Posted on 02/08/2009 8:12:37 AM PST by rellimpank
Last month, Los Angeles Times columnist Tim Rutten penned a column on the recent tumble of the nation's 401(k) tax-deferred retirement accounts.
(Since October 2007 our 401(k)s have lost a third of their value -- a cumulative $1 trillion.)
"There's been little discussion of the way in which this economic implosion has exposed the utter failure of the now-ubiquitous 401(k) retirement accounts," Mr. Rutten offered. "In fact, the entire 401(k) system looks increasingly like the sort of bait-and-switch con relished by the Bernie Madoffs of the world."
The problem, according to Mr. Rutten, is that "in 1978, when Congress amended the Internal Revenue Code to include Section 401(k), it envisioned the provision mainly as a way for workers to supplement their companies' traditional defined-benefit pension plans and Social Security. ...
"Nobody at the time envisioned the 401(k) as something on which people would rely for their retirement. But in the years that followed, more and more employers began to look for ways to get out of funding the pension and health plans that, up to then, had been regarded as part of the responsible capitalist social contract. ...
"Nobody bothered to ask employees whether they wanted to swap their pensions for choice or ownership, nor did anybody stop to notice that very few people are suited by background, ability or temperament to actively manage investments.
(Excerpt) Read more at lvrj.com ...
Most pensions aren’t worth the paper they are written on either. You are totally at the mercy of the company. What happens if the company goes under?
They days when people worked for a company 30 years then retired are long gone. Most people switch jobs (and even careers) multiple times in their lifetime.
The problem with 401k plans is that they are tied to a company at all. Why should my retirement fund be tied in any way/shape/form to a company I happen to work for?
As for people not being up to managing their 401k funds. The current system ties you to a limited number of options through the company 401k plan. Most people would be much better establishing a retirement account with a big mutual fund (like say Fidelity) and letting them assign someone to manage your account for you based on your goal (”I need retire in 30 years vs. I need to retire in 5 years.)
“Nobody at the time envisioned the 401(k) as something on which people would rely for their retirement.”
What?
more statements that the taxpayers are too stupid to manage their own money
of course, you stupid peons out there, the government could have and can do a MUCH better job of assuring you a pension. BOHICA.
Just look at how well they are managing our natonal budget. and social security
Hey, ss must be well managed, the checks keep arriviing- right?
Everyone should learn how to manage their 401k account.
--I haven't kept up to speed on this but 401k's were created about then as an alternative to unsustainable pension plans, (as all of them were becoming)--
Also, the 401k plans are only insured up to 100,000. If you have over that what happens if the owning company fails?
I put mine in what they call the ‘stable fund’ and haven’t lost anything.
What amount must you remove and at what incriments once you retire?
As for people not being up to managing their 401k funds. The current system ties you to a limited number of options through the company 401k plan.”
Exactly and the answer is to offer far more options in this area, not less or talk about abolishing it either as the left is clamouring to do. As a matter of fact, I for one would prefer that nothing change with them for the period of time the left wing jokers are in power. The “cure” they will present will most likely be far worse than the problem.
“Everyone should learn how to manage their 401k account.”
I wholeheartedly agree. I just begged to differ with the original statement the writer wrote.
Yes, we’ve done very well, excepting the last few months, which were bad, but ... we fell with everybody, no professional would have done better and most did worse.
I’m in a company 401K, managed by Fidelity
I’m not in any of these no brainer choose your retirement date plans. Here is how they did in 2008. I did worse than they did choosing my own, but I’m not blaming anyone but myself.
FID FREEDOM 2010
-26.00
FID FREEDOM 2020
-32.34
FID FREEDOM 2030
-37.04
FID FREEDOM 2040
-38.81
FID FREEDOM 2005
-24.91
FID FREEDOM 2015
-27.45
FID FREEDOM 2025
-33.85
FID FREEDOM 2035
-37.87
FID FREEDOM 2045
-39.29
FID FREEDOM 2050
-40.78
Does anyone really know where all this money has gone? It just disappeared into thin air. George Soros and Obama Dems have done a terrific job of stealing our money and ruining our economic viability. All this was planned well in advance and was accomplished too quickly and easily - it boggles the mind. Hopefully someone will write a book and expose how Soros and his American hating pals totally destroyed our Nation.
Actually, although it cannot be done with your current employer, past 401K funds can be wrapped up in an IRA account and be self-directed, one can even invest in real estate with a self-directed IRA account.
If you really want to manage your IRA account, go the self-directed route.
Yes, in one plan we have that problem — I gave the broker a list of eight funds to distribute 401K funds into and he said his company’s plan only allowed us to invest in two of them. That kept us out of Brazil, when we would have done very well there. In our Vanguard funds we have the ability to invest in just about any 401K allowed investment. I like Vanguard! The other company, the one with the damned restrictions, shares part of its name with the reprehensible US Rep from Mass.
Does anyone really know where all this money has gone? It just disappeared into thin air. George Soros and Obama Dems have done a terrific job of stealing our money and ruining our economic viability. All this was planned well in advance and was accomplished too quickly and easily - it boggles the mind. Hopefully someone will write a book and expose how Soros and his American hating pals totally destroyed our Nation.
There is merit to what you suggest. I was shocked to learn of the fees that the mutual fund companies charge, particularly the ‘funds of funds’. It seems we pay fees for the management of the funds that contain other proprietary funds - all of which charge their own fees.
I've been listening to Ric Edelman and trying to become educated enough to ask the right questions. I have to decide if I should pull my IRA from Fidelity and go with an advisor who will invest me into diverse exchange traded funds (which have lower overhead).
.
Same here. I had a Fidelity account for decades. When I retired, I rolled it over to Edward Jones. Not exactly complaining about Fidelity, because I did allright, but look at ALL their "Advice" ads on Yahoo Finance every day. They ALL say, to the effect, "NO!!! NO!! Keep it in!!!! Let us take it to the racetrack one more time!!", and this does not give me a warm feeling.
This is opposed to where I could call Jones and say "Get me the hell out of derivatives and avoid FNMA and FMC like the plague" and have it happen THEN.
Much of it never existed. It was a false prosperity based on inflated asset values that are now returning toward reality (but still aren't there yet).
While true they're tied to a company you're working for, a mobile employee can move it to the next companies' 401k (most companies with 401k's allow this) or to an IRA. That said, I agree completely a preferable approach would have it completely out of the company's control (assuming there is an honest Wall St. company available to manage it instead). They're left inside employee companies because of the differing amounts and methods of 'matching funds', bonus provisions, multi-tiered savings accounts, etc...as with all employee benefits, so I can't imagine that change with 401k's. As with anything else, if an employee finds that to be a problem, time to start job hunting! The 401k was a blessing when it came out. That Defined Benefit Pension plans died is a curse. That the 2006 Congress passed the Pension Relief Act is another curse that can be directly tied to most of the layoffs in the last year!(you won't see that in print in the dinosaur media). That the NEA has an agenda to preclude anyone graduating from an American Public School have an iota of economic understanding is the greatest curse.
True story: My wife’s former company stopped their matching 401k contributions last year causing the employees to finally take a good look at their 401k.
It turns out the company was actually choosing what they thought were the “best” investments for their employees 401k and in the process most employees lost at least 40-60% of their money.
Those who wanted to cash out of the plan found that beside federal taxes, an additional 5% was deducted from their cash-out money by the company for “administrative fees”.
It turns out that most of the employees were unaware that they could have gone onto the plans website and changed their investments themselves-by the time they found out it was too late.
The employees have filed a complaint with the NY labor board.
Luckily my wife cashed out in good shape before all this happened because I kept track of her investments on this web site and trashed any that were not making money.
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