Did anyone see "60 Minutes" this week? They quashed the 401(k) and mutual fund industry:
http://www.cbsnews.com/stories/2009/04/17/60minutes/main4951968.shtml
What they didn't represent was behavioral finance of 401(k) investing! They represent the idea that 401(K)s are not the problem, but that investors making poor choices might have a lot more to do with the "disaster" we are in now. But they could easily have address a number of ways investors can still see the bright light at the end of the tunnel for 401(k)s: by working with an advisor that can help them understand choices. Even for retirees living off their investments, they can make some adjustments-spending a little bit less for just a few years will stretch their investments a great deal. Perspective would also ease the fear that we will run out of money: in 1929, it took investors 6 years to get back to pre-market crash. That's not a whole generation of lost investments, as some headlines touted back then, and are doing again.
The press is incentivized to sell sensationalist stories, but there has to be some checks and balances on the good news that is out there, but being missed.
Shame on you 60 Minutes, I know you can do better.
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Not a joke
10 hours ago
Good point. I had similar thoughts. They put all of the problems in one basket after painting them with a single broad brush - 401(k) fees (bad!), unemployment (assuredly bad!), and retirement insecurity (complicated but forget that, really really bad!).
ReplyDeleteThe 401(k) phenomenon is driven by cost - it costs less when employers can shift the burden of creating defined investment returns to their employees. Pure and simple. There was no fraud or snake oil sale involved. As you point out, this means that education is the key going forward, not creating villains. Can you imagine if corporate America was still using defined benefit pensions? We'd be talking about trillion dollar bailouts of the PBGC. People need to invest the time to manage this part of their retirement security, that should have been the point of that aspect of the presentation I thought.