The Great 401(k) Hoax: What You Need to Know to Protect Your Family and Your Future

Rating:
Summary: Accurate, Relevant, Poorly Written
Review: "The Great 401(k) Hoax" offers an accurate, well-researched analysis of what has become an fallacious bit of common wisdom in the United States: that the Stock Market is a means by which average Americans can amass wealth. It is a lie, perpetrated by the US financial industry to divert funds that would have gone into traditional, safer long-term investment options like bonds, start-up businesses or real estate into mutual funds and small-investor portfolios.

A part of this transfer is the 401(k) plan, where the weight of a pension plan is supposed to rest on stock investment rather than defined benefits (pensions where retirees receive fixed payments). The authors do an excellent job of explaining why companies in America switched from defined benefit pensions, and why using the Stock Market as a basis for them is a terrible idea. Readers of "One Market Under God" will find this information and argument very familiar, but the specific focus on the 401(k) plan and it's impact on the future retirement of millions of Americans is enlightening.

The major failure of the book is in its writing style. I've edited MA Theses and Dissertations that were vastly superior in terms of diction and command of the language than this book. Frankly, whoever edited this book should be fired. Also, I have to seriously wonder if the authors did not enjoy reading "The Starr Report" a little too much. Clearly they have a bone to pick with Bill Clinton, which is fine with me. However, by the middle of the book, I wanted to strangle them both if I had to read that Clinton blew another opportunity to do great things because he had "Monica's thong wrapped around his head." Their efforts at sarcastic humor detract from what is a very serious subject - the future retirement of millions of Americans - and their every sarcastic effort comes across as the work of a witless junior high schooler obsessed with potty jokes.

Rating:
Summary: long-term view that public must heed
Review: Firstly - It's not that I disagree with everything in this book - it's just that it's mostly a editorial, and I disagree with most of it. It full of innuendoes and opinions and unlike that other reviewers - I do not think very will supported with facts. Their conclusions have no traction in real life - they suggest alternatives for people that even they acknowledge are not available. Further they display a total lack of knowledge of current pension law - i.e. ERISA. The authors are in dire need of some Prosac and if any unwary readers get a hand on this book, a lot of other people may as well. Poorly written and without substance. Read the funnies - I want my money back!

Rating:
Summary: Clunker
Review: From the title of this book, one might conclude that he or she shouldn't contribute to a 401(k). However, with few companies offering pension plans, and the precarious state of the Social Security system, what alternatives does the average investor have to try to obtain a comfortable retirement? What Wolman is really saying with his sensational title is that the average investor should be careful when investing in the stock market. He then gives some simplistic advice on why the bond market is the place for retirement dollars. Taken alone, this chapter on bonds does balance the other advice in popular investing magazines, which focus mostly on using the stock market for retirement planning. Wolman also rehashes the post-Enron 401(k) legislation floating through Congress and presents these ideas as his own. All in all, "The Great 401(k) Hoax" has a few germs of good advice, but be careful about taking everything at face value.

Rating:
Summary: Historically relevant, prescriptive not really
Review: If you are looking for the ultimate debunking of the 401(k), this does not quite cut it. But as an earlier reviewer mentioned, used as a companion piece to Thomas Frank's ONE MARKET UNDER GOD (a classic and *highly* recommended) and his Harper's essay on the attempts to privatize Social Security this book provides invaluable context for the shift in the mentality of the country from viewing economic matters from a social perspective (our forebears who pushed for radical social change and got stuck with Social Security instead) to an alienated, individuated (bowling alone and/or we only have individual responsibility, i.e., there is NO social world) one -- a shift that has taken place in the last 25 years.

The history of this shift and the Wall Street numbers of other downturns were very instructive and persuasively clear to this reader.

Unfortunately, the writing really became rather opaque and not particularly clear about prescriptive measures to optimize one's investments, i.e., what "stillwater investing" really means and what options one has as an investor. I had to reread sections fairly closely to figure out what advice they were trying to pass along to the reader and even then it was not spelled out very well. You have to say that it is an editorial blunder to lead readers to such a pessimistic assessment and then stumble around in providing answers. The steps needed in creating an investor's movement for change seemed to be more tacked on at the end than any sort of useful manifesto.

Regardless, their perspective was useful and taken to heart with my recent 401(k) rollover.

Rating:
Summary: long-term view that public must heed
Review: The great 401(k) hoax has a long-term view that is very sobering and that people must pay attention to. The public has been told that they will do best if they take care of their own pension plans -- this saves corporations billions of dollars!

Rating:
Summary: You Be The Judge--Before It's Too Late For You
Review: This book examines what the authors' contend are the many foundational weaknesses of the 401k. Informative book, but could have used more proofing and editing. As for the "K," one of the first to voice the cracks in it was Edward N. Wolf, and now others have hopped on the band-wagon. The creation, history, and current conditions are discussed. Many reasons are provided as to why Americans are bemused with this fund. Although the "traditional" pension is rapidly becoming a thing of the past, the 401k is still only a supplement to retirement--even if that's the only thing most Americans will have. It's a supplement, pure and simple. For most it'll provide some enjoyment and/or cut down on fixed-income living expenses, or maybe reduce the shock of those prescription medicine bills that are rising year after year. If people diversify the 401k supplement over domestic and international stock index funds, micro, small, medium, large cap, growth, value, and balanced funds etc., they may benefit from long-term tax-deferred compound interest. Hey, I forgot to throw additional money markets, bonds and REITs, for additional diversification. The average American doesn't have the net worth, resources, time, and life-time--to recover from such massive losses after a certain age. And, that age is quite young. For many but not all of those that did want to re-allocate, they were bound by corporate rules and regulations that hindered them from doing so--if they were a worker, and many lost years worth of potential earnings and savings. Management wasn't bound by these rules, they were free to do what they wanted, and many of them posted enormous profits from these preferential rules.

The E.R.I.S.A. act in 1974 was a scheme to "empower" the "average" American to have financial control over their future. About 20 years later, the financial industry benefitted tremendously from 1990s market boom. The CFPs and brokers, brokerage houses, and investment bankers rode the wave, understandably, and successfully promoted a fantastic advertising and marketing campaign. Guru newsletters, financial magazines, traveling seminars, contradictory radio and TV pundits, and book writers did great business as well.

Who benefits from the 401k? The employer does. If this wasn't the case it would never have been allowed to exist at all by Congressional legislation.

Rating:
Summary: A Revelation
Review: This book, written by a senior contributing editor and former staff writer for Business Week magazine, makes a powerful showing that the 401(k) and other defined contribution retirement plans exist for the benefit of corporations, not for the individual investor. For me, the most impressive argument was the mathematical proof the authors offer showing that it is simply impossible for a large number of Americans to retire on their stock market earnings. In 1999, they claim, the entire after-tax profits of the whole corporate sector of the United States economy came to $455.7 billion. Distributed evenly among all Americans 65 years of age or older, this comes to only $1,117 per month. And we know darn well it is not and never will be distributed evenly. Other statistics they cite show that the average amount held in a 401(k) plan is ludicrously low compared to projected retirement needs. No doubt, this average has dropped precipitously even since the time their book was published, owing to the worsening of the recent economic downturn.

Other books, such as "Retirement Myth," have explored the difficulties inherent in the idea of mass retirement. The problem is stunningly simple, if you think about it: stocks represent a right to a share of future corporate production. In other words, to a share of the value of the work put in by other people, from the CEO to the guy who sweeps the floor. Never, in the history of the world, has a large proportion of a population been able to live solely off of the work of others. Even slavery supports only a privileged minority.

The solution the authors offer is to invest in bonds of various types, including U.S. savings bonds. This rankles a bit, too, because savings bonds depend on future taxes paid by other people. The same is true of social security. Given the choice between corporate profits and an obligation backed by the full faith and credit of the United States Government, however, it's not too difficult to see which is more reliable. I think most of us should just resign ourselves to working at least part time as long as we are able to do so.