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Charlie, there is no way for everyone to invest in their 401(k) in bonds as you do, or even invest entirely in corporate bonds in any way shape or form because there simply aren't enough corporate bonds to go around. So, by definition, it would end up being, at least partially, put into treasury bonds, and they barely keep up with inflation not to mention attempting to accrue some real gains over the 30 years of saving for retirement.


How big is the corporate bond market compared to the equity market? [Hint: there's plenty of supply. LOL ]
How successful have those average equity investors been? [That was the point of the interview. ]
Do any of them now have the now-needed investment skills to recover the losses they're suffered? [Few to none]

There's a proverb that goes like this Half a loaf is better than none. And there's beaucoup studies that demonstrate that small, but steady gains out-perform higher, but more volatile ones. It's a huge irony that I find myself arguing against taking on investment risk as a means to build retirement assets. But I really believe such a case can be made. It's a slim case and there are genuine obstacles that have to be managed/overcome. But a path can be charted that is far easier for an average investor to understand and to implement than what has been touted in the last 20 years as the one, best path to wealth.

Read that 60 Minutes interview or watch the film. What has to be said of those 401k investors is that they were not stupid, lazy people. In their work lives, they were competent, and when they lost their jobs, they went scrambling to find another. That has to be admired. But, meanwhile, the 401k scammers are also telling them. "Oh, by the way. Your second job? the one you didn't ask for but we imposed on you for our own benefit? It has also fired you. Too bad, sucker. See you around.”

There is no question in my mind who has the moral high ground in this argument and who deserves help and protection from the 401k predators. At my former place of employment, I wrangled a seat on the 401k advisory committee for company as the only "desk-plate" representative. (aka, a representative from labor, rather than management.) When my son, who works in the financial industry, found out he yelled: "Dad, quit immediately. You're putting yourself into jeopardy with regard to fiduciary responsibilities that will bite you in the butt. Plan participants are not being properly advised, and it won't take a very smart lawyer to win a suit when 401k plans fail to deliver on their implied promises." His wife at the time, a gal who was pulling down $250k/year as a Barley’s rep for marketing pension plans to institutionals, seconded his opinion. The whole 401k thing was a scam that was going to blow up sooner or later, and advisory committee members would be the likely fall guys.

The recourse against lawsuits was insurance. Such a thing exists. So I read the 401k laws, argued that the company was not fulfilling its fiduciary responsibilities, and insisted that my participation was dependent on all committee members being insured. I was also extended an invitation (which I accepted) by the plan’s manager to visit their headquarters and to review their fund selection process. So I’ve been a lot deeper into the inner workings of 401ks than most investors get.

My final decision? I ran away as fast as I could from troubles I knew would happen. I quit and nominated my stock investing buddy to take my place after expressing to him my fears. Management found him to be a compatible choice and he didn’t share my worries. Now both of us are retired and the problem is behind us. Each of can live off our investing. Both of us have relatively secure retirements. But that isn’t the case for a lot of people who would like to retire and who are being badly advised to take on risks they don’t understand and can’t manage. On a dollar for dollar basis, my investment losses (from the crisis) were as large any 401k participant that 60 Minutes interviewed. The difference between them and me is I got took a serious hit, and they got smashed, both financially and emotionally. I can recover, because I know how to recover. But they have quit, because they know they’ve been beaten. When a person has grown afraid to open their monthly 401k statement fro fear of what they'll see, they've been so badly beaten they will never be able to recover. They've lost the will. That doesn't mean they aren't willing to work hard at things they understand. But it does mean they won't ever invest again, and certainly effectively. Therefore, saving is their only path.

I don’t want to make a crusade out of this Saving vs. Investing debate. But I know who has the moral high ground, and I can show how that high ground can be defended. It’s not my path, and it is easy to point to alternatives. But those alternatives require more investing experience and more investment savvy than most people can bring to the task. So it becomes a Midas-muffler sort of problem. “Pay them now (with the education and training they need), or pay them later (when they become wards of the state due to their poverty."

Eight years ago, way before the present financial crisis, shrewd observers were predicting that the boomers would go bust if they retired, for typically depleting their assets long before they died. Now those assets have been cut in half, and massive numbers of boomers have been involuntarily retired from the workforce. They can’t work, for there are no jobs, and they can’t invest, because they don’t know how to. Meanwhile, the 401k scammers have grown as rich as Croeseus, and their victims are impoverished. That’s just wonderful. So, yes, I’m outraged and, yes, I’ll question my own beliefs and practices to try to find ways to help people toward a bit of financial dignity. If that means trying to find ways to make an old-fashioned saving ethic work in present, "new-fashioned" times, then that’s the path I’ll take. The tool at hand is used.

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