Kerry Hannon from Forbes wrote a great article in January of 2013 about The Three Surprises in 401(k)s, http://www.forbes.com/sites/kerryhannon/2013/01/13/the-three-surprises-in-401ks/. This article was written so well there is no reason for me to rewrite any of it, I encourage you to read it. What I do want to address is why the solution she writes of is NOT the answer to the problem.
As you can see in the article she got her insight from Hedrick Smith, the author of Who Stole the American Dream? and Jack Bogle the founder and CEO of Vanguard mutual funds.
Only mistake is in the last paragraph of her article where Mr. Bogle’s solution to the lack of retirement funds is to use index funds rather than mutual funds. He states mutual fund fees take 63% of the return and the investor but up 100% of the money and risk. I find this solution is only correcting the amount of money lost to fees. Even in an index fund there are fees! The solution does not address the point he makes that those investing are carrying 100% of the capital AND risk.
Regardless what kind of fund it is in the investor is putting up all the capital and all the risk! Anytime money is in the market it is 100% at risk. I had a young man tell me, “there is one guarantee in the market, you will lose money at some point in your lifetime.” I do believe this young man is correct.
The key to a retirement system is to have something that is guaranteed. These funds in the article are making LESS than a whole life insurance policy and nothing is guaranteed. To add to the risk and fees there is loss of use, money in these funds is not accessible without penalty.
If you are contributing to a 401(k), IRA or other type of product you MUST read this article and save what you can going forward with guarantees.
Call me to visit about the infinite banking concepts® today. These funds are not working and that is evident every day you see an older individual working!