LOS ANGELES — Some Americans worried about running out of money in their golden years are trying a new investment strategy: day trading their retirement funds.
Disillusioned with the conventional buy-and-hold approach, some baby boomers are eager to improve their retirement prospects after two punishing bear markets in the past decade.
Some are trading the mutual funds in their 401(k) plans more frequently. Others are venturing into options. And some aggressive investors have begun day trading their nest eggs, all in a bid to make up for lost time.
"A lot more frequent trading is happening," said Chad Carlson, a financial planner based outside Chicago. "People are saying, 'I'm that much closer to retirement, so I have to do something.' "
That thinking prompted 49-year-old Vlad Tokarev to start day trading his three individual retirement accounts last year.
The Minneapolis biomedical software engineer wants to quit working before age 65. But after watching his 401(k) get pounded in the last bear market, he fears that another plunge could wreak havoc with his plans.
Minutes before the market closes every day, Tokarev buys or sells a mutual fund linked to the Standard & Poor's 500 stock index. He buys when stocks are falling and sells when they're rising.
"I didn't see a lot of returns using the buy-and-hold method," he said.
Most Americans with IRA or 401(k) accounts embrace the "set it and forget it" philosophy. Only about 15 percent of investors made any change to their 401(k)s last year, according to benefits firm Aon Hewitt. But among those willing to make shifts, there's a growing inclination to do so more frequently as retirement approaches, according to some financial planners. These experts sympathize with investor frustrations but predict that this type of trading will backfire for most.
Day trading was popular during the bull market of the 1990s, when investors moved in and out of stocks dozens of times each day seeking a quick profit. It was considered risky at the time, and the technology crash a few years later wiped out many day traders.
"You get the guy who hits the home run who everyone wants to be like, and then you get the guy who is the big loser," said Winfield Evens, a partner at Aon Hewitt.
The average 60-year-old has $114,500 in his or her 401(k), and half have less than $37,300, according to Aon Hewitt. Americans are a collective $6.6 trillion short of the amount they need to retire comfortably, according to a 2010 analysis by the Center for Retirement Research at Boston College.
Those type of numbers have even helped create a cottage industry for advisers who preach the benefits of trading 401(k) and other retirement accounts.
Richard Schmitt, an adjunct professor at Golden Gate University in San Francisco and a former retirement plan consultant, has come out with a book called 401(k) Day Trading: The Art of Cashing in on a Shaky Market in Minutes a Day. The book, published in October by Wiley Trading, has a list price of $49.95.
"I've seen so many people make their 401(k)s into 201(k)s," Schmitt said of day trading. "This gives you the opportunity to make it into an 801(k)."
Schmitt has been day trading his 401(k) account for four years and has beaten the S&P 500 by 15.2 percent during that time, he said.
Todd Larsen, a mechanical engineer from Willow Park, Texas, runs www.401ktradingsystem.com, a website that advises followers to shift their money once a month. The site, which charges a one-time fee of $199, says it recommends safe money-market funds about 75 percent of the time.
Some people are trying another potentially risky tactic to overcome the weak market: trading stock options in their IRA accounts.
They agree to buy a falling stock, or sell a rising one, in exchange for a set payment. The goal is to pocket steady fees without having to buy or sell at inopportune times.
As many as 40 percent of people trading options at the Motley Fool do so in retirement accounts, said Jeff Fischer, an options adviser at the investment website.
"There is — I don't want to use the word 'desperation' — but it's close to that," Fischer said. "Ten years of a flat stock market bumps up against reality for people in their 50s or 60s who are running out of time to see appreciation" in the stock market.