this post was submitted on 21 Jan 2024
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Work Reform
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The great 401k lie?
Can't speak for OP, but I don't look at the 401k as a stable retirement vehicle. It's a vehicle to pump "dumb money" (read: casino chips) into the stock market. If the stock market downturns just before you retire, if the firm managing your 401k makes bad investments, if another 2008-style real estate collapse happens, your retirement fund suddenly has less money in it than you hoped, so you're gonna have to work longer.
The administrator of your accounts has zero control over most of the funds available in them, their rise or fall, and your funds are separate from any investments that financial institution may or may not have made.
If you have a 401k with fidelity, or ADP or Schwab or Trowe Price or whoever, some of those are banks, soke finance companies, some payroll, anyway, the point is for each, the money in your account is yours to allot and invest as you wish based on yhe invesrment options your company chose or negotiating with them to administer your company's plan. The admin makes money by admin fees, not by taking your money and reinvesting it in something you don't know about. Granted, yes if there is a stock market crash, most financial companies will similarly overall struggle, but they have lots of arms and operations (mortgage loans, commercial, consumer banking, investment banking, etc.) and they are 100% all disconnected from the money in your 401k.
That said, 401ks are awful and a sham that were pushed on an uninformed public and we've only just begun to see the effects as the first generation reaches end of work age...and can't stop working. It'll continue. Props to anyone fighting and organizing against it or trying to avoid as much as possible. System fully bought and broken by greed.
What's the point of your first two paragraphs? The person you responded to is 100% right. The point is to pump money in to the fuckin stock market so the wealthiest people can profit off that "investment"
The point was is the plan administrator has no control over whether the value of his account goes up and down, which Op said they did. I agree with everything else Op said but think it's important since most people don't understand the mechanics to learn about them so added the correct info.
When the plan administrator is picking the stocks in their “Target Retirement 2055” account, I’d say they have a large amount of control.
Now the S&P 500? Probably no control. But is it truly the S&P 500 or some bull shirt index fund from the 401k provider that’s not 100% following the S&P 500?
The portion of the comment I replied to, which I highlighted at the top of my response was that Op had said that "if the company managing your 4401k makes a bad investment", concerned that (among Ops other accurate concerns) your 401k funds could be used elsewhere without your knowledge or permission by the plan administrator, which they can't. So I corrected it.
Lazy people immediately REEE when someone doesn't immediately jump on the tribal circle jerk and agree even when parts of a statement are incorrect. Ops point was overall correct and a good one and correcting something that was wrong doesn't mean I disagree with the rest of it. Lookup false dichotomy.
If you’re investment is in the hands of a company that’s manually picking and choosing you’re in bad hands.
Better?
Thanks for the informed take.
While true, I'm not an investor, I'm a software engineer. I don't know good investments from bad, so if I tried to invest myself as an uninformed person, odds are good I will lose a lot of money very quickly. And becoming an informed investor is a lot of time and effort I don't have. I rely on the managed plan because I know there are professionals handling it.
My employer actually switched our 401k's from ML to John Hancock. I had no say in this, I don't know if JH is more or less competent as a firm than ML. So if I have fewer choices because I don't know how to invest and would prefer someone to manage it, I have even fewer choices because I don't even get to choose who manages it.
This is where we most agree. Most people don't know how to invest, so they either let the retirement funds handle it, or they try it themselves. If they try it themselves, they either have to learn how to invest, or they have to get lucky. If the funds handle it, they can be lured in by "stable, lucrative" investments that turn out to be bad, like Mortgage-Backed Securities. Even informed investors can lose money. No matter which path we follow, it all becomes gambling in the end. It's unacceptable that retirement funds are treated as such.
The 401k replaced the pension. It used to be that a company would pay for your retirement, now you pay for your own by being forced to pay into the stock market, and it doesn't go nearly as far as the pensions used to. People are working well into their 60s or older, because 401k's often don't pay out enough to live on. It's another way that companies have figured out to avoid having to pay their employees while pumping up the value of the stock market at the same time.
In the late 80s and early 90s, all the badly managed companies went bankrupt and convinced business friendly judges to delete pensions, too expensive, you see. This left a lot of boomers and their parents with nothing all of a sudden.
The 401k problem is that you are now responsible for managing things and all the liability that brings. Pensions were managed by professionals.