THE 401(K) WAS STARTED 30 years ago as a supplement to Social Security and private pension plans. In effect, 401(k)s would form the diird leg of the proverbial "three-legged stool" fora safe retirement: Social Security, a pension and personal savings.
Once these 401(k) plans started gaining some traction in die workplace, employers saw them as a way to slash their pension costs. Today, 401(k)-style plans outnumber traditional plans by a staggering 12-1 ratio.
The fact that die stock market doubled and redoubled in 1 1 years after the inception of 401(k) plans helped convince employees, too, mat this was something worth doing. It seemed die sky really was the limit. All you had to do was buy something, sit back and watch it grow; and since the boss was chipping in, why not buy?
The average 401 (k) balance (including employer contributions) of the 60 percent of workers nearing retirement is a measly $64,000. If you want an income of $30,000 a year after retirement, you need to have at least $445,000!
Here are a few reasons these plans have failed to produce the secure retirement they promised:
* People started too late, and they haven't saved enough. Today, you'll find responsible advisers suggesting 10-20 percent of salary should be invested toward retirement- double what was accepted dogma 30 years ago.
* Most people are too busy living a challenging life to spend the time necessary to become skilled investors. They fail to diversify or rebalance their portfolios regularly, and panic when there's trouble. …