Reply to NPR story today on 401Ks and hidden costs

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[quote=Anonymous]Read a great Slate piece on this a few weeks back:

[quote]Here's the essential shape of 401(k) as a backbone of the retirement system:

— Poor people get absolutely nothing.
— Wealthy people who would have had large savings anyway get a nice tax cut that offers no meaningful incentive effect.
— For people in the middle, the quantity of subsidy you receive is linked to the marginal tax rate you pay—in other words, it's inverse to need.
— A small minority of middle-class people manage to file the paperwork to save an adequate amount and then select a prudent low-fee, broadly diversified fund as their savings vehicle.
— Most middle-class savers end up either undersaving, overtrading, investing in excessively high-fee vehicles or some combination of the three.
— A small number of highly compensated folks now have lucrative careers offering bad investment products to a middle-class mass market based on their ability to swindle people.
Congratulations, America! Across a very wide range of products there's a strong case for a large dose of consumer sovereignty. People should buy the shoes and sandwiches and shirts they want. They should watch the shows they want to watch. Get the furniture and appliances they like, and pick their own hairstylists and their own favorite grocery stores. Tastes differ, so even though competition and choice will rarely lead to a perfect outcome it's going to lead to a much better outcome than trying to have a Shoe Commission tell everyone how many shoes they need and what they should cost and look like.

Middle class retirement savings isn't like that. We know roughly how much people need to put away in order to retire with a standard of living they'll be comfortable with. And we definitely know what kind of investment vehicles are most appropriate for middle class savers. And we have abundant evidence that, left to their own devices, a very large share of middle class savers will make the wrong choices. What's more, because of the nature of the right choices it's obvious that the dominant business strategy for vendors of middle class investment products is to dedicate your time and energy to developing and marketing inferior products, since the essence of superior products in this field is that they're less remunerative.[/quote]

http://www.slate.com/blogs/moneybox/2013/05/01/it_s_a_401_k_world_and_it_sucks.html[/quote]

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