Comments on: Are 401(k) Plans Really That Bad?

By: Jim

Jim — Thu, 28 Aug 2008 13:35:01 +0000

Bozo,
You’re on the money with your comments (except that I’m cranky). I have the knowledge of an industry insider and know first hand how participants are just plain squeezed. This is the rule, not the exception. Vanguard? One of the few bright lights in a sea of opaque, poorly performing offerings.

Participants will NOT rock the boat about their plan choices because they’re rightly afraid they’ll be on the next short list for pink slips when the company makes “strategic adjustments due to market conditions”. Just too risky.

I wish there were more positive things to say.
Best,
Jim

By: JLP

JLP — Thu, 28 Aug 2008 00:40:05 +0000

Jim,

I think EDUCATION is the key. If more participants knew the right questions to ask company management, companies would be forced to take a look at their plans.

By: Bozo

Bozo — Thu, 28 Aug 2008 00:33:43 +0000

Jim, you sure are cranky. OK, for starters, Vanguard. This was the plan my employer adopted quite some years back. Offered (and still does) rock-bottom fees with properly-managed index funds. Fidelity is another. Both funds are very transparent and cost-effective. From Vanguard, I received very good advice when I wanted to swap out half my money into laddered CDs. The Vanguard Bond Desk told me in no uncertain terms to do it myself, since I could get much better rates than they could. This was NOT in Vanguard’s self-interest, but it sure increased my yield over the past two years.

OK, we’ve done well with Vanguard, and have gotten good service and good advice.

Just my $.02.

Bozo

By: Jim

Jim — Wed, 27 Aug 2008 23:23:51 +0000

Education or “advice” for participants is a fallacy. It’s the RARE plan that is transparent and cost effective. The value of the tax deduction is easily offset by the outrageous hidden fees collected by the vendors, brokers, and “Advisors”. If you are only offered garbage, then you can only choose from garbage (or to NOT participate). The retirement industrial complex is without question, the greatest rip off ever achieved in the history of our great country. Literally BILLIONS of dollars are siphoned off every year from the accounts of unsuspecting participants. Employers simply have no clue! Think I’m wrong? Name the funds and plan.
Jim

By: Bozo

Bozo — Wed, 27 Aug 2008 21:43:20 +0000

JLP: I’ve never really found personal investing all that much of a mine field, but maybe I’ve been lucky. My wife and I thought once about going to a “personal financial planner”, recommended by a friend of a friend of a friend, until we found out that the “planner” really was an annuity salesperson.

Once I discovered on-line blogs and financial calculators, I found that I could do 95% of what the “planners” did by myself. I could find the best CD rates, determine proper asset allocation in stocks/bonds, calculate what our principal would yield in thus and such many years, etc.

Staying conservative, I was able to maintain principal, grow it at a reasonable rate, and sleep well at night.

Now, in retirement, I’d say the key is still to avoid the hucksters, seek a reasonable rate of return consistent with safety, and spend less than you earn (whether that be earnings on investment/Social Security/pension, or by working, or all of the above). That way, you’re sort of guaranteed not to run out of money. Yes, I learned that from my Mom (who is 93, and will NEVER run out of money, just ask her). Earn an average of 5% and withdraw 4%, works like a charm.

Yours,

Bozo

PS: Thanks for the blog. It does make for interesting reading.

By: Lord

Lord — Wed, 27 Aug 2008 18:38:12 +0000

The biggest problem with 401ks is so many do not use them. Making them the default is a start, but many won’t anyway.

By: JLP

JLP — Wed, 27 Aug 2008 18:33:44 +0000

Bozo,

Keep in mind that it’s to the professional’s advantage to belittle people and make them feel stupid and that they need the services of a professional to help them navigate through this amazingly complex financial mine field.

By: Bozo

Bozo — Wed, 27 Aug 2008 18:27:14 +0000

I stayed in my former employer’s 401K plan for nine years after the leaving the firm. It was invested in a “vanilla” 60/40 balanced fund (with Vanguard). I only switched to a traditional IRA in 2006 so I could move half my money into non-Vanguard IRA CDs.

Those CDs have done pretty well, I might add.

I think some posters give folks too little credit for managing their retirement funds. The trick is to stay conservative, balanced, and leery of the “get-rich-quick” schemes.

Just my $.02.

Yours,

Bozo

By: "Mo" Money

"Mo" Money — Wed, 27 Aug 2008 18:23:30 +0000

I think education is the key. Along with 401k’s folks need to be educated in how to divesify there contributions.

By: JimmyDaGeek

JimmyDaGeek — Wed, 27 Aug 2008 17:58:28 +0000

Unfortunately, people are too stupid and greedy to manage their own financial resources. If they weren’t, we wouldn’t have the current subprime mess.

The government 401k only has index funds and targeted date index funds. Even with these limited choices, people can screw themselves chasing the previous month’s gainers, instead on settling on an asset allocation and sticking with it. The various Lazy Man’s Portfolios prove the point – slow and steady wins the race.