If Henry Ford had regretted popularizing the automobile decades after his efforts, would you raise an eyebrow?
We would. Which is one reason we did just that when a man named Herbert Whitehouse said he now has pangs of conscience with respect to his role in popularizing the now-ubiquitous 401(k) retirement savings plan.
Whitehouse, a former Johnson & Johnson (JNJ) executive, pushed for the adoption of 401(k)s in 1981 as a way to supplement a company pension that guaranteed payouts for life.
Here’s how the Wall Street Journal put it:
Thirty-five years later, the former Johnson & Johnson human-resources executive has misgivings about what he helped start. What Mr. Whitehouse and other proponents didn’t anticipate was that the tax-deferred savings tool would largely replace pensions as big employers looked for ways to cut expenses.
Just 13% of all private-sector workers now having access to traditional pensions (vs. 38% in 1979). So, it’s easy to see why the cloud of regret hangs over the Whitehouse.
The early push made 401(k)s popular, and those responsible are lamenting that push. From the WSJ:
Many early backers of the 401(k) now say they have regrets about how their creation turned out despite its emergence as the dominant way most Americans save.
Some say it wasn’t designed to be a primary retirement tool and acknowledge they used forecasts that were too optimistic to sell the plan in its early days.
Others say the proliferation of 401(k) plans has exposed workers to big drops in the stock market and high fees from Wall Street money managers while making it easier for companies to shed guaranteed retiree payouts.
We think all of this is likely true, especially the part about forecasts being too optimistic.
It’s also true that a 401(k) leaves one exposed to market drops and the high management fees found in so many mutual funds. (Although some fund managers are well-worth their fees.)
Still, there is a flipside to this coin. Unlike a traditional pension plan, a 401(k) allows you to participate in the good years of the stock market … and there have been many more of those than there have been big drops.
We have no doubt that the decline in traditional pensions has contributed to more retirement angst than there once was.
But the reality in the corporate world for decades has been the inability of most companies to offer a decent pension the way many could in the 1950s and 1960s.
Given this reality — and the reality that, like it or not, your retirement options are basically your 401(k), Social Security and your own outside money saved and invested — what should an investor do?
Our solution might be somewhat biased here, but we think it’s spot-on.
That solution is to be active with your money … such that you are able to grow your investments over the course of your working life so that you never have to worry about money when you retire.
Yes, this is easier said than done.
Yet there are thousands of individuals retiring each year with plenty of money to fund decades of post-employment activity.
How did they do it?
Well, some started saving early, and that’s good — there really is no substitute for the power of multi-year compounding.
Also, some people just make a lot of money in their work lives. This gives them the ability to put more money to work, save more and just have more in retirement.
Yet there are those who made what could be called a decent, above-average salary during their work years. And some of these folks saved a decent amount of money during their life. (Decent here is about 10% of their annual income, on average.)
The difference in this last group — and what allows them to retire comfortably — is that they’ve taken advantage of the investment opportunities in various equity, bond, commodities and options markets.
These are what you might call the "active investor class," a class of smart people who make up the core of our readership here at Uncommon Wisdom Daily.
Our commitment is to help those in the active investor class achieve their investing goals, and to help them buttress their retirement situation such that they don’t ever have to lament any investment choices …
Even their choice to save via a 401(k).
That means alerting you to the best ETF of 2016, defining the trading range where you should consider selling gold, letting you know it’s time to be aware (and perhaps a little skeptical) of a stock that’s about to IPO and revealing the only four stocks that went up each of the last 13 years. And that’s only a sample of the ideas we’ve shared with you over the past week! Be sure to check those ideas out when you can, and stay tuned … because we have many, many more coming your way soon.
The Uncommon Wisdom Daily Team