I just read the Time Magazine article about why 401K's should be retired.
The article basically talked about how the old pension programs were cancelled as companies tried to cut costs and increas profits. The article then showed how 401K's have not performed as well compared to old pension programs.
The main reasons for the lack of performance in 401k programs were said to be lack on individual investment by employees, poor fund performance, and lack of time for 401K programs to grow. Of course anytime you look at the performance of an investment program during one of the worst markets in history, there will be arguments for something different.
I can't imagine trying to retire within the past few years. Just when you think everything is all set, your retirement account drops 30 - 40 % and now you either can't retire or will need to live on much less.
The proposed fix for future retirement plannig is to have retirement insurance programs. This way, the risk would be pooled and benefits would be guaranteed.
I think the idea of retirement insurance is interesting. I'm not sure on all of the details or if there are retirement insurance plans available now.
Since I am younger, I plan to continue investing in 401K and mutual fund investment programs. So far, my recent investments have been doing pretty well.
I understand though that I am not the usual person. Most people are not taking responsibility for their own retirement savings. Most people are not visiting sites like this one to talk about investing.
What will happen if many people do not invest in their personal retirement savings accounts and if the ones who do see poor performance. We might have a crisis on the horizon with tons of senior citizens not being able to afford basic amenities.
Well, the main benefit of the retirement insurance program is that you would be forced to pay your premiums each month. It also would be guaranteed returns, but most insurance programs have ways of making money by finding loopholes that discredit your claim when the time comes to collect your retirement money.
I think there are many problems with the 401K program, but I still like the idea of individual retirement accounts. People have been in the pension habit so long that it will take time to get used to the idea that we are responsible for our own retirements. Even when people realize we need to save for retirement, most people don't undertand just how much we should be saving and investing on a monthly basis. Until theis habit/culture change takes place, most of the retirement accounts fo Americans will be greatly underfunded.
The other thing I was thinking about is that most analysis of 401K programs will show negative results because we just went through a very negative period of lower stock prices. Any type of investment program could be shown to be a loser when the snapshot is taken during one ot the worst recessions in history
Delayed gratification is not a strong point in our culture. By the time people start to think about retirement and what they need to do for it, they have already wasted a ton of investment time. With compopund interest playing a huge role in our portfolios, that early investment time lost is magnified.