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Why Is Your 401(k) In Trouble? Because You Don't Have Time To Read This Post

Time-starved? Rushing from pillar to carpool to assisted-living open house? No wonder your 401(k) is in trouble.

The average American multitasker is way too busy and stressed for DIY retirement investing. This is not something you can do instead of texting while you're bumper-to-bumper on the freeway. Talk about safety! What's at stake? Your life, health, and happiness in the last, oh, 20 to 40 years of your life.

The White House has 401(k) relief high on its priority list for 2010. Among the questions raised: Should the 401(k) itself be retired? Should we have opt-in or opt-out? Can we go back to the pension model - or something with more security?

But the problem predates the recent unnatural disaster6s (recession, market slide, burst bubbles) that have devastated American financial futures. (Mine too: In December, when I looked at my year-end numbers, it was clear that if my retirement account was a tree, as suggested by one ad campaign, it was more Charlie Brown than Rockefeller Center.)

There's a pivotal question even for better economic times:

Can we - you and I - cut it? Can we handle our own investments?

Many experts, pundits, and industry types reassure us that the average American can look out for his or her own interests.

I'm not so sure. This isn't about the smarts of the average American; it's about how much energy and time goes into this "looking out" thing. Just look at my colleagues' lists of "10 things to get right" or "stupidest mistakes" to avoid. (And the multimillion-dollar industry of books and workshops provided by those reassuring pundits and experts.)

First time-suck: "educate yourself." Start by mastering the lingo: defined benefit, conservative growth, rebalance, commingled, no-load, SEP, SWP, EFT. (For these, and a mind-numbing column of others, check out a handy-dandy glossary like this.) As my editor here at MoneyWatch says, the call for "financial literacy'' is favorite industry dodge, when the real issue is financial services reform.

Even the most literate among us then face obstacles. First, you have to spend quality time deliberating on the kind of questions that send otherwise sane adults into denial so deep that they don't even create a will: How long will I live? How soon will my fellow breadwinner die? Once you've done all the math (another favorite activity), remember to always read the fine print, scrutinize claims and be proactively skeptical; there are plenty of deadly pitfalls.

With all due respect to the 10 Things list concocters, who has the time? Or the stomach? (Mike: You really think your list takes one hour? Even if our readers do have all their financial statements handy?)

The 401(k) was sold to us as another apple-pie opportunity to Make Our Own Choices. Unfortunately, we're swimming in choices right now. Back in the day when we had pensions that someone else handled, we also had fewer life choices to agonize over, from milk (Skim Plus? Skim Minus? Soy Joy? Soy Yuck?) and light bulbs (spend now, save later) to phone service and health insurance (High deductible? Out-of-network? Accelerated bankruptcy?) The joys of choice are dangerously overrated anyway.

The investment industry would have us believe it's all very simple. Fidelity's ads show a green-brick-road that magically appears to steer would-be retirees through the forest of options and distractions; when one investor is lured off-track by a mid-life-crisis car in a showroom window, the Fidelity adviser (updated from diffident suit to caring mom) gently guides him back to safety.

But do-it-yourself is better when the stakes are lower: assembling your IKEA bookcase, shellacking your deck, scrapbooking. Or if you're a person who loves the investment process and wants to spend their abundant leisure time on it, like a devotee of vintage Mustang who likes to take the engine apart.

Love it or hate it, for now, you're stuck with the job. Maybe start with this list.

  • Manage your anxiety. You do have to tackle the literacy thing, and the more you know, the less it will scare you. Make a date with yourself to spend just 10 minutes on a website like Fidelity's or Principal's. They do walk you through it, and that can demystify. Next time, you'll spend 30 minutes.
  • Remember you're on a learning curve. Don't be afraid to ask dumb questions. (After all, don't you wish Alan Greenspan had?)
  • Go for some handholding. Take advantage of free workshops your employer, public library or community college may offer. (Be wary of those run by reps from investment houses.)
  • Outsource. Consult (at least once) with an independent financial adviser. Or use the services of an investment company (just don't leave all the driving to them).
Meanwhile, check out the "most dangerous woman in America," Teresa Ghilarducci, whose book is called When I'm Sixty-Four: The Plot Against Pensions and the Plan to Save Them.

For my money, this "plot" is one of the better conspiracy theories out there.