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The hidden fees of 401k plans have been displaced to Wall St firms unbeknownst to most participants because they don't show up on statements, and because the ba

by bcg1 12y ago

The hidden fees of 401k plans have been displaced to Wall St firms unbeknownst to most participants because they don't show up on statements, and because the balance that people see on their statements give an inflated sense of how much they have saved, even though they still need to pay taxes when they withdraw. It also diverts money away from more conservative long term investments in tangible wealth like real estate and into the stock market, so people are less diversified and lose out when the markets go down. 401k's really only let you take long positions, while financial firms can take either side of the trade... you can reason out who the winner will be in that situation.

Consultant32452 12y ago
Those things aren't significantly different compared to pensions. In a pension your pension fund will be paying wall street fees. You have even less control to be able to do things like invest in real estate with a pension. At least in a 401k plan you can potentially invest in mutual funds that are proxies for real estate. I have an IRA through my employer (which happens to be my own company, but that's irrelevant). I can bet against the market via ETFs if I want in my IRA. Your employer just chooses a plan for you with crap flexibility. I think the biggest change has really been the social acceptance of massive consumer debt. I cringe so hard every time I hear someone say something like, "I paid down my credit card a bit so I could buy that new XBox." People didn't used to live that way and the removal of pensions had nothing to do with that. I would still put a lot of blame on Wall Street there, but not because of fees on retirement plans.
- bcg1 12y ago
  I agree with you... my statements were actually specifically about 401k's, and whether or not they contribute to capital misallocation. Almost all 401k plans are much more restrictive than IRA accounts. Personally I think that a self-directed IRA is a fantastic vehicle where you can buy actual real estate etc, but they are so far outside the norm that they almost don't exist when speaking in generalities. I also agree about the social acceptance of consumer debt. They say you learn from your mistakes, and boy have I done a lot of learning. Resolving to get and stay out of debt is a life changing decision for sure.

by bcg1 12y ago

Consultant32452 12y ago

Those things aren't significantly different compared to pensions. In a pension your pension fund will be paying wall street fees. You have even less control to be able to do things like invest in real estate with a pension. At least in a 401k plan you can potentially invest in mutual funds that are proxies for real estate. I have an IRA through my employer (which happens to be my own company, but that's irrelevant). I can bet against the market via ETFs if I want in my IRA. Your employer just chooses a plan for you with crap flexibility. I think the biggest change has really been the social acceptance of massive consumer debt. I cringe so hard every time I hear someone say something like, "I paid down my credit card a bit so I could buy that new XBox." People didn't used to live that way and the removal of pensions had nothing to do with that. I would still put a lot of blame on Wall Street there, but not because of fees on retirement plans.

bcg1 12y ago
I agree with you... my statements were actually specifically about 401k's, and whether or not they contribute to capital misallocation. Almost all 401k plans are much more restrictive than IRA accounts. Personally I think that a self-directed IRA is a fantastic vehicle where you can buy actual real estate etc, but they are so far outside the norm that they almost don't exist when speaking in generalities. I also agree about the social acceptance of consumer debt. They say you learn from your mistakes, and boy have I done a lot of learning. Resolving to get and stay out of debt is a life changing decision for sure.