401Ks are a disaster: Column

[FreeJoe]

133. My experience is different

I've been in a 401K for 20 years (since my late 20s). I've contributed the federal maximum every year ($17,500 this year). I've also put in the maximum into a Roth IRA for myself and my wife every year. In the few cases where I have left a company with a pension, I have rolled the pension funds over into an IRA rather than leave them with my former employer to manage. We have invested it steadily and prudently in low cost US stock index funds, international stock index funds, and bond index funds. We have accumulated well over $1,000,000 and are happy with the retirement income it should provide when we start withdrawing funds from it in another 12 years. Yes, we have had some serious dips, but during those times our money went much further when buying stocks. As I told my compatriots back during the boom days in the 90s, things might be great for people selling, but I'm buying and I'd prefer to buy at a discount, not a premium.

I agree that the system does not work well for the intermittently employed. Neither did the pension system. That's why I advocate a combination of a modified version of SS as a core safety net and federally managed individual investment accounts. The former makes sure that no one starves and the latter helps to ensure that people who do earn decent wages save that money in a safe and effective fashion.

I'm not sure why you don't think you can't buy annuities like that. My company obviously does or they wouldn't offer those as options to employees. I can also go to a site like this (https://www.newretirement.com/services/annuity_calculator.aspx) and shop for annuities. I've never looked at them as I prefer to manage my own funds, but my impression is that the market is fairly large and competitive.

And as to your final comment about some dying months after buying an annuity, they have an option for that. There are annuities that guarantee 5 years or 10 years of payments even if you die. Obviously, they pay somewhat less than those that don't offer the guarantee, but that only seems fair.