Free Markets, Free People


401 (k)s are a failure … or something

More whining from the baby boomers (and yes, I’m a boomer).  Joe Nocera of the NYT is 60 and his 401 (k) has just failed to provide for his retirement:

The only thing I haven’t dealt with on my to-do checklist is retirement planning. The reason is simple: I’m not planning to retire. More accurately, I can’t retire. My 401(k) plan, which was supposed to take care of my retirement, is in tatters.

And Old Joe was a fan of 401 (k)s too:

Like millions of other aging baby boomers, I first began putting money into a tax-deferred retirement account a few years after they were legislated into existence in the late 1970s. The great bull market, which began in 1982, was just gearing up. As a young journalist, I couldn’t afford to invest a lot of money, but my account grew as the market rose, and the bull market gave me an inflated sense of my investing skills.

I became such an enthusiast of the new investing culture that I wrote my first book, in the mid-1990s, about what I called “the democratization of money.” It was only right, I argued, that the little guy have the same access to the markets as the wealthy. In the book, I didn’t make much of the decline of pensions. After all, we were in the middle of the tech bubble by then. What fun!

But the tech bubble knocked the poo out his tech heavy portfolio (yeah, everyone took a bit of a soaking, but much of it came back). 

Here’s the part that gets me.  While you can kinda, sorta, give him a pat on the back for the tech stock thing and say “aw, poor thing”, that’s not why his 401(k) is in “tatters”:

A half-dozen years later, I got divorced, cutting my 401(k) in half again. A few years after that, I bought a house that needed some costly renovations. Since my retirement account was now hopelessly inadequate for actual retirement, I reasoned that I might as well get some use out of the money while I could. So I threw another chunk of my 401(k) at the renovation. That’s where I stand today.

Or said another way – he spent most of it on things that have nothing to do with retirement while also losing half to a divorced spouse.

How is that that fault of the 401(k)?!

Of course, it’s not.

But Nocera spends the rest of his article blaming all of this on the inadequacies of 401(k)s.  So what does he do … find an “expert” to buttress his obvious conclusion:

What, then, will people do when they retire? I asked Ghilarducci. “Their retirement plan is faith based,” she replied. “They have faith that it will somehow work out.”

I laughed, but it’s not funny. “The 401(k),” she concluded, “is a failed experiment. It is time to rethink it.”

Uh, no, it’s not.

It’s certainly not as failed an experiment as Social Security.  And, by the way, for those for whom it is a failure, it’s a failure with their own money (and not mine or millions of other tax payers).  Anyone who looks at Nocera’s explanation as to why there’s nothing in his 401(k) today knows better than to claim it’s the fault of the program or somehow a “failed experiment”. 

Clue: when you make huge withdrawals to buy and renovate houses prior to your retirement, you might be gutting your retirement program – you know, the program in which you were able to save a large amount of money for after you retired that you chose to use today?  And someone should also clue Mr. Nocera into the fact that his interpersonal relationships which end in divorce aren’t the fault of the 401(k) either.

But hey, in today’s world, it is hip to be a victim, isn’t it?   Everyone has to have something or someone to blame for their stupid decisions in life.   And Nocera provides a great example of the type.   Blame the fund, not the fool making the dumb decisions.

~McQ

Twitter: @McQandO

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26 Responses to 401 (k)s are a failure … or something

  • So, Nocera replayed the Social Security lock box game. He declared he had a lock box for retirement, he declared he had put money in there, he declared he could use it ‘now’ because he wasn’t retiring any time soon (and to cap it off, he declared a variation on the famously silly game, “its only (x amount), so NOT spending it will hardly make a difference!”.
    ==========================================================================
    And now that he’s older, and has his renovated house, is he looking to create a plan that involves ME contributing to HIS retirement? My kids? Who? Because I’m right there with him, we can write each other IOU’s, but I’m not pretending my retirement, or lack of, is going to be anyone’s fault but mine.

    • @looker — It’s another ploy by the left to justify seizing 401Ks for forced investment into Social Security II. Nocera is willfully ignoring that “the little guy” DOES have the same access. The little guy has the same freedom to work at a place that offers a 401K, and degrees to get into good jobs are hardly out of reach of poor students. Harvard, Yale and other “elite” schools will admit the poorest of students if your grades, tests and extra-curriculars are high enough

      Meanwhile, the New York Times still hasn’t reached a deal with its unionized writers. It thinks its workers are demanding too much! “Socialism for thee, not for me.”

  • “Individual responsibility, adult conduct…those are failed experiments. It is time to rethink this whole ‘self-government’ idea”. Nocera is excellent serf material.

    • @Ragspierre Serf material – surely this comes as no surprise, there are more of those than not.

      • @looker The Founders said not. Maybe hoped not. Still, the sample is biased. NYC…after all… “Serf City”, with apologies to Jan and Dean.

        • @Ragspierre I think the founders were elitists in this regard. They didn’t expect people without property (or women) would be allowed to vote . This obviously would change the very nature of the government since people who cannot vote are not going to become legislators or Executives or justices.
          =======================================================
          Fast forward to vote buying with the public treasury as we have officially franchised everyone over the age of 17 years and 364 days and in some places (where we don’t require any id) repeat voters, the dead, felons, and non citizens.
          =====================================================
          I don’t think the founders believed everyone should have a vote or they would have enshrined it in the original document when they covered our inalienable rights. Entirely possible that some believed it, but knew that it would never pass muster and be approved by the controlling class then at large (white, male, property holders).

        • @looker I disagree, looker. Tocqueville…after all…was looking at America as designed, and saw the potential flaws (if you can call them that). Women are as capable of self-government as men. While the Founders were very enlightened fellas, they were still men in the context of their time, and women were still suffering from the norms of the Dark Ages in a lot of respects.

        • @Ragspierre I only say this, because for centuries we have as a species, demonstrably massed thousands upon thousands, for various purposes both noble, and ignoble and those masses were not all thinking for themselves. In fact the species has specialized in creating institutions to accomplish various goals that frown on ‘thinking for yourself’.

        • @Ragspierre Yes, agreed on all counts, and I’m not suggesting we disenfranchise anyone who has a legitimate franchise. I for one will gladly surrender my vote after I have shuffled off this mortal coil and will be extremely peeved if someone continues to vote on my deceased behalf. And I think the founders had high hopes that we would prove be a nation of something other than sheep.

        • @looker I think we are at the nubbin of that question…right here, on our shew…

  • “…his tech heavy portfolio…”—————–Like the real estate mantra, ‘Location, location, location’, there is an investment mantra, ‘Diversify, diversify, diversify’. No one forced him to invest heavily in any stock, much less speculative ones like the tech stocks. There are also bonds, which are much more conservative (at least until the Obama administration). As a journalist of the boomer generation, he was no doubt aware of the seemingly infinite number of published books, magazine articles, etc. advising people how to invest their 401(k) money. He should have done less writing, more reading.

    • @timactual Note also that he arrogates to himself expertise in economics matters. He is…noteably…THE source for an attack on the AEI author who asserts that the financial collapse is directly attributable to the CRAP mortages force on the private sector by BIG GOVERNMENT.

      • @Ragspierre “Note also that he arrogates to himself expertise in economics matters.”—–Oh, I noted that. It’s hard to ignore when our betters lecture us. What I also noted was his simultaneous exhibition of economic ignorance. What is it they say about the ability to hold two contradictory ideas in mind at the same time?

    • Oh dear, I used the ‘c’ word. Evidently conservat*sm is so vile that it is even forbidden when managing one’s own financial affairs. Typical liberal, whining about how nasty reality is, and how helpless we are to cope with it, which is why he needs someone else to take responsibility. It puzzles me,though, why these folks seem to think that some government hack has more intelligence, knowledge, and skill than they do, and at the same time assume they have the intelligence, knowledge, etc. to lecture the rest of us.

      • @timactual You know markets don’t regulate themselves, they need wise progressives to do that.

  • “Comments are no longer being accepted” Because our writer got tired of being told what a moron he is…

  • Sell the house. The reason you accumulate assets on the way to retirement is to be able to sell them off to fund retirement.

  • What is actually insane is defined benifit programs like traditional pensions and social security. The left likes the idea of a guaranteed happy ending, but it isn’t a sustainable model.

  • Given that his wife was smart enough to leave his whiny ass, I wonder if she was also smart enough to refrain from squandering her half of the 401K.

    If someone interviewed her to find out that her retirement is looking just fine right now, I’d laugh my ass off.

  • I still remember those stories in the late 70′s about putting a couple of thousand dollars in an IRA each year and when you retire, you will be a millionaire. Of course, when you had double-digit interest rates, it seemed possible.

  • Joe Nocera of the NYT is 60 and his 401 (k) has just failed to provide for his retirement:
    >>>> Not to sound nasty about it…….but I really hope he ends up destitute eating dog food. NYT writer…..eff him.

  • Luckily for me, I go laid off in 2002 and my 401k and a (smaller) lump sum from my pension rolled over into an IRA.

    I had been doing just fine in diversified ETFs. After the initial stock bounce back, I and am doing even better in a diversified portfolio of individual stocks in good companies.

    Just hanging onto a bunch of SPRs works pretty well.

    I have about as much sympathy for Nocera as I do for the employees of Enron whose 401k were stuffed with Enron stock.

  • I thought that her name sounded familiar.  Do some poking around on that lady…she is a totalitarian fellow-traveler:  http://money.usnews.com/money/blogs/capital-commerce/2008/10/29/401k-foe-teresa-ghilarducci-the-most-dangerous-woman-in-america

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