The 401(k) movement was always a disaster waiting to happen. Trouble is, when markets were rising, no one bothered thinking about the fact that we ordinary mortals were ill-equipped to manage our nest eggs. And so, during the 1990s stock market boom – and again prior to last year’s financial meltdown – we watched as the value of our self-administered retirement plans rose and rose … and we thought: “Wow, we’re so well-off!” What we didn’t think was, “What do we really know about investing for the long-term?”
This has all changed, of course, and we can barely bring ourselves to look at our 401(k) balances – even now that markets have rebounded somewhat. Amid the ruins, some employers are rushing in to save us, the WSJ reports in a piece headlined “Employers Begin Driving Your 401(k).” I always felt workers were ill-served by the do-it-yourself retirement movement, and the reason I was skeptical from Day 1 was that even I, a financial journalist steeped in markets, invariably made goofy investing decisions for myself and my family. Many friends in financial journalism and also financial services felt the same way: They’d likewise prefer to have their life savings managed by a wise, arms-length professional than do it themselves. The WSJ piece, by Eleanor Laise, notes that there’s a downside to the new parameters employers are placing on workers’ retirement plans – because the guidelines tend to be fairly conservative. But cautious investing is surely preferable to cowboy investing of the sort that led too many employees to dump their nest eggs into tech funds in the late 1990s – just before the tech-stock bust. Or to pump most of their retirement savings into their employer’s stock. Or, worst of all, to borrow against their 401(k) plan to buy a second home, renovate a primary residence or buy a boat.