401(k) reality check

Across the street from Madison Square Garden stands a building that sports an electronic scroll reporting the latest movements in the stock market. One afternoon in September 2008, I stopped outside and phoned my daughter, who worked in a high-rise across the street. I asked if she would like to come down and have a cup of coffee. She would. But she had a few items to tidy up first, so I would have to cool my heels. While I was waiting, I kept an eye on that scroll bar, as the stock market went down 300 points. I couldn't have been standing there much more than 25 minutes.

In 2008, such previously unimaginable disasters were routine. The Dow would be up 200 points, then down 400 in a matter of minutes. One day it lost 8% of its value. These cataclysms are ingrained in my psyche because I used to wait downstairs for my daughter a lot, so I would gaze up at the scroll, watching the world disintegrate before my eyes. It was like regularly going to a movie theater that showed only one film: "The Texas Chainsaw Massacre."

Lately, the visceral memory of these horrors seems to have retreated into the realm of mythology. These days, I see more and more reports about the market stabilizing, about the little guy dipping his toes back into the water. The old catch-phrases are returning: We are in the midst of one of the great bull markets in history; March was a once-in-a-lifetime buying opportunity.

Balderdash. The current bull market is a classic sucker rally in the middle of a bear market. This happened all the time during the Depression. The recent 50% bounce still leaves the Dow about 4,000 points below its all-time high. March was not a once-in-a-lifetime buying opportunity; it was a once-in-a-lifetime salvage opportunity. It was a chance to buy back your lost shirt while conceding that your pants are gone for good.

Even more infuriating are the "experts" advising people how to invest the money they plan to retire on. On several occasions, I have seen articles in which financial planners or academics discuss the optimum amount of money retirees should take out of their 401(k)s in their twilight years. Usually, that number is pegged at 4%. But one article in the New York Times suggested that this figure might be overly cautious. Based on a reasonably plausible projected rate of return, retirees might be able to take out as much as 6% and not have their nest egg run out before they buy the farm.