Reply to 401s are they just a big scam? Is it a new reitrement thing that hasn't stood the test of time?

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Reply to "401s are they just a big scam? Is it a new reitrement thing that hasn't stood the test of time?"

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[quote=Anonymous]The 401k vehicle in and of itself isn't a scam at all. It's just a way of transferring responsibility for your retirement to you rather than to your employer as in the old defined benefit (pension) plans.

The disadvantageous part comes from many other factors such as the fact that the vehicles you can invest in (mutual funds) are severely restricted in the kind of transactions they can take part in and are essentially reduced to picking over the leftovers after big investors have had their day. Usually that means following trends because they have to measure up against a benchmark, buying high after the pre-IPO high networth investors dump astronomically valued shares that they acquired for a pittance, being forced to dump shares at the wrong time to keep in line with  their allocation, etc.
The mutual fund co.'s know this but they don't care since they are compensated based on the size of assets under management. So it's in their advantage to spin a tale whereby you are going to be left out in the cold in your old age unless you "invest" every penny you can with them. Big investors would never contradict this since in order for them to sell high, somebody has to buy high.[/quote]

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