Comments on: The 401(k) S(k)am

By: Joy

Joy — Tue, 14 Oct 2008 04:09:05 +0000

Come on gives us a break. No one holds a gun to your head to participate in the 401k.

Keep in mind the current crisis started in REAL ESTATE!!

Lastly, American over consume in almost every category, much of it purchased on credit. The problem is not the 401k, it’s the culture of consumption and credit.

By: Cindy Allen

Cindy Allen — Mon, 13 Oct 2008 22:33:29 +0000

Patrick and Chris,

You both just convinced me. I’m deleting Andrew’s comments from this point forward, unless he decides to actually contribute something valuable to the discussion.

You’re right, Jay Louis, this is a real estate site. The 401(k) post fell under the category of investments, and real estate and the stock markets are not very good investments right now, for related reasons. But trust me, this will probably be the only 401(k) post I’ll do.

I’m all for personal responsibility, but as I said, most professionals don’t outperform the market, so it’s doubtful that the average person will. All I know is that despite following the direction of financial experts, I am not nearly as ready for retirement as I was led to believe I will be, and I doubt I’m the only one.

And although it’s nice to think we have control over our investments, is that really true, when the market crashes every few years and the bottom falls out of the real estate market?

By: Chris

Chris — Mon, 13 Oct 2008 21:54:16 +0000

I think it’s harsh and unfair to call 401k’s a scam. The 401k allows you to allocate your money however you choose to do so — into safe areas with little growth or more risky investments with high growth. If you had all or the majority of your money in stocks through your 401k, then that’s a risk that you have to be responsible for. I agree with Workafrolic. Maybe this will help encourage people to be more knowledgeable about their portfolios and reassess exactly how much risk they honestly wish to take with their money. P.S. The Andrew Waite comment comes across to me as more like SPAM to get people to visit his website or subscribe to his newsletter or whatever he’s selling.

By: Patrick

Patrick — Mon, 13 Oct 2008 21:16:14 +0000

Boy that Andrew guy sure is a jerk.

By: Jay Louis

Jay Louis — Mon, 13 Oct 2008 20:02:52 +0000

Can we talk real estate? Isn’t that what this site is about?

By: carlivar

carlivar — Mon, 13 Oct 2008 19:53:55 +0000

Again, please look at GM’s retiree burden for an example of why pensions and such DO NOT WORK. My friend’s father is a retired Delta pilot and he lots his pension.

I’m tired of people giving the excuse that “people don’t know how to do” something. If people can’t be bothered to learn about their finances because American Idol is on, that’s their problem. As the quote goes: “Liberty means responsibility. That is why most men dread it.”

By: Cindy Allen

Cindy Allen — Mon, 13 Oct 2008 16:09:58 +0000

Workafrolic, did you mean that employees make better investment managers than employers? I think you did.

I don’t think many employees understand the stock market and mutual funds the way they should. Therefore, they’re at the mercy of the limited number of funds available to them, their limited knowledge, and the market itself. Yes, some people make it their business to understand the market, but many others don’t. People are financially unsophisticated and undisciplined. You only have to look at the amount of debt in this country to see that.

Employers don’t want to provide employee benefits anymore. They’ve ditched pensions, and every year they contribute less and less to health-care benefits. Unless the U.S. wants to end up with a nation of people with no health care and no retirement savings, something needs to change.

By: Workafrolic

Workafrolic — Mon, 13 Oct 2008 15:29:35 +0000

Cindy, While I can’t defend the executive perks you mention, I’m not sure I agree that employers make better investment managers than employees. Each person has a different risk:reward point based on their personal tolerance and the amount of time they have until retirement. Employer plans usually didn’t allow enough breadth for a customized mix, just a one-size-fits-all solution. Additionally, companies under pressure for short-term results might be pressured to do odd things with employee contributions like hold too much company stock, fail to properly diversify, or compensate for poor investment choices by paying today’s retirees with today’s employee contributions. At least with the 401k, I have no-one to blame for poor oversight but myself.

By: carlivar

carlivar — Mon, 13 Oct 2008 15:24:32 +0000

You don’t have to buy stocks in your 401k. You could go 100% bonds, or even change your account type to avoid the small list of managed funds and buy stocks directly yourself. Granted, the recommendations tell Average Joe to buy more stocks the younger he or she is. That is still probably a good strategy. As you get older you move your funds from stocks into bonds. That’s why I don’t understand why soon-to-be-retirees are so impacted by the market. If they used the “401k calculators” and such provided by nearly everyone, it would have told them to be in about 80% bonds.

Pensions aren’t all that great either. Just ask retired Delta Airlines pilots (who lost theirs). And GM is struggling desperately to pay their retired employee obligations, as everyone with sympathy for these retirees drives around in a Prius…

By: Andrew Waite

Andrew Waite — Mon, 13 Oct 2008 15:20:52 +0000

Cindy: You are certainly caught up in all the popular trends, renting and 401Ks. Try planning.

This whole financial swoon makes self directed IRAs in cashflow positive real estate look really attractive. Returns in 2008 year to day – 14% Not bad for real estate in a down year.

Most people plan their vacation better than their lives. Its not hard to learn how not to be a Lemming!

Andrew Waite
Personal Real Estate Investor Magazine