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...what must seem like a cruel joke to many, the accounts proved the most dangerous for those closest to retirement. During the market downturn, the 401(k)s of 55-to-65-year-olds lost a quarter more than those of their 35-to-45-year-old colleagues. That's because in your early years, your 401(k)'s growth is driven mostly by contributions. You control your own destiny. But the longer you hold a 401(k), the more market-exposed it becomes. It's a twist that breaks the most basic rule of financial planning. (See 10 ways...
...Society of Professional Asset-Managers and Record Keepers says nearly 73 million Americans, or just under 50% of our working population, now have a 401(k). And collectively we pour more than $200 billion into these accounts each year. But retire rich? Don't bet on it. The average 401(k) has a balance of $45,519. That's not retirement. That's two years of college. Even worse, 46% of all 401(k) accounts have less than $10,000. Today, just 21% of all U.S. workers are covered by traditional pensions, and the number shrinks every year. "The time...
...k)'s defenders say bad markets don't make the accounts a bad idea - and that it's still too soon to tell whether they work. Many companies adopted them less than 20 years ago. Even then, most firms (including mine) still provided pension plans to their workers. So boomers retiring now were never focused on piling money into 401(k)s. In order for the plans to succeed, workers have to stash savings regularly for about 30 years. Most accounts haven't been around that long...
...exception is Occidental Petroleum. In 1983 the energy and chemicals giant, then No. 14 on the Fortune 500, became the first large company to toss its pension and switch to a defined-contribution 401(k)-type system. That was at least a decade before most other large companies made a similar switch, which makes the experience of Oxy Pete and its employees an ideal window on the 401(k...
...talked to nearly two dozen former Occidental employees. All of them are alumni of the company's chemicals division and worked in a Niagara Falls plant. Not all are 401(k) disaster stories, and most had good things to say about Oxy Pete. Some said they were very happy with their 401(k). Jim Maul, 70, has two cars and a boat and travels regularly. (See 10 big recession surprises...