I read an article in last Sunday’s Boston Globe titled “During a bear market, future of the 401(k) is questioned.” The author gives us some data points such as “about one in four 401(k) participants ages 56 to 65 had more than 90% of their money invested in stocks.” Now, this is just one data point, which can alternately be stated,”fewer than one in four pre-retirees had more than 90% of their money in stock.”
The article goes on to suggest that “the 401(k) has shifted all the responsibilities for retirement investment from the firm to the individual.” Well, when did one’s employer become our caretaker? An employee with a defined benefit plan could work six jobs over thirty years and find that the individual pension didn’t add up to much when compared to the employee who stuck it out with one company for twenty plus years. A 401(k) with some matched employer money provides a nice portable plan that one should contribute to over their working life.
Why is it that when the market was flirting with its all time high, there were calls to invest the social security trust fund in stocks, but now that we are nearly 50% off that high, even 401(k)s are too dangerous and we need the government to take away our choices?
Disclosure – I am down in my retirement accounts by about the same amount the S&P is down, a bit less as there’s a bit of cash there. In my mid-40’s I am still nearly 15 years from retirement. As I aproach the 10 year mark, I’d start to rebalance and be about 50/50 as I’d intend to be during retirement. Keep in mind, 401(k) does not mean stocks. It’s simply a wrapper, tax deferred, into which you can put stocks, bonds, cash, etc.
I hope this movement doesn’t gain any popular momentum. Bad idea.