Comments on: Is the 401k a bad idea?

By: P. Scully

P. Scully — Thu, 12 Jan 2012 15:59:09 +0000

Forced savings seem to be what the majority of people need as most people do not have the discipline necessary to save for retirement on their own. An interesting article.

By: Mr. Not the Jet Set

Mr. Not the Jet Set — Tue, 17 Nov 2009 16:50:32 +0000

Actually, the 401k is neither a savings program nor an investment. The 401k is simply a section of the tax code that allows certain qualified investments to grow tax-deferred. As Dave Ramsey describes, “it’s the coat that keeps the investment warm…. warm from the bitter cold of taxes”.

Where you put your money inside of that 401k depends upon your choices inside of what your company and the plan’s custodian allow – company stock, bonds, mutual funds, even short-term savings. The options vary widely.

If you, perhaps wanted to invest in something else, like real estate or businesses, then you would have to do it outside of your 401k and lose your tax-advantage. Given the past two years, I’m not terribly sure how either one of those would be considered safer than mutual funds (which are bouncing back). On top of that, you add your company’s dollar for dollar match (up to a certain percent)…. I’ll keep my 401k, thankyouverymuch.

By: Matt

Matt — Mon, 16 Nov 2009 21:37:29 +0000

@trent What I was saying was that most people feel that retirement is something they are owed, whether they’ll have the money to do so or not. Certainly anyone has a ‘right’ to retire if they can afford to do so. Just like the second amendment secures our right to own guns it doesn’t say the government has to provide us with any guns.

By: Len Penzo

Len Penzo — Mon, 16 Nov 2009 20:24:16 +0000

@Trent: Those who contribute to 401(k) plans have a lot more control over their contributions than you give credit for. For example, I saw the economic storm clouds building in late 2007 and eventually transferred all of my 401(k) money from stock market funds to a stable value fund over 6 months before the markets collapsed in late 2008.

While the stock markets plunged, my 401(k) didn’t lose a dime.

Yes, those who “stick their heads in the sand” may get burned – but there is plenty of control for people who pay attention to their 401(k) accounts.

By: JoeTaxpayer

JoeTaxpayer — Mon, 16 Nov 2009 19:34:29 +0000

Trent – your comment implies that putting one’s money into stocks for the long term is something you feel is not an investment. Am I mis-reading you?
401(k) is only a shell, a tax status, and investment limitation, some plans are better than others. Mine has a brokerage account, so I can invest in anything stock or fund that I could outside of the 401(k).
Sounds like you choose starting a business instead. Not that I want to debate the pro/con of it, but for those who ‘work for the man,’ a 401(k) can be a useful tool for retirement.

By: Trent

Trent — Mon, 16 Nov 2009 19:26:23 +0000

The problem with the 401k, as with any other “product” pitched by an advisor or financial planner, is that you lose control of your money. You hand it over and hope that the market goes up. That’s it. If it goes down, you can blame your losses on someone else while your head stays in the sand.

I noticed that some comments mentioned “investing” in your 401k; the 401k is a savings program, not an investment vehicle. Seems like small potatoes, but the two are 180 degrees from one another. Read Kiyosaki’s “Conspiracy of the Rich” where he gives a great explanation of the origins, purposes and pitfalls of the 401k among many other topics.

The best financial education we could get is not how to pick the best stocks or mutual funds to put into our 401k (which I don’t have, by the way); that’s as useful as getting and education on how to beat Vegas. We should be learning how to build businesses and investments where we control our own futures and produce monthly income streams INTO our pockets rather than OUT of our pockets like you get with the 401K.

PS: I do feel that it is my right to not have to work my entire life until I’m too old to appreciate what it has to offer, and once achieved, it is a wonderful luxury to have.

Trent

By: Carnival of Personal Finance #229 : Carnival of Personal Finance

Carnival of Personal Finance #229 : Carnival of Personal Finance — Mon, 02 Nov 2009 17:58:58 +0000

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By: Carnival of Personal Finance #229: candy edition — the centsible life

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[...] Is the 401k a bad idea?: Bob from Christian Finances discusses a recent Time magazine article suggesting we do away with the 401k. [...]

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The Best of the Best in Money and Personal Finance #8 — Sun, 01 Nov 2009 23:12:41 +0000

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By: Len Penzo

Len Penzo — Sat, 31 Oct 2009 18:33:21 +0000

The problem is Time seems to believe a comfortable retirement is a right, not a privilege. That is so typical of the entitlement mentality that seems to have taken root in America over the past two decades or so.

There is nothing wrong with the 401(k) program – it works well for folks who are personally responsible. Maintaining a 401(k) account is not rocket science: for most people it requires little more than adjusting fund balances and managing contribution amounts every three months. Savvier folks (those who take a couple minutes a day to follow current events) can adjust their fund allocations.

Oh, and by the way, Dave Ramsey is wrong. Only truly stupid retired people will ever eat Alpo – it’s more expensive than ramen noodles!

My $0.02 (after taxes)

Len
Len Penzo dot Com