i made some pretty extreme and disparaging generalizations under the disclaimer that the comments were “dangerous commentary”, ie., highly opinionated and mostly unsupported. so with that in mind…
401k = pyramid scheme:
i’m actually referring to the underlying assets, ie., stocks and bonds. while your investment strategy is interesting, it doesn’t address the fact that businesses need growth in order to either increase their stock price or maintain their dividends. for dividends in particular, a company that is not growing is falling behind; inflation in wages/costs, price competition… growth opportunities being taken up by competitors… as competition grows, price competition grows as well as labor competition. how is that a pyramid scheme? the entire economy is now forced to expand continuously in order to stay on top of debts. money has to either be brought in from new sources, generated by the fed out of thin air or taxed directly from the citizenry. price competition is so strong that raising prices could mean death. the only real option is permanent growth. how realistic is that?
asset manipulation and transparency. transparency is kinda moot in a way. the recent fed cut, for example. if everyone had access to fed board opinions ahead of time, there would still be the volatility of people speculating one way or the other. the fact that the fed controls interest rates at all in the way they do is the problem. there is no market efficiency when the fed can manipulate credit and currency the way they do. people are complaining about china fixing their currency to the dollar and yet they don’t complain that the fed is price fixing the dollar, albeit in a far less effective manner.
the interest earned on the tax deferred dollar is definately good. but you can get that with an ira and without being locked in to the company plan. but in either case, you’re locked in to a long term investment. if you’re confident that the markets will remain sound throughout your working and retirement years, ok. but i’m concerned about the input required to maintain portfolio values, about the national debt and tax changes, about entitlements and tax changes, about dollar devaluation, national solvency… political upheaval…
i use the invention of the 401k as the marker for the current bull market (lasting from the 80’s to today with intermittent “corrections”) because it does conveniently correlate. your comment about interest rates may bear as well as geopolitical, globalization events that may have occured at the time. as well as inflation. but, consider that only some 20% of households own stocks. yet 50% of households own retirement plans. what portion of those retirement plans are of the 401k type vs ira, i dont know. but the ease of which a 401 can be set up and run is suggestive to me that it is a large portion.
suze orman. she’s not my girl, but she’s recognized and does give financial advise. better than cramer, i think. i did notice that she glossed over why she says you shouldn’t put more into the 401 than your emp contributes, but she does elaborate on why you should never borrow against it. it bothers me a little, maybe i’ll look deeper into it, but for now, suffice to say that she does know a bit more about this stuff than i do and she agrees with my opinion (max emp contribution and that’s it). if you would elaborate on why you think you should go above and beyond, this is the perfect time and the perfect thread to do it in. because, so far, the rationale has been limited to “trust me”, “it’s too complicated”, “just do it” and one or two that said “i’m freaking rich thanks to my 401k and you can be too!”. maybe someone’s posted something more in depth and i just missed it? i understand the tax implications and i understand the “magic” of compound interest. outside of that, the base assumption is that the markets are “infraggable”. kinda like the housing market.
my retirement goals: all tongue in cheek. although, trying to have 401 kids might be fun. might also precipitate moving to singapore (or whatever cheap and convenient place) as well as an early death.
