401(k)s: “A lousy idea, a financial flop, a rotten repository of our retirement reserves”

Our last blog entry noted how the opponents of defined benefit plans willfully peddle an unwarranted assumption fallacy, that 401(k)s are the only solution to the liabilities that some (not all) pensions are currently experiencing.
But, we continue ask, are 401(k)s really the best alternative in seeking the best outcome for America’s hard working middle class?

There is a growing body of evidence that they are not and the headline of this blog entry is a summation of Stephen Gandel, one financial journalist who is writing on the issue.

We recommend reading Gandel’s entire article, “How easy is it to become a 401(k) millionaire? Here’s the truth,” but we’ve posted his conclusion below:

If you want to end up with $1 million dollars in your 401(k), all you have to do is work for the same employer for more than three decades, save about 40% more than most financial planners dare to recommend, land a job at of the rare companies generous enough to match 5% of your contributions, and totally crush the market, while you go about your normal day job, avoiding all the sudden financial traumas that lead people to borrow against their retirement funds.

Of course Gandel ridicules the possibility for all those components of the perfect world equation that are offered by Fidelity Investments. In sum, 401(k)s are sending many hard-working, hopeful American workers down a rabbit hole of future despair. We would not wish them upon our worst enemies.