Comments on: Retirement Dreams Disappear With 401(k)s
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- The story was good, but only scratched the surface of the issues and how we got here.
One of the benefits to employees of 401(k)s is "portability" - the ability to take your account with you when you move jobs. Traditional pensions aren't portable, since one has to work at the same firm for often more than a decade before earning any benefit. 401(k)s offer a better choice today's mobile workforce.
One of the benefits to employers is "defined contribution" - companies make a contribution and/or match the employees contribution and the company has satisfied **** obligation. Pensions offered a nearly endless obligation because the are "defined benefit" - they state a certain income the beneficiary will receive years out in retirement. The company owes this in the future, regardless of how its investments perform. This is a HUGE liability (reference GM, Ford, states and municipalities).
Both these benefits are valid. However, both of these attributes of 401(k)s cost money to administer. First, because every employee needs their own account. So instead of a 10,000 employee company having a $500 million dollar pension fund, run with all the efficiencies and low fees of a single large fund, the company's plan would need to have 10,000 accounts each averaging $50,000.
A second source of additional costs is the the "need" (or desire) for daily access (trading, account balance, loans). The desire for daily access is absurd. Retirement is a 30-50 year investment, what is the need to trade it every day? Sophisticated long-term investors take a very measured view of trading and rebalancing. The cost of running a daily-accessible fund is much. much higher than a less-frequently accessible fund. But the shift of investing from a true long-run investment to a quasi-personal financial product drove the need to have more and more "features" - such as daily access. This all costs money guys, so no one should be surprised that there are all kinds of fees.
It really too bad that this happened. It has been a long transition over 20+ years. As a 20 year veteran of the pension investment industry, many saw this happening. Many of us agrued against the trend of using high-fee vehicles with features that were unneeded, but the demand from employees and employers was too great. The medicine tasted too bad to take and the disease was too long in acting for the patients to understand. - Reply to this comment
- Kathleen Coleman----where are you?
I run a small business----and could have a place for you.
I've been trying to find someone who has and does----exactly what you seem to do/have?
The values and skills you seemingly have---could really help us both?
so google skimoil and call me - Reply to this comment
- I watched the 60 minutes piece on how 401k plans are unreliable and
devastating to people. I did my own analysis on what is the best retirement plan.
Social security collects 6.2% from the employee and 6.2% from the employer for
up to 90,000 of your salary. In ten years, you have achieved
"max credits", yet have to pay into the plan for the REST of
your life. I simply took that same 12.4% of 90grand and
invested it for the past 40 years in the a.) the stock market using the s&p 500return and then
b.) ten year treasury note rate at the start of each year.
Here is the benefit:
Social security: $945/mo
Stocks: $2,152,907 or approx 13 grand a month annuity for life
Bonds: $2,460,827 or over 15 grand a month for life
and yes, this is AFTER the "devastating losses of 2008."
Therefore, private investment in EITHER stocks OR bonds yields a return of over 1,000 percent over Social Security. In order to reduce volatility, it would be wise to put say half of your money into the stock market and half into bonds in your 401k when you are young. As you get older, one should reduce the percent of stocks. I'd listen to suggestions that might regulate and enforce this percentage, but the 60 minutes argument that ALL 401k's are bad is nonsense. Social Security is by far the weaker program according to my math. I will agree, upon request, to send anyone (including 60 minutes) my excel spreadsheet of the analysis. - Reply to this comment
- I wonder why Rep. Miller and Mr. Kroft did not tell the 60 Minute audience that the Pension Protection Act of 2006 calls for the disclosure of fees charged against the Participant Accounts in 401k Plans by 2008. This law also called for Brokers and Mutual Fund folks to make substantial disclosure of other involvement that could affect fees and investment performance. The PPA of '06 was hailed as the premier retirement plan law in 25 years.
Congress directed that the Department of Labor was to promulgate rules to implement this new law. Tragically, such regulations have come forth slowly. But with his Democrat party controlling Congress and with Rep. Miller chairing the Committee that directly oversees retirement plans, Miller has no one to blame but himself for the poor congressional handling of the implementation of the Pension Protection Act of 2006.
In fact, both Miller and Kroft should know and should have told the audience that many of the fees they were shooting at are actually paid by the Employer.
There are some real important things that should be said about 401k plans.....things that can help the "little people" who are saving via a 401k. It would be hard for Mr. Kroft to bring such information forward because "picking on the Boss and on the high fees" is "better copy". What ever happened to good reporting and good journalism.
Ray Gal................ - Reply to this comment
- I guess I didn't know prople brought their 401k statements to job fairs- that couldn't be a setup by Mr. Kroft could it?
The story indicated that many are novice investors- if so where are they supposed to get advice- under the law , employers can't give it- it's a violation of fiduciary responsibility- so they will have to get it from trained professionals- and their are many good ones out there who Mr. Kroft failed to interview in this one sided story- maybe they can get the government to do that too?
You have to pay for advice, just as you pay to get your car and plumbing fixed if you don't know how to do it.
Mr. Krofts report is sensationalism- something 60 minutes didn't used to do when they actually had journalists instead of someone looking to sell ratings- report a story in a fair and unbiased way- and while your at it fully disclose that CBS earns it's revenue from advertising fees based on ratings based on how sensational they can make a story to get more viewers - Reply to this comment
- Thanks for calling me a "chump". I guess 80% of the rest of the U.S. Citizens who have been contributing to 401(k)'s for the past 20-30 years are chumps also? My stuff was allocated EQUALLY among mutual funds and bonds - 50% of my "portfolio" was LOW RISK, because I am a low risk type. I also have a lot of CASH in savings, so no, I am not a chump. I do have some savings, but it sure is not going to support me in my old age. My 401(k) is with Fidelity - supposedly a solid (trustworthy?) company? I guess none of them are trustworthy, come to find out.
I am no longer an advocate of investing. I used to be. But yes, I sure do feel like a "chump" for doing what everyone else was doing: contributing as much as I could to a 401(k). I was led to believe this was the "responsible" thing to do - plan for my retirement. I should have just put the cash in the bank.
If you are going to invest in "safe" things (and what is that these days? GM? Lol ! Right) then what is the point of having a 401(k)? Why not just put the money in a long term CD and earn some interest. That is pretty safe, I would think. There is no "safe allocation" in a 401K as far as I am concerned. - Reply to this comment
- To all of you,
This story yes missed a lot of the story the focused on everyone being down 50% which is find. The reason why there down 50% is that the average American HAS NO EXPERIENCE IN INVESTING THEY SHOULDN'T BE DOING THEIR ON 401KS. THEY DON'T KNOW how to BUILD A SUCCESSFUL RETIREMENT PORTFOLIO. Its like us fixing our own cavaites in our mouth. You would never do it so why do you think your knowledgeable to do your own 401k. That's why there is professionals and no I'm not talking about brokers. Most people need to do their homework when finding a advisor. Their out there and there called Fiduciary advisors. Once they put it in writing that they are a fiduciary of the plan they can only have the best interest of the employees. But employers are choosing their friends at the broker dealer to run and pick their 401k. Even though their job is to sale mutual funds and not run a proper 401k. Most of them have taking one test and misrepresenting themselves as a true fiduciary adviser. I found this out by researching myself once my sister got ripped off in her 401k. She had 4% in hidden fees in her plan. By the way to all of you that think fees aren't a big deal couple words for you your stupid and you deserve to be ripped off. i don't want some salesman taking my sisters 401k or my money because he put some mutual funds in my 401k. The only reason he put it in the plan is because he knows how much he gets paid from it. Yes that's right huge conflict of interest. Theirs so many conflicts of interest in these things its unbelievable. I learned theirs 15 different hidden fees they can use to take from your money. And all your paper work won't show it. Why because theirs no law against it they don't have to show it any where. I recommend the 401k ripoff book. Its shows how to find all the fees yourself. At least the ones that are listed. Wrap, transaction, float, 12b1, revenue sharing and much more. When I asked my financial guy he didn't know anything. I knew more than he did how sad is that. If you have 2% of extra hidden fees in you plan when you retire the financial firm has stolen half of your money yes 2% only 2% can add up to 50% of you entire money do the math 2% of hidden fees times 25 years is 50. From what I hear your benchmark should be 1.25 total cost for everything the average 401k plan is close to 3% which is about 2% to much. So go do your homework as I did its the only way to fight back. So yes fees are a huge deal. - Reply to this comment
- [Im wondering if you are one of those people who didn't realize that dems and socialists are bad for the market. Did you think Nancy and Obama would be good for your portfolio? LMAO. You should have been in cash adn treasuries like most thinking people. Chump! ]
[Posted by azirine1 at 11:07 AM : Apr 21, 2009 ]
never fails ... another idiot who thinks everything is the liberals fault ... all while it was the whole financial sector who have been scamming their customers all along ... and this moron would expect you to believe that this group was run by ... supported by ... and deregulated by liberals. - Reply to this comment
- If Kathleen Coleman wants to move to Ruston, LA, I have a job for you.
cshoppe
csshoppe, I hope this is a sincere offer. My husband spent his life at one company (that ability doesn't happen any more) retired at 62 partly because of the workplace changes and partly because of a back condition. We have lost more that half of his 401k. What was left will sit making a pittance in interest until the market recovers. If and when it does we will once again place our confidence in the stock market and reinvest a portion of the money we do have. Until that time, we too feel the need to stock up on 'canned soup'. - Reply to this comment
- If 401(k)'s were NOT DESIGNED for retirement, then please tell me why they were marketed as RETIREMENT portfolio's ?? I mean, you could not access the money before the age of ... (what? 60? 65?) without substantial penalties. Seems to me .... that means it was to be used for LATER IN LIFE - you know -- Retirement ?!!!
The stupidity of "experts" out there just amazes me sometimes.
Also: another beef: I cannot believe that all the financial 'advisors' are still advocating 401(k)'s and investing and "keep your money in there! and keep contributing!"
You've got to be kidding me.
My 401(k) is less now, than it was TEN YEARS ago. So how long is it going to take to get back to what it was ? 10 years? 20 years? And what happens when the banks/market crash again, within those 20 years? Back down to 10% of what I had built it up to again?
401(k)'s are a huge colossal JOKE. And YES - they WERE marketed as a RETIREMENT Plan - to replace a pension, which companies no longer have - and to replace or augment Social Security - which is now no longer guaranteed to be there. I am 45. I have time to save a little money before retirement. But how much can I really save in 20 years? To live on? I am just laughing here. I guess I will have to "reinvent myself" as the buzzword phrase that keeps going around now. That's fine.
But I really feel for the 60,70,80-year olds who fell for this 401(k) crap (like I did) hook line and sinker. They are STUCK.
ARRRRRGH. I guess I will start stocking up on canned soup now, for when I am 70, because that will be the only way I will be able to eat. Does canned soup last for 25 years? - Reply to this comment
