REading the Scott Burns/Lary Kotlikoff BooK on "Spend till the End"Fascinanting book and will blow away all your thinking on savings/spending assumptions. "Yes, there are three problems with the 401K as I see it: one is, as you said, it's voluntary, so if people don't realize in their 20s and 30s -- the best time to invest for retirement growth -- that they need to feed the kitty, they risk having little or nothing to retire on and have to play a furious "catchup" game."That depends upon income level, number of dependents...... the conventional wisdom on percent you need to save is highly WRONG!....."Another problem is that workers are least likely to be able to afford to contribute a lot of cash to their plans when it would be of maximum benefit for them to do so: while they are young."That depends upon income level!.....the rich need to save a higher percentage....than the low wage earner. "The other problem is inappropriate investment mix. If a 60-year-old had 100% of his/her 401K in stock mutual funds and they were planning on depending on it for retirement income, they took too many risks and sabotaged their retirement."A lot of that also has to do with the fees to manage funds. Too many 401Ks have ridiculous fees/loads on funds......people have been sold bad investments by wall street. "So really, the 401K investor is more prone to self-destruction of wealth through those two wealth-killing emotions, fear and greed. "And high cost, chasing the latest fad, emotional investing style in all areas of financial planning. "Pension fund managers don't really deal with this because they tend to keep an overall asset mix appropriate for both the 20-somethings and retirees pooled together in the fund."Well, not really. Lately pension funds have been used as piggy banks, reaping 'excess contributions' by the company NOT making contributions, often resulting in underfunding.The majority of pension plans are under funded - some severely. Many will go bust or have to cut benefits or both. Most pension plans will be frozen. (my opinion)..... The high income earner is much more at risk than the low income earner - to company bankruptcy, pension plan failure, etc. I wouldn't count on many states to be able to afford all the promised high pensions......there is going to be a revolt one of these days....and cities will go bust....and states may go bust....or raise taxes that people and business will flee......Companies can go bust....and dissappear....Gov't can only raise taxes to a certain point...then the taxpayers revolt...or leave.....CA is going to get a rude wake up call with gov't entities going to have to fork up 3-4% additional pension contributions next year to keep the CALPERS system solvent.....or the stock market will have to rebound.... If you find a copy of the book, read it......half way through now....t.
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