Not much is up with 401Ks. When I was out of high school my dad told me how great the 401k plan is and I do agree it does have it's positives.
Now it might be easy for me to discuss why I don't like 401ks given the recent turn of the DOW index from 14,000 to 6,600 in about 6 months. However, I will give you a few reasons of my disgust with the 401k retirement plans.
I have lost money in my 401k plan and I recognize that I have no one to blame but myslef for that. Luckily though I am not 50+ and have not lost half my investment/retirement. However, I am young (or I tell myself that) and did lose 50% of my money, but that pot of money is relatively small compared to most others.
Here are a few reasons why I do not like the 401K plan:
1: By investing in a 401k one automatically signs up to become a mutual fund manager, or market investor. Are you qualified? Do you have what it takes? Most people are ignorant and think I have a retirement plan (a 401K), I will be safe....
2: You pay someone to manage your retirement money whether that fund goes up or down. Many people lost a great deal of money, but their mutual fund managers still made great money. In-fact they probably received a bailout on top of what we have been paying them every time a portion of our checks enter a 401k. Do you think our ancestors would roll over in their graves if they new we pay others to hold our money?
3: A financial planner will tell you that the market since inception has averaged over 12% a year. This is a true fact, however will that trend always remain? There are lots of existing factors that do not point in that direction. Lets say it does though, if the DOW were at 10,000 in 2010 and it averaged a 12% gain for the next 20 years, in 2030 the DOW would be at 96 thousand and change. Yeah right!!!
4: HIDDEN FEES, gotta love those!
5: A 401K plan provides a false sense of future security, which increases a tolerance of debt and promotes bad spending habits of living beyond ones means.
6: Your money is essentially inaccessible until you 59.5 or whatever the age is now. Sure you can borrow against it which is a stupid idea and you can pull money out of it which is another stupid idea! This equals a loss of other investments that you could have made during this time.
7: Limited choices of funds and lack of education. Red=risky but high returns (go for the lottery wins) Green equals having your money in the bank. Choices based on risk, yes you are a good investor. Can anyone name a stock in their mutual fund?
The solution...
Figure it out yourself!!!
I think it is simply to not put all your eggs in the same basket. I believe that future generations will not bank on 401Ks the same that we have been told to not count entirely on Social Security. I think younger generations will need an assortment of investments to retire properly: real-estate, bonds, business ventures, stock investments, passive income, collectibles and other types of investment vehicles.
May we not be as the picture when I started this blog.
http://ryansbigpicture.blogspot.com/2008/09/big-picture.html
