A Plea for Help From 401(k) Land
The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
By Richard Schmitt
NEW YORK (
) - Dear Uncle Sam,
Big Brother took me on an adventure to a new place called 401(k) land. Believe me, this is no theme park. It's more like a bewildering maze of choices. Although you give 401(k) land the same kind of breaks as my former pension -- that old misunderstood, flea-bag of a motel that I used to call home -- I miss the comfort and safety my pension provided me. I'm not sure I'm going to like it here in 401(k) land.
At first, my journey into 401(k) land was kind of exhilarating, taking me to new heights not seen before. But lately the terrain has been more like terrifying, as we go from peak to valley and back more times than I care to remember. If I were looking for this type of thrill, I could have ridden that new rollercoaster they call "The Lost Decade" all on my own. I did not need Big Brother to take me here.
Some adventure this 401(k) land turned out to be. Coming in raw, I was not ready to be left in the wilderness to fend for myself against the elements. With each day, I face the risks of surviving now and of outliving my resources later. Sometimes I get caught up in the moment and forget about saving and managing my provisions for the future. Yet I know I must put away enough reserves for later and dutifully manage them in anticipation of that inevitable day when I tire of foraging for a living and need to rely exclusively on those accumulated reserves.
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Big Brother keeps telling me that I get more choices here in 401(k) land than what I used to have with my old-fashion pension. Of course, this is the same Big Brother who meddled with my pension to make it so expensive and complicated to maintain that I am no longer welcome to seek cover there. He insists he will always have my back, but I now question his ability to honor that pledge of support in view of his spendthrift ways.
This combination of my vacated pension and Big Brother's potentially unreliable backing threatens my pillars of support, leaving me alone to provide for myself now and later. As empowering as the choices here in 401(k) land might seem, I also find all these choices confusing.
The transition from a traditional defined benefit pension plan that provided me guaranteed lifetime retirement income to a 401(k) plan has been difficult. It leaves little old me with the responsibility of socking away and managing accumulated savings well enough to last a lifetime. No longer do professionals manage my retirement assets nor does my employer bear the investment and longevity risks associated with guaranteeing me retirement income for life. Now with Social Security facing its own funding challenges, here I am left on my own to manage my 401(k) savings so that it provides lifetime retirement income.
I still long for the carefree days when I could rely on my good old pension and Big Brother to cover my back. But now it's time to move on and look forward to better days ahead. I may not have that many arrows in my quiver, but I know I can figure this out.
From my 401(k) plan experience, I learned I had to save, diversify my savings among different asset classes, invest in cost-effective fund options, and actively rebalance my savings. Accordingly, I figure that my future success in 401(k) land depends on socking away provisions, storing them in different places, keeping them accessible, and rotating them seasonally.
I know I am up to the challenge, but just in case, do you know of anyone other than Big Brother who can help?
Fondly,
B.B. Boomer
This article was written by Richard Schmitt, author of
401(k) Day Trading: The Art of Cashing in on a Shaky Market in Minutes a Day
. Outside of his appearances on
Fox Business News
, KCBS, and
Business News Talk Radio
, he is an Adjunct Professor teaching retirement planning at the Edward S. Ageno School of Business at Golden Gate University.
