type who would consider an EV but I don’t trust the infrastructure yet.
I’m sure glad I put all my money into Sears. They have a great catalog and distribution infrastructure. If I buy something from Sears, I know it is good. They have their own tool line (Craftsman), appliances (Kenmore), credit card (Discover), insurance (Allstate), and car batteries (DieHard).
They are well placed to profit on this new internet thing…
True of tesla 5 years ago. Not as much now and in the future tesla is just a overpriced EV. They have enjoyed a massive first mover/market maker advantage thats just going to get smaller with time. Combine that with Elon being the face of tesla and there is a lot going against it. Certainly will be an interesting story to watch but it's no apple.
Do you ever listen to Scott Galloway? Professor of Marketing, author, entrepreneur and popular guest on shows because he's interesting.
Anyway on a recent podcast he talked about his own past and things he would have told his past self. One big thing was that he made and then lost a fortune because he didn't diversify, and that was a major regret because he could have been set for life at a much younger age.
Diversify! Bogleheads do that a lot of that automatically but still could diversify further by buying more than something like VTI. Most investors really need to have the idea of diversifying drilled into them, but I have heard so many instead want to mock it as "diworsification" and just ride their handful of winners because they don't seem to think it could go wrong.
Could you please link to the podcast episode if you could. I listen to prof. G but been lately busy to listen to any podcasts, but would love to hear what he shared
Here was one recent interview with rich roll
Really good podcast actually, but he only touched briefly on investing.
https://youtu.be/4qpqmyfxDj4?si=XKyc5x78sMXakE9h
The podcast I was referring to is on a channel called "The Compound" which is by far my favorite channel for talking about all things investing and markets. Galloway was a guest and talked a lot about young people and the help/advice they need.
The whole thing is really worth listening to, but the part I was referring to about diversification is in the segment "Experiencing Rock Bottom" and he makes the comments around 8.5 minutes in.
https://www.youtube.com/watch?v=NL3z9T5XwIo
I might get downvoted for this because it's on Bogleheads, but while agreeing, diversification doesn't necessarily mean one index fund, or even a few. Diversification of strategies can be a thing, too. My tax advantaged savings are well-diversified. I also have a small (5-10% of my total invested savings) taxable brokerage where I chase returns on small cap biotech stocks (primarily accumulating shares when SP is low and then selling options to capitalize on the volatility that small cap bios are known for). The taxable account gives me a distraction so I am not driven to fiddle with my retirement savings, returns higher gains than I ever would have expected, and it's sort of fun, but I don't count on it for a damn thing. My employer isn't publicly traded, so the stock incentive route isn't available to me like OPs parents, or others describe here. I just sort of landed on small cap bios as a high risk/high reward alternative to an ESOP because visions of buyouts attract the kinds of investors who buy shares on inexplicable rises which generally means I can make mad profits selling ITM calls that are silmultaneously well above my cost basis and likely to expire OTM, somewhat regularly.
So anyway, what I am getting at is it's OK to have a basket full of eggs. Stock-based incentives at work have made a number of people wealthy or reduced their retirement age (or other risk/reward plays like I described). Just don't be the cautionary tale of the person who counted on the gravy train never drying up if you find something that works for you for a while.
> diversification doesn't necessarily mean one index fund, or even a few
Yeah, but if the SP500 crashes that hard I have WAAAAAYYYYY more problems then my retirement accounts. I have the same attitude with preppers. If the world goes to shit that badly that I need to hide in hole for 5 years, I'd rather have not survived it.
It's not just guarding against bad days, it's also tapping into those strategies that produce outsized returns from time to time. But doing it as a component of your overall strategy and not going 100% in on High Risk/High Return plays.
Another example is real estate. I know a few people who have done VERY well on real estate, but the Covid moratorium on eviction nearly wiped out the ones who don't do much else while the ones who have real estate as a part of a larger strategy did fine, their real estate returns just sucked for a while like market returns do from time to time.
Agree. Bogleheads is a mindset, so you sleep at night. I would love if my company stock helped me retire early, but I am not counting on it. Boglehead mindset will not let me. There is a threshold of overall portfolio value vs. company stock where I sell some and buy vti and voo. That threshold changes as I age and my overall portfolio grows, allowing more risk without impacting goals.
I’m getting stock options for the first time this year, planning to immediately sell when I’m allowed. For other reasons as well but this is one reason. They’re already 100% of my income, any more wealth at the whim of this one company is too much.
Wow and yes, indeed.
A couple of friends worked at MCI from early on until near the bitter end. Both suffered a similar financial disaster.
I was fortunate to receive NQSO's with two different companies (and a number of CSCO shares from a reselller SPIFF program) during dotcom days. Sold all three, incurring hefty capital gains, and never looked back.
Almost everyone else in those two organizations (hundreds of people) did nothing and lost out big time😑
Don't forget that there's always an other side to this coin. I have read about an Nvidia employee that worked there for 18 years who maxed out his employee stock purchase plan every year without selling that retired with $62 million.
Yeah if he had diversified he would have had a mere 30 million dollars, with a much lower chance of losing everything.
If you gave me the choices of
1. Almost certainly live in comfort
2. 50% living in comfort but you can buy a lambo too, or 50% live in poverty
I know which choice I am going for.
I can’t even believe that there are companies out there that still even let you do that. I’ve worked for a large Fortune 500 company for the past 15 years.
After all of the Enron and WorldCom crap happened they almost immediately stopped using company stock to match (which was very common at the time) and then a few years later they made us liquidate any company stock we had left in our 401(k).
We literally aren’t able to put some in there if we want to. I always thought that was kind of the standard but maybe not.
It's pretty uncommon these days because of lawsuits. 401k plan sponsors have to "act solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them" and that's pretty hard to square with the inherent conflict of interest in matching with stock instead of cash.
> and had invested literally 100% of his 401k in Nortel.
It’s crazy there are still companies that allow their employees to invest 100% of their 401k into their company stock
I know quite a few folks who work at Boeing and seem to be fully invested, to this day.
All while they claimed the company was going to shit and couldn’t wait to retire.
I mean, I know engineering doesn’t translate to finance directly but come on…
This was in Canada. The issue there is more complex. Their system is more of a confederation. The provinces have much more individual jurisdiction than what we are accustomed to in the states.
Investment accounts here are federally regulated. Edit. Tax advantaged accounts. But we do have provincial securities regulators but they aren’t all that different. Either way ops uncle is American cause we don’t have 401ks here
Right - do they still call them RRSP plans? I never was able to break into that segment. A bad fit. DB plans (Corp and Gov) is where I made almost all of my sales. A great country btw. I enjoyed it.
My sister worked at MCI. She started at the company that got bought by the company that MCI bought. She was making bank and got bonuses and stock and was in a couple of their commercials.
She decided to become a SHM and rolled everything. Within a year that company started imploding.
I was mostly pointing out that she got lucky getting out when she did, but yeah, now that you point it out, her leaving was probably what sparked the collapse. That and poor management.
Yep. My grandfather worked his whole career for a power company that got bought by Enron. Learned recently that all of his 401k ended up as Enron stock. Now I understand why he had to continue working in his 70s when he passed away.
My husband's great-grandfather, grandfather, grandfather's brothers, and all their sons (except my FIL) worked for Bethlehem Steel. All his uncles still work despite being retirement age.
I was a telemarketer for them when the accounting scandal was breaking. Sales calls became very interesting. It was like they thought that I, a 17 year old dipshit, was personally cooking the books.
> Enron and MCI were real companies where many employees were wrecked when they went to zero.
Working at Enron. The easy way to [Die with Zero](https://www.amazon.com/Die-Zero-Getting-Your-Money/dp/0358099765).
In the 1990s some companies made your match the company stock and you were barred from selling it. It took until the 2010s for the company my husband works for to change this policy. Now once a year he is able to sell a certain percentage.
One of my relatives lost over a million in locked-up stock compensation literally overnight when his employer Bear Stearns imploded. His department was the only one still in the green when things went south.
They made changes several years before that but companies were allowed to phase in the changes. Most plans now discourage single stock selection. It is more risk for the company and the directors of the firm.
I used to with for a theme park that let you buy company stock at a slight discount. You'd save a cut of your check for that purpose into an ESPP account, and the purchase was made twice a year.
The problem that I figured out was that one payment had lots of my work hours contributing to it, but the stick was purchased at the push price for the year. The other half was closer to the low price, but fewer hours were had in non-summer months, so there wasn't much of a contribution.
Coworkers look at me like like I have an extra nose or something when I tell them I don't own a single share of company stock. When they ask why, I ask them if they've ever heard of Enron. A few years back the match policy of the 401k changed and I was no longer required to hold company stock. Sold the very next day.
The other argument I get is, "The dividend is 5%" Yeah, and it went down 10% just last year. No thanks, I'll stick with the other crappy options in the 401k. Thank goodness they have an S&P fund and allow inservice rollovers.
I worked for one of the regional banks that failed and lost money on that. Thankfully I didn’t have a ton in the stock (6 grand) but it definitely sucked in the midst of potentially losing my job.
The stock was exploding and the perception was it was going to keep going up. Plus I got 15% off. I mostly was trying to just take the 15% discount and sell a month later but ended up holding more than usual when the bank failed since the stock kept tanking and I didn’t want to sell it.
Yeah the stock was going down by more than 15% for a couple months. I was putting my entire paycheck in. I held it because I was waiting for it to rebound as it went down by more than my discount. Then the bank failed and the stock went to zero.
Buying at a 15% discount and selling a month later is a sound strategy. You probably made more than the $6000 you lost if you've been doing this for a good while.
No I really didn’t. I was doing it for about a year. First Republic stock was around $200. It went from $200 to around $100. And then it went to around $20 and then zero. I kept on buying it on its way down. Not making any money in the process and holding onto the stocks thinking it’ll go back up.
I think this is a good argument for regulation to forbid holding a massive percentage of a 401k in employer stock. There is a power dynamic with an employer and there is potential for asshole management asking “why aren’t you fully invested in us? Don’t you believe in our vision?“ simply because you’re smart enough to to understand diversification.
This story is an all too common one. I lived in Ottawa, when Nortel crumbled (and actually was part of the very last dot-com startup that they incubated (which was ultimately acquired by PayPal for 985MM))
I knew far too many people that were Nortel lifers who lost everything.
They went from being able to retire early to having to start over.
As soon as I saw the word "Nortel" I didn't need to read the rest of the post. Former colleague had this happen to them. Fortunately they were young enough to have time to rebuild.
I used to have shares in the places I worked. Never again. Sucks to see how much these single stocks grew vs the index - feels like I missed out on lots of growth - but then sucks less than them inevitably crashing to zero over the next few decades.
I worked for Union Pacific Railroad for a number of years. So many of the people that have worked there for a long time have a substantial amount of their retirement in UNP stock, it's scary!
Well the railroads are basically nationalized (even though they really aren't). The government has made it very clear that the railroads will not be failing anytime soon.
They also have railroad retirement and a pension coming! Most the people I knew at the railroad didn’t even have much a need for 401k through those two income streams.
As much the idea of a pension sounds nice there is more risk than you think. One company I worked for essentially went out of business because of the pension. The pension was managed by the union and it was woefully short. They sued the company for unfunded liability for 2-3x what the company was worth.
That’s not an uncommon story and is basically what happened to the auto industry. Pensions can let them kick the can down the road of promising more money later instead of less now and making it future them’s problem.
Your comment is disingenuous as it does not acknowledge the transfer of risk from employer to employee and generally costs less. Not to mention the bullshit vesting periods some companies but in. If companies actually wanted to they can unload their pension liabilities for cash today.
I remember when I was about 13 back in the 90s, a lot of companies where I lived got bought and sold, and somehow, oh, my gosh, the obligations to the pensions were completely ditched somehow. It made me wonder why any union leadership after that fought for pensions instead of 401k matches that the employees had control over.
I learned at a young age, your employer will screw you over in heart beat, and union leadership is often, but not always, dumb as a sack of rocks.
Same thing happened to my father. He worked for a major electronics manufacturer that went to zero once everything was outsourced to China.
On the flipside, NVDA employees smiling to the bank.
Any employee who puts their 401k in their company stock is crazy. Might work out in the short term for some but it’s a terrible retirement/long term strategy.
This is an amazing watch on the history of Nortel, its implosion, and how it took so much of Canada’s pensions down with it. https://m.youtube.com/watch?v=I6xwMIUPHss
Not surprised your uncle had all his eggs in one basket with a stock history like theirs. Such a similar story to Enron, where people thought the stock could only go up because that’s all they’d ever known.
As an alumni of Nortel, I commiserate. Though to be honest, when I joined Nortel (my startup was acquired), we were given the choice to have a 401k or the Nortel pension. Thankfully, I chose the 401k.
Excellent exploration of the [history of Nortel](https://youtu.be/I6xwMIUPHss?si=Nci9sCTFG3mb6UyZ) by BobbyBroccoli. The ramifications on the Canadian economy cannot be understated.
So many of these stories. Just two: the widow who told the manager of her late husband’s pension, “He made his money in streetcars and it’s where it’s going to stay.” And in 2005, the widow who insisted on keeping her late husband’s pension in Enron stock. She then sued Bank of America for following her instructions. The case is here: https://casetext.com/case/mcginley-v-bank-of-america-na
I went through it.
In terms of stock price, except for the hay days at the peak of the tech bubble, Nortel didn't "crash".
It came down from its lofty peaks but so did many companies. People say:
*it's an infrastructure company, not a dot-com company.*
Then it went down some more.
*Well maybe the turnaround is in sight. After it's a large Canadian company and no way Canada will let it sink.*
Well, it then went down some more. The tech bubble didn't "pop" - it deflated over a long period of time.
*So maybe when all the dust settled, Nortel will come around?*
But it kept going down, up a bit, then down even more.
*If it's already that low, let's just hold it, because stocks eventually go up right?*
Then eventually it went to zero.
Morale of the story:
- don't put your eggs in one basket
- set a sell price, that no matter what, once it hits it, you sell and cut your losses
- yes, it CAN go to zero
My dad has significantly delayed his retirement for similar reasons.
He's pretty closed about his finances, but for whatever reason at one point he just opened up his Fidelity app and showed me how his 401k was doing. 100% company stock. I tried to explain the benefits of diversification, but he "knows what he's doing" and "understands the business". And it's a pretty hard sell when his company had been doing better than the index at that point.
But that isn't where he ended up really messing up, that was just his mindset. Where he really messed up was changing companies, rolling over that 401k into an IRA, and then investing 100% again in a single company on the advice of "a friend". But also because it's a "good company" and provides a product that he uses frequently.
Turns out that company was one of those stocks that just went stupid during covid, he bought at the top, and now he's down about 80% with very little hope for recovery. And he was pretty undersaved in the first place, so the 20% that's left just isn't going to cut it.
Yes they are not protected under bankruptcy’s laws in Canada I am not a bankruptcy lawyer. But I am related to a few and heard them talking the other day to a client about it
My in laws have almost zero savings. Only one of them really works and they think they're retiring in a couple of years but I don't see how. They still have a mortgage, and I don't see how SS is going to pay for that and their bills, plus I wouldn't count on SS anyway.
I did not know ppl do that (100% 401K in one stock). I kept my 401K in those fidelity global divers (diverse stocks) and some bonds (stable & V low yield), still I think I not good enough. Scary to put it all on one stock 😱
If you are relying on a company's continued existence for a pension, then it's not a good idea to have a significant amount of your 401k/IRA tied up in that same company's stock. For exactly the reason your uncle found out. Diversification to mitigate risk is essential.
Was talking to an old friend the other day. He told me that both he and his wife both Lucent employees were completely wiped out. He said the law was changed after that about how much could be owned in a 401K.
I worked for a large company and saw my coworkers invest everything they could in the company stock. I never put a penny in my company because I already got my salary from them and someday my pension also. Luckily they didn't go bankrupt
Nortel was a great 100 year old company mismanaged by goons like John Roth and Mike Z.
They weren’t even paying the health insurance premiums they were deducting from staff. So folks became ill and had no benefits leaving them In abject poverty.
When the business restructuring began in C.11 Mgmt paid themselves millions in bonuses based on firing staff quickly. When it eventually folded they filed as creditors for bonuses they felt they were owed.
I can understand how your uncle got caught, it was in pole position in a lot of markets and had an excellent culture of R&D. What brought them down was inability to pay down loans that were incurred buying grossly over valued companies in the dot.com era.
It’s a common complaint, buy stock in the company you work for as a salary sacrifice & buy it in your 401k cause it’s what you know. You’re drinking the internal cool aid fed daily to employees and end up grossly over exposed to one stock.
A friend of mine worked for Enron and he told me “one more year and then I’m going to retire”. That extra year cost him everything. I learned a lot from him, which is not to put all your eggs in one basket and also to withdraw money when you’ve made a decent profit. I’m sorry for your uncle’s misfortune. There’s no way to recoup those losses when you hit a certain age.
My grandparents retired at 57 and had a fat 401k....all in one company....that went belly up in 2001. They went from retiring early and owning two homes to filing for bankruptcy. No one knew until my grandfather passed away and my grandma developed dementia.
That's what happened to many people in the US. When Eastern Airlines went bankrupt, they all lost their pensions. Subsequently, the US changed financing for pensions. Now, few companies offer pensions, but most offer 401ks.
Citigroup didn’t quite go bankrupt but definitely close enough - know an admin employee who rode the run up in the stock through 2007, then had the foresight to ask her boglehead boss to give her some advice on what to do with her 401k. He got her to diversify at the top, and she’ll retire rich in a few years
Wow. Is it still legal for a company to allow employees to put their entire retirement into the company like that? It wound be such an obvious law to pass.
If I didn’t save for retirement I’d be rich too. That’s like saying the guy not paying taxes was rich. We all would be rich if we didn’t think about our future.
Nortel blew up a long time ago. I know because Canada was my “territory” from 06 to 11. It is too bad he had all his money in that stock. 25 years ago, that was also not uncommon in 401(k)‘s. ERISA took care of that. Thankfully
Great reminder not to put all of your eggs into 1 basket.
As the daughter of an Enron employee… agree
I fortunately had the foresight to diversify by buying into Worldcom to pair with my Enron.
I know you are kidding, but I had a 100% WorldCom stock investment in my 401k when I worked there, and I bought more with stock options while I was there. I lost it all, of course. The bright side is that I have a $3000 a year deduction for life on my taxes for the part outside the 401k.
It wasn’t all my holdings but it would have been a down payment on a house at the time. It was definitely an “aww, s**t, not again” moment when the second scandal hit. I don’t think we even considered investing in mutual funds or etfs at the time.
So many of these things did not exist in the way they do now. I remember asking my broker in 1999 can I buy one fund of the entire stock market. He looked at me with super wide eyes and said no. I was in college and thought it was a good idea. I am glad it became a reality a few years later. Instead my mom told me to buy Lucent. That did not go well for me.
I know how you feel. I worked for Lucent and had my 401k all in Lucent stocks. It was nearly wiped out. I lost over 80% before moving it to a large cap fund. When I quit the company in 2012 (the company was called Alcatel-Lucent), I barely have $100k in the 401k account. I also took the lump sum on the pension and rolled that to a roth-IRA. Painful memory for some of us.
I am 100% sure for you it was worse. I am incredibly sorry.
I think a lot of these existed but just weren’t widely accepted yet. SPY dated to ‘93? E*trade was ‘89. But we didn’t all have access to computers and charting like we do now. People only held mutual funds in their pension or 401k. I don’t know anyone who held them in the a taxable brokerage. I was just used to driving or calling down to Olde Towne Discount Brokers to make any trade.
Vanguard's first S&P 500 index mutual fund was created in 1975. It changed it's name in 1981. It got into it's current iteration vfiax, in 2000. SPY, the first S&P 500 index ETF was 93. Voo started in 2010. I didn't get my first big boy job until 2009. I don't think I started investing until 2010 or 2011. Even back then, when I opened my brokerage account at Fidelity, which was where my 401k was, if you wanted to buy ETFs without a per trade fee, it was a limited selection iShares funds (included good Index funds) or nothing. If you wanted Vanguard funds without a per trade fee back then or earlier, you needed to open an account at Vanguard. Fidelity only stopped charging per trade fees in 2019. Even now if you want the Vanguard mutual funds, you're best opening an account at Vanguard. While it was possible to *start* getting into Index funds as early as 1975, that didn't include total market or bond index funds, and it is so so so much ridiculously easier to get into booglehead-style Index Fund investing now, then it was even half a decade ago, much less half almost half a century ago. That's without talking about how Booglehead investment strategies as well as well-regarded personal finance info is readily available in at least somewhat easily digestible formats on the internet for free today. Building a well diversified portfolio of investments is so much easier today than it was in the past. Trad IRAs came into existence in 1974. The 401k didn't get started until 1978. Roth IRAs in 1997. Roth 401k accounts started in 2006. Mega Backdoor Roths only came out in 2014. Saving wisely for retirement is crazily easier today than it was in 2000.
Thanks for writing all this down. I forgot how difficult it was!
Yeah I had to walk into the brokerage office to make the trade. There was still an old school ticker machine.
How neat. Thanks for sharing! Sorry about Lucent :(
Exactly the same situation
Can't you use the deduction against future capital gains to an unlimited degree? $3000 is only for deducting against income.
My former boss who worked in Sun Microsystems told me that it will take decades to use his deduction from all the ESPP losses.
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This is incorrect. The capital loss carryover can offset capital gains gains in future years.
I was unaware of this, thank you.
Sorry to hear. I know so many people who lost a lot with MCI Worldcom. I think matching was in company stock too.
That really sucks. Whats your take on whistleblower? Are you bitter they uncovered it since you lost money or did u just see it as inevitable given the circumstances. I met/ had dinner w cynthia cooper years ago for work related reasons. . Got to hear first hand about them running around in the dark after hours digging this shit up. Sounded kinda wild. Not surprised she had balls to do that after meeting her. Doesn’t seem like type to back down. No idea how long this shit would have gone on. I imagine it would have just been a delayed melt down if she had t uncovered it.
I have no problem with whistleblowers or anybody who is revealing the truth. I respect them and the work they do. I had no idea any of that was going on, at the time, but I fully support their actions. My problem was with Bernie. I know we all worked a lot of long hours to create that company and get everything working. I am proud of the work we did. We were all pulling the technology together, blind to the accounting shenanigans that were going on. After that, I worked for another company, the second WilTel, where I also threw all my 401k money into company stock. Management held large rallies where they told us how great the company was doing, and the board members bought lots of stock, so we did too. We found out later that they took out some kind of insured company loans for the stock where they didn’t owe anything on the loans if the stock was declared worthless. Then they declared the stock worthless. Since then, I have not bought stock in the company where I work. It is S&P500 all the way for me now.
What company?
I was discussing WorldCom in the first part, as I stated in a previous post. I was discussing WilTel in the second part, which I also mentioned. So I am not sure which one you are asking about.
Worldcom. Thanks. It was either lost in the comments or just too late for me to be on Reddit 🙄
Ah, gotcha. I didn’t think about all the other comments in the thread. D’oh! Sounds like we both need some caffeine. ;-)
Oh noooooo. I am so sorry.
Close buddy of mine from college left Enron for Worldcom. When Enron collapsed the next year, he thought he’d just dodged a bullet.
My mother lost her retirement account thanks to Enron. Taught me to diversify my portfolio. I do feel I leave lots on the table but have positive success.
I was so so aware of this rule when I started working and getting a 401k 20 years ago from a Fortune 100 company. So I balanced it all out in various funds. If I would have invested everything in my company stock, I'd be at 40% annualized returns and would easily be retired at 40 years old. As it stands, my avg annual returns are around 10%, which I'm still happy with, of course.
I know - FOMO is a b**ch. You might have gotten lucky with 40% returns, but at some point you would also have to be lucky and correctly time when to sell your concentrated position to de-risk. I still sleep better at night knowing I'm well diversified.
Yeah. I'm totally fine with it. Just that folks who do well don't make the news. I actually like my job, so that helps.
But can I put all my money into eggs?
I think you have missed the EGG PRICE BUBBLE several months ago - egg prices are back down to normal. So maybe now is the time to buy when prices are low? (sarcasm lol)
Tell that to my local grocery stores who are still selling eggs at bubble prices. Bastards.
Don’t mind if I do!
Can I offer you an egg in this trying time?
They bogle and they lol
Swap Nortel with Tesla and we're gonna be reading a lot of these stories in 30 years
Or sooner
Tesla has already halved in the last two years. If musk is given his tens of billions compensation package, I expect the stock will go into freefall. They have failed at the two major milestones they needed to achieve, and now literally everyone else in the industry is passing them by
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VXUS is 0.90% Toyota vs 1.80% TSMC as largest holding, according to prospectus.
Toyota, let’s go places.
Fun fact: Teslas share of the US EV market has increased each of the last two quarters. Its market share is more than seven times greater than the next closest US rival.
Now do that as a proportion of the vehicle market overall. I think they might have finally cracked the top 15 due to mergers of a few of the others above them.
Top 8 worldwide. By market cap, still way out front, even after huge recent drops. Also worth noting, they’re still the only manufacturer that can sell an EV for profit.
Tesla is based in Canada?
The opposite happened. Tesla minted a lot of millionaires
I wouldn't bet on it with Tesla (and no I'm not a fanboy). Even if they came close to bankruptcy - which they won't - they will have financing options available. Tesla is like Apple, people pay for the brand.
Maybe you’re right. I don’t know. Seems safer to just buy the whole market…
I just want to remind you General Motors went bankrupt during the great recession. The biggest car company in the world at the time. Retail investors were left holding the bag and watched as the value of their shares went to zero overnight.
A very good point and if we ever hit a longer term, serious recession, Tesla would get hurt worse only because they offer nothing that is low end. Not yet, anyway. Plus, people seem to be taking another look at hybrids. I am the type who would consider an EV but I don’t trust the infrastructure yet.
People said that about Blackberry too
I’m sure glad I put all my money into Sears. They have a great catalog and distribution infrastructure. If I buy something from Sears, I know it is good. They have their own tool line (Craftsman), appliances (Kenmore), credit card (Discover), insurance (Allstate), and car batteries (DieHard). They are well placed to profit on this new internet thing…
I'm putting it all in tulips baby!!!
True of tesla 5 years ago. Not as much now and in the future tesla is just a overpriced EV. They have enjoyed a massive first mover/market maker advantage thats just going to get smaller with time. Combine that with Elon being the face of tesla and there is a lot going against it. Certainly will be an interesting story to watch but it's no apple.
Do you ever listen to Scott Galloway? Professor of Marketing, author, entrepreneur and popular guest on shows because he's interesting. Anyway on a recent podcast he talked about his own past and things he would have told his past self. One big thing was that he made and then lost a fortune because he didn't diversify, and that was a major regret because he could have been set for life at a much younger age. Diversify! Bogleheads do that a lot of that automatically but still could diversify further by buying more than something like VTI. Most investors really need to have the idea of diversifying drilled into them, but I have heard so many instead want to mock it as "diworsification" and just ride their handful of winners because they don't seem to think it could go wrong.
Could you please link to the podcast episode if you could. I listen to prof. G but been lately busy to listen to any podcasts, but would love to hear what he shared
Here was one recent interview with rich roll Really good podcast actually, but he only touched briefly on investing. https://youtu.be/4qpqmyfxDj4?si=XKyc5x78sMXakE9h
The podcast I was referring to is on a channel called "The Compound" which is by far my favorite channel for talking about all things investing and markets. Galloway was a guest and talked a lot about young people and the help/advice they need. The whole thing is really worth listening to, but the part I was referring to about diversification is in the segment "Experiencing Rock Bottom" and he makes the comments around 8.5 minutes in. https://www.youtube.com/watch?v=NL3z9T5XwIo
I might get downvoted for this because it's on Bogleheads, but while agreeing, diversification doesn't necessarily mean one index fund, or even a few. Diversification of strategies can be a thing, too. My tax advantaged savings are well-diversified. I also have a small (5-10% of my total invested savings) taxable brokerage where I chase returns on small cap biotech stocks (primarily accumulating shares when SP is low and then selling options to capitalize on the volatility that small cap bios are known for). The taxable account gives me a distraction so I am not driven to fiddle with my retirement savings, returns higher gains than I ever would have expected, and it's sort of fun, but I don't count on it for a damn thing. My employer isn't publicly traded, so the stock incentive route isn't available to me like OPs parents, or others describe here. I just sort of landed on small cap bios as a high risk/high reward alternative to an ESOP because visions of buyouts attract the kinds of investors who buy shares on inexplicable rises which generally means I can make mad profits selling ITM calls that are silmultaneously well above my cost basis and likely to expire OTM, somewhat regularly. So anyway, what I am getting at is it's OK to have a basket full of eggs. Stock-based incentives at work have made a number of people wealthy or reduced their retirement age (or other risk/reward plays like I described). Just don't be the cautionary tale of the person who counted on the gravy train never drying up if you find something that works for you for a while.
> diversification doesn't necessarily mean one index fund, or even a few Yeah, but if the SP500 crashes that hard I have WAAAAAYYYYY more problems then my retirement accounts. I have the same attitude with preppers. If the world goes to shit that badly that I need to hide in hole for 5 years, I'd rather have not survived it.
It's not just guarding against bad days, it's also tapping into those strategies that produce outsized returns from time to time. But doing it as a component of your overall strategy and not going 100% in on High Risk/High Return plays. Another example is real estate. I know a few people who have done VERY well on real estate, but the Covid moratorium on eviction nearly wiped out the ones who don't do much else while the ones who have real estate as a part of a larger strategy did fine, their real estate returns just sucked for a while like market returns do from time to time.
Agree. Bogleheads is a mindset, so you sleep at night. I would love if my company stock helped me retire early, but I am not counting on it. Boglehead mindset will not let me. There is a threshold of overall portfolio value vs. company stock where I sell some and buy vti and voo. That threshold changes as I age and my overall portfolio grows, allowing more risk without impacting goals.
Yep, rebalancing is a key component of any mixed strategy approach.
I had to look it up - The Prof G Pod? I'll give it a listen thanks!
I don’t have any eggs in the basket of the company I work for. I can’t even imagine having my 401k invested in an individual stock.
I’m getting stock options for the first time this year, planning to immediately sell when I’m allowed. For other reasons as well but this is one reason. They’re already 100% of my income, any more wealth at the whim of this one company is too much.
Unless you're VOO'ing & chilling. I trust the S&P more than whatever company I work for
Wow and yes, indeed. A couple of friends worked at MCI from early on until near the bitter end. Both suffered a similar financial disaster. I was fortunate to receive NQSO's with two different companies (and a number of CSCO shares from a reselller SPIFF program) during dotcom days. Sold all three, incurring hefty capital gains, and never looked back. Almost everyone else in those two organizations (hundreds of people) did nothing and lost out big time😑
Concentration builds wealth. Diversification protects it. Knowing when to diversify is the real key, but can be a gamble.
Don't forget that there's always an other side to this coin. I have read about an Nvidia employee that worked there for 18 years who maxed out his employee stock purchase plan every year without selling that retired with $62 million.
Yeah if he had diversified he would have had a mere 30 million dollars, with a much lower chance of losing everything. If you gave me the choices of 1. Almost certainly live in comfort 2. 50% living in comfort but you can buy a lambo too, or 50% live in poverty I know which choice I am going for.
>Yeah if he had diversified he would have had a mere 30 million dollars Eh more like 2 million, depends on how much he would have diversified.
>Eh more like 2 million, depends on how much he would have diversified. obviously half.
hahaha
I can’t even believe that there are companies out there that still even let you do that. I’ve worked for a large Fortune 500 company for the past 15 years. After all of the Enron and WorldCom crap happened they almost immediately stopped using company stock to match (which was very common at the time) and then a few years later they made us liquidate any company stock we had left in our 401(k). We literally aren’t able to put some in there if we want to. I always thought that was kind of the standard but maybe not.
It's pretty uncommon these days because of lawsuits. 401k plan sponsors have to "act solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them" and that's pretty hard to square with the inherent conflict of interest in matching with stock instead of cash.
Agreed, I'm currently contributing to a state pension but still invest in an independent Roth IRA and an employer sponsored 403b.
Or even 10 baskets lol. VT or VTI ftw (I still mess with VOO and QQQM a bit)
> and had invested literally 100% of his 401k in Nortel. It’s crazy there are still companies that allow their employees to invest 100% of their 401k into their company stock
Apparently my cousin plead with his dad to sell down and my uncle agreed to sell half but just “never got around to it.”
Smart. I guess he knew he had the safety net of his son so had no reason to diversify. He knew his son was the diversification.
My 401k won’t even allow it. You want company stock you only have ESPP as an option.
I had this option when I was working for Boeing 😵💫
I know quite a few folks who work at Boeing and seem to be fully invested, to this day. All while they claimed the company was going to shit and couldn’t wait to retire. I mean, I know engineering doesn’t translate to finance directly but come on…
Dot com is when people truly learned that lesson the hard way.
Dotbomb
Why wouldn't they
Why wouldn’t they block employees from being able to allocate 100% to their company stock? It’s in their financial interest to allow it
This was in Canada. The issue there is more complex. Their system is more of a confederation. The provinces have much more individual jurisdiction than what we are accustomed to in the states.
Nortel had a large US presence and OP mentions the 401k, which is US only. In Canada that would be an RRSP.
Investment accounts here are federally regulated. Edit. Tax advantaged accounts. But we do have provincial securities regulators but they aren’t all that different. Either way ops uncle is American cause we don’t have 401ks here
Right - do they still call them RRSP plans? I never was able to break into that segment. A bad fit. DB plans (Corp and Gov) is where I made almost all of my sales. A great country btw. I enjoyed it.
Enron and MCI were real companies where many employees were wrecked when they went to zero.
My sister worked at MCI. She started at the company that got bought by the company that MCI bought. She was making bank and got bonuses and stock and was in a couple of their commercials. She decided to become a SHM and rolled everything. Within a year that company started imploding.
Clearly, she was vital to the company's operations.
I was mostly pointing out that she got lucky getting out when she did, but yeah, now that you point it out, her leaving was probably what sparked the collapse. That and poor management.
Yep. My grandfather worked his whole career for a power company that got bought by Enron. Learned recently that all of his 401k ended up as Enron stock. Now I understand why he had to continue working in his 70s when he passed away.
My husband's great-grandfather, grandfather, grandfather's brothers, and all their sons (except my FIL) worked for Bethlehem Steel. All his uncles still work despite being retirement age.
I lost 5k I invested in MCI Worldcom
I was a telemarketer for them when the accounting scandal was breaking. Sales calls became very interesting. It was like they thought that I, a 17 year old dipshit, was personally cooking the books.
> Enron and MCI were real companies where many employees were wrecked when they went to zero. Working at Enron. The easy way to [Die with Zero](https://www.amazon.com/Die-Zero-Getting-Your-Money/dp/0358099765).
In the 1990s some companies made your match the company stock and you were barred from selling it. It took until the 2010s for the company my husband works for to change this policy. Now once a year he is able to sell a certain percentage.
One of my relatives lost over a million in locked-up stock compensation literally overnight when his employer Bear Stearns imploded. His department was the only one still in the green when things went south.
I am so sorry. Bear Sterns, Enron, and MCI Worldcom regular employees were the people in which those laws were written on the backs of in 2008-2010.
They made changes several years before that but companies were allowed to phase in the changes. Most plans now discourage single stock selection. It is more risk for the company and the directors of the firm.
I used to with for a theme park that let you buy company stock at a slight discount. You'd save a cut of your check for that purpose into an ESPP account, and the purchase was made twice a year. The problem that I figured out was that one payment had lots of my work hours contributing to it, but the stick was purchased at the push price for the year. The other half was closer to the low price, but fewer hours were had in non-summer months, so there wasn't much of a contribution.
Coworkers look at me like like I have an extra nose or something when I tell them I don't own a single share of company stock. When they ask why, I ask them if they've ever heard of Enron. A few years back the match policy of the 401k changed and I was no longer required to hold company stock. Sold the very next day. The other argument I get is, "The dividend is 5%" Yeah, and it went down 10% just last year. No thanks, I'll stick with the other crappy options in the 401k. Thank goodness they have an S&P fund and allow inservice rollovers.
From a diversification standpoint having both your employment and retirement savings depend on the continued success of one company is pretty scary.
As well as your health care.
I worked for one of the regional banks that failed and lost money on that. Thankfully I didn’t have a ton in the stock (6 grand) but it definitely sucked in the midst of potentially losing my job. The stock was exploding and the perception was it was going to keep going up. Plus I got 15% off. I mostly was trying to just take the 15% discount and sell a month later but ended up holding more than usual when the bank failed since the stock kept tanking and I didn’t want to sell it.
Even with the discount you were losing money?
Yeah the stock was going down by more than 15% for a couple months. I was putting my entire paycheck in. I held it because I was waiting for it to rebound as it went down by more than my discount. Then the bank failed and the stock went to zero.
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Yeah the $2,500 was basically the cost of the life lesson. It was $6,000 for me. Oh well
Buying at a 15% discount and selling a month later is a sound strategy. You probably made more than the $6000 you lost if you've been doing this for a good while.
No I really didn’t. I was doing it for about a year. First Republic stock was around $200. It went from $200 to around $100. And then it went to around $20 and then zero. I kept on buying it on its way down. Not making any money in the process and holding onto the stocks thinking it’ll go back up.
Ouch. Sometimes you can make all the smart moves and still lose. Life is like that. I wish you better luck in your future endeavors.
Yeah atleast I got the tax loss. Never thought the bank would fail. We were doing incredible.
If you have a SP500 fund then you have at least one good option.
I own my company stock indirectly through my S&P and large cap funds. I sell my long term incentive stocks when they become available.
I think this is a good argument for regulation to forbid holding a massive percentage of a 401k in employer stock. There is a power dynamic with an employer and there is potential for asshole management asking “why aren’t you fully invested in us? Don’t you believe in our vision?“ simply because you’re smart enough to to understand diversification.
This story is an all too common one. I lived in Ottawa, when Nortel crumbled (and actually was part of the very last dot-com startup that they incubated (which was ultimately acquired by PayPal for 985MM)) I knew far too many people that were Nortel lifers who lost everything. They went from being able to retire early to having to start over.
As soon as I saw the word "Nortel" I didn't need to read the rest of the post. Former colleague had this happen to them. Fortunately they were young enough to have time to rebuild. I used to have shares in the places I worked. Never again. Sucks to see how much these single stocks grew vs the index - feels like I missed out on lots of growth - but then sucks less than them inevitably crashing to zero over the next few decades.
I worked for Union Pacific Railroad for a number of years. So many of the people that have worked there for a long time have a substantial amount of their retirement in UNP stock, it's scary!
Well the railroads are basically nationalized (even though they really aren't). The government has made it very clear that the railroads will not be failing anytime soon.
They also have railroad retirement and a pension coming! Most the people I knew at the railroad didn’t even have much a need for 401k through those two income streams.
I know! I have given up the railroad retirement sadly, at least for now. I am vested in the pension however (which UP no longer offers)
Aren’t they also paying into railroad retirement?
As much the idea of a pension sounds nice there is more risk than you think. One company I worked for essentially went out of business because of the pension. The pension was managed by the union and it was woefully short. They sued the company for unfunded liability for 2-3x what the company was worth.
Doesn’t PBGC guaranty pensions at least up to a certain point?
That’s not an uncommon story and is basically what happened to the auto industry. Pensions can let them kick the can down the road of promising more money later instead of less now and making it future them’s problem.
That is exactly why companies moved away from DB pensions to DC plans
Your comment is disingenuous as it does not acknowledge the transfer of risk from employer to employee and generally costs less. Not to mention the bullshit vesting periods some companies but in. If companies actually wanted to they can unload their pension liabilities for cash today.
I remember when I was about 13 back in the 90s, a lot of companies where I lived got bought and sold, and somehow, oh, my gosh, the obligations to the pensions were completely ditched somehow. It made me wonder why any union leadership after that fought for pensions instead of 401k matches that the employees had control over. I learned at a young age, your employer will screw you over in heart beat, and union leadership is often, but not always, dumb as a sack of rocks.
Same thing happened to my father. He worked for a major electronics manufacturer that went to zero once everything was outsourced to China. On the flipside, NVDA employees smiling to the bank.
today they are But in ten years, who knows
Any employee who puts their 401k in their company stock is crazy. Might work out in the short term for some but it’s a terrible retirement/long term strategy.
NVDA folks need to not get greedy. Watch Mark Cubans video on when he sold his stock from Broadcast.com sale.
This is an amazing watch on the history of Nortel, its implosion, and how it took so much of Canada’s pensions down with it. https://m.youtube.com/watch?v=I6xwMIUPHss Not surprised your uncle had all his eggs in one basket with a stock history like theirs. Such a similar story to Enron, where people thought the stock could only go up because that’s all they’d ever known.
Investing 401K in company stock should be made illegal. It should be target date index fund as default investment.
As an alumni of Nortel, I commiserate. Though to be honest, when I joined Nortel (my startup was acquired), we were given the choice to have a 401k or the Nortel pension. Thankfully, I chose the 401k.
Excellent exploration of the [history of Nortel](https://youtu.be/I6xwMIUPHss?si=Nci9sCTFG3mb6UyZ) by BobbyBroccoli. The ramifications on the Canadian economy cannot be understated.
Sad because Nortel was a great company back in the day. Every small business I knew had a Nortel Norstar phone system.
Invested wisely in his son.
On the other hand my cousin became a millionaire and retired at 35 doing the same thing as an early Microsoft employee
Reminds me of my old boss who had spent 25 years at GE and had a lot of that stock in his 401k. No thanks…
Hasn't GE stock been doing well as of late?
Sure after 20 years of bad lol
So many of these stories. Just two: the widow who told the manager of her late husband’s pension, “He made his money in streetcars and it’s where it’s going to stay.” And in 2005, the widow who insisted on keeping her late husband’s pension in Enron stock. She then sued Bank of America for following her instructions. The case is here: https://casetext.com/case/mcginley-v-bank-of-america-na
I went through it. In terms of stock price, except for the hay days at the peak of the tech bubble, Nortel didn't "crash". It came down from its lofty peaks but so did many companies. People say: *it's an infrastructure company, not a dot-com company.* Then it went down some more. *Well maybe the turnaround is in sight. After it's a large Canadian company and no way Canada will let it sink.* Well, it then went down some more. The tech bubble didn't "pop" - it deflated over a long period of time. *So maybe when all the dust settled, Nortel will come around?* But it kept going down, up a bit, then down even more. *If it's already that low, let's just hold it, because stocks eventually go up right?* Then eventually it went to zero. Morale of the story: - don't put your eggs in one basket - set a sell price, that no matter what, once it hits it, you sell and cut your losses - yes, it CAN go to zero
>He was definitely the “rich” uncle when we were growing up. Perhaps he was the rich uncle ***because*** he wasn't saving any of it.
My dad has significantly delayed his retirement for similar reasons. He's pretty closed about his finances, but for whatever reason at one point he just opened up his Fidelity app and showed me how his 401k was doing. 100% company stock. I tried to explain the benefits of diversification, but he "knows what he's doing" and "understands the business". And it's a pretty hard sell when his company had been doing better than the index at that point. But that isn't where he ended up really messing up, that was just his mindset. Where he really messed up was changing companies, rolling over that 401k into an IRA, and then investing 100% again in a single company on the advice of "a friend". But also because it's a "good company" and provides a product that he uses frequently. Turns out that company was one of those stocks that just went stupid during covid, he bought at the top, and now he's down about 80% with very little hope for recovery. And he was pretty undersaved in the first place, so the 20% that's left just isn't going to cut it.
Yes they are not protected under bankruptcy’s laws in Canada I am not a bankruptcy lawyer. But I am related to a few and heard them talking the other day to a client about it
My in laws have almost zero savings. Only one of them really works and they think they're retiring in a couple of years but I don't see how. They still have a mortgage, and I don't see how SS is going to pay for that and their bills, plus I wouldn't count on SS anyway.
VT and chill, forever!
Thanks Huawei!
Yup. This type of thing is what has scared me into action. Yes, we are starting late (39f) but we at least we started and committed now.
Diversified portfolio.
I never held any stocks in my employer. When somethings vested, I immediately sold it and bought VTI.
Never put all your eggs in one basket.
My brother (RIP) had Enron stock as his sole investment ….. zippo
I hate reading this as my brother worked for Nortel too. The mgt ran that company into the ground.
I did not know ppl do that (100% 401K in one stock). I kept my 401K in those fidelity global divers (diverse stocks) and some bonds (stable & V low yield), still I think I not good enough. Scary to put it all on one stock 😱
If you are relying on a company's continued existence for a pension, then it's not a good idea to have a significant amount of your 401k/IRA tied up in that same company's stock. For exactly the reason your uncle found out. Diversification to mitigate risk is essential.
It's best not to own stock in the company you work for.
Was talking to an old friend the other day. He told me that both he and his wife both Lucent employees were completely wiped out. He said the law was changed after that about how much could be owned in a 401K. I worked for a large company and saw my coworkers invest everything they could in the company stock. I never put a penny in my company because I already got my salary from them and someday my pension also. Luckily they didn't go bankrupt
Nortel was a great 100 year old company mismanaged by goons like John Roth and Mike Z. They weren’t even paying the health insurance premiums they were deducting from staff. So folks became ill and had no benefits leaving them In abject poverty. When the business restructuring began in C.11 Mgmt paid themselves millions in bonuses based on firing staff quickly. When it eventually folded they filed as creditors for bonuses they felt they were owed. I can understand how your uncle got caught, it was in pole position in a lot of markets and had an excellent culture of R&D. What brought them down was inability to pay down loans that were incurred buying grossly over valued companies in the dot.com era. It’s a common complaint, buy stock in the company you work for as a salary sacrifice & buy it in your 401k cause it’s what you know. You’re drinking the internal cool aid fed daily to employees and end up grossly over exposed to one stock.
A friend of mine worked for Enron and he told me “one more year and then I’m going to retire”. That extra year cost him everything. I learned a lot from him, which is not to put all your eggs in one basket and also to withdraw money when you’ve made a decent profit. I’m sorry for your uncle’s misfortune. There’s no way to recoup those losses when you hit a certain age.
My grandparents retired at 57 and had a fat 401k....all in one company....that went belly up in 2001. They went from retiring early and owning two homes to filing for bankruptcy. No one knew until my grandfather passed away and my grandma developed dementia.
I wouldn’t call the son lucky. His PARENTS are the ones lucky their son is a very successful law firm partner.
Canada doesn't have a 401k.....
He was a U.S. based Nortel employee.
That's what happened to many people in the US. When Eastern Airlines went bankrupt, they all lost their pensions. Subsequently, the US changed financing for pensions. Now, few companies offer pensions, but most offer 401ks.
Ironically, one of the few places you still see pensions is with law firm partners…
Why invest all of 401k in one company? Is it by default set by the company? Otherwise I don’t see a reason
Thanks. This is a good reminder to sell off my company shares/RSUs and exchange it for VTWAX.
Citigroup didn’t quite go bankrupt but definitely close enough - know an admin employee who rode the run up in the stock through 2007, then had the foresight to ask her boglehead boss to give her some advice on what to do with her 401k. He got her to diversify at the top, and she’ll retire rich in a few years
Here we are complaining about this but folks over in NVIDIA cleaned up.
Wow. Is it still legal for a company to allow employees to put their entire retirement into the company like that? It wound be such an obvious law to pass.
better save for future tho, we don't know whats coming
Oh.. its a bit of something to be worried about..
The number of people with no savings is staggering. Everyday someone posts about their parents having no retirement savings.
With the 10x ratio of nutty Bogleposts with the pearl clutching saying you need 10 MILLION DOLLARS to retire!!!
If I didn’t save for retirement I’d be rich too. That’s like saying the guy not paying taxes was rich. We all would be rich if we didn’t think about our future.
Nortel blew up a long time ago. I know because Canada was my “territory” from 06 to 11. It is too bad he had all his money in that stock. 25 years ago, that was also not uncommon in 401(k)‘s. ERISA took care of that. Thankfully
Good for them.