401ks Are Not Broken, You Are



My Sunday Washington Post Business Section column is out. This morning, we look at the 401k.

The print version headline was What’s the problem with 401(k)s? You while the online version was There’s nothing wrong with 401(k)s, except the players involved.

Here’s an excerpt from the column:

“What’s wrong with these plans? Human behavior, which has managed to turn a relatively simple idea into a complex, overpriced, underperforming mess. Returns have lagged behind a myriad of asset classes doing exceptionally well over the long haul.

The solution is not very difficult: Simplify the plans, reduce the fees, make enrollment automatic and get out of the way.

To understand how to do this better, consider the three parties to any tax-deferred retirement plan, and what each gets out of it: the employer, the employee and the investment-management firm.”

I also got to throw in a snarky comment about Tim Armstrong’s distressed baby foolishness:

“The employer gets a low-cost compensation tool. Nearly all companies — the exception being AOL, which seemingly uses its 401(k) plan to discourage people from working there — use these plans to attract and retain high-quality employees . . .”

The entire column is worth the read . . .


There’s nothing wrong with 401(k)s, except the players involved
Barry Ritholtz
Washington Post, March 9, 2014   http://wapo.st/1cIBkAe

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