Our Nation Gets Screwed by 401Ks

Posted: Mar 01, 2011 12:01 AM

Police all over the country are being asked to give up their pensions for a 401k. But no one explains to them that if they do, they’re going to get screwed because 401k’s were never meant to be retirement accounts. The myth that 401k’s were designed for the working class is just that; a myth. They were actually created as a way for elitist CEO’s to set aside money for their retirement.

If that’s not enough, unlike a government guaranteed pension plan, the 401k has no backstop. For example, if a cop gets killed in the line of duty, a 401k will not protect him and his family in the same way that a pension would. At least with a pension, his wife and children are guaranteed on average 65% of his salary for the rest of their lives. Conversely, they’re out of luck with a 401k. 401k’s are a fraud because unlike the 6%-10% contribution that is recommended by your planner, realistically 20% of every paycheck should be set aside for this purpose.

According to an article in the Wall Street Journal, the typical 401k bearing 60-62 year old person has less than one quarter of what is required to maintain his or her standard of living in retirement. Even with social security and a pension, most 401k holders have insufficient financial reserves.

The gap in savings between what people need in retirement, which is 85% of working income, and what they actually have, is astonishing. For most Americans, the amount of “wealth” achieved with a 401k will make it impossible for them to maintain the type of lifestyle in retirement that they have grown accustomed to while in the workforce. Therefore, many in the working class will be required to work part-time until their death.

The 401k was a cruel hoax synonymous with withholding taxes. In the 1980’s, the corporate elitist CEO’s of our country wanted to replace the costly pension plan with something else. When they couldn’t find it, they went to Wall Street and Congress and said….”let’s use the 401k to screw the working guy and get the burden of these costly pensions off our backs so we can make bigger bonuses.”

Guys like Dodd and Phil Graham were easily bought, and over the past 30 years the 401k program evolved from a small enterprise to a multi-trillion dollar industry that now supports thousands of money- grubbing planners, advisors, and fund managers who are as crooked as a cork screw. Even worse, they wouldn’t know a good investment from a bad one if they tripped over it.

The fraudulent 401k industry grew so big that the elitist corporate owners of our country decided that they could get even wealthier by shipping our country’s high paying manufacturing based jobs overseas, replacing them with low paying financial service jobs domestically. As a result, we will never have a recovery until we get our jobs back from China. Sadly, that won’t happen because of our weak industrial base. In order for America to become strong again, it must rebuild its manufacturing base, erect tariff barriers on goods and services, and start saving again. It will never happen.

The reason we have so many planners and money managers in the financial services industry is because none of them know how to successfully execute a trade. They devised a compensation system for themselves not based on performance of the fund they support, but rather on the size of the contributions to the fund from the public (you and I). Planners are notorious for picking losing funds.

Based on fee structures, hidden fees, and taxes, it’s impossible to make money in a 401k. A 2% investment fee is deducted up front, taking into account 2% inflation, followed by 25% in capital gains taxes. After throwing in the day trading commissions, finder’s fees, rap fees, revenue sharing fees, surrender charges, soft dollars, and the fund’s marketing costs, it would take 70 years to double your money.

My advice: stay away from the 401k, and join me at www.Phil’sGang.com to learn what “Wall Street doesn’t want you to know!”