An employee’s 401(k) used to be the end-all and be-all of retirement plans. However, the recent economic climate and the recent downturn have shown cracks in the 401(k). It’s become so bad that President Obama himself has decided to step in.
Obama is fighting for retirement reform on the basis that if fiduciary rules and retirement plans are not altered, the taxpayer will end up paying for it in the future. After all, high earners will be forced to pay higher taxes to cover for the employees who didn’t benefit from their 401(k). It is a sticky situation, one that triggers a chain reaction that will eventually lead to an even worse economy.
It could stem from the fact that a lot of companies offer poor 401(k) plans that don’t really benefit employees. For example, some companies don’t offer what is called a Roth 401(k). A Roth 401(k) allows an employee to save more toward retirement because it grows tax-free. Meaning, you don’t have to share your nest egg with the IRS when the time comes. It’s a sensible alternative, but something that a lot of companies don’t necessarily offer.
A poor 401(k) plan will lead to a lot of employees being left with no viable source of income after they retire. In an unsure economic climate, this could lead to some employees working past retirement age. It’s also a sad fact that most of the money being put in 401(k) plans go to the companies who don’t really manage it well. Professor Teresa Ghilarducci has said for years that the 401(k) plan is an experiment that ultimately failed. It is not the secure retirement plan that we thought it was. It’s not even a viable alternative for the various retirement options available.
However, there are ways to take the 401(k) out of the picture and still have enough money for when you retire. One option is investment. Find something you can invest in that would net you a steady cash flow even after you retire. Using the money you invest in your 401(k), you could buy real estate. And while the housing market isn’t as secure as any other form of investment, it will still generate regular income until your retirement. Ultimately, you will gain more money in the end than if you just put your savings into your retirement plan.
You could find something that fits for you, but it’s important to put your money into something more worthwhile. Because at this rate, a 401(k) will just lead to more financial troubles down the line.