ShareThis Page

Questions about 401(k)s

| Saturday, March 2, 2013, 9:00 p.m.

Questions about 401(k)s

Socrates, philosopher and teacher, claimed that asking the right question will elicit the correct answer. So let's not ask how our 401(k) is changing but rather, why invest in a 401(k) in the first place?

Why in the world would Pennsylvania employees, including teachers, believe they will have sufficient 401(k) retirement returns? How inviting is a 3 percent return on a 401(k) investment when (in 2011) the rate of inflation was 3 percent? Are the highly touted tax advantages meaningful? Do employees realize a 401(k) is a form of investing, not a form of savings?

401(k) disadvantages include:

• Limited investment choices.

• Hidden fees.

• Lack of individual expertise to evaluate market performance.

• Investment vulnerability to the vagaries of the stock market.

• Lack of a guarantee the investment will provide enough for retirement.

Workers provide a steady infusion of capital from their automatic 401(k) investments, causing the market to rise. Those in a position to take advantage of daily market fluctuations — the professional investors/banks — get the greatest benefits. The savvy investors take their profits, driving the market down. Then the continuing 401(k) capital pushes it up again until they cash out again.

The cycle makes big investors billionaires while average employees in it “for the long run” hope no major world catastrophe occurs to jeopardize their retirement funds.

While contemplating how to respond to these important questions, people should — as Socrates would — ask the right questions. As a former educator, I remain skeptical: 401(k)s remind me of seasonal sheep shearing.

Alexander Lairo

Frankfurt, Germany

The writer is formerly of Vandergrift.

TribLIVE commenting policy

You are solely responsible for your comments and by using you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.