It’s hard not to hate on 401(k)s

I always shake my head in dis­be­lief at peo­ple who don’t take the time to rollover their 401(k). I under­stand that invest­ing has a high bar­ri­er for peo­ple — both because of our fear of math & the “heav­i­ness” of to top­ic of mon­ey.

It’s sim­ply irre­spon­si­ble* to leave your 401(k) in an employ­ee plan after leav­ing the com­pa­ny.

When you actu­al­ly think about it, and fol­low the mon­ey, 401(k)s aren’t real­ly a great deal. They’re sold on the ben­e­fit to the cus­tomer because “funds are bet­ter” and “indi­vid­ual stocks are dan­ger­ous” (oth­er­wise known as fear-mon­ger­ing, for the most part).

I know that sounds con­spir­a­cy the­o­ry-ish, but take it from some­one much smarter than me, Ben Carlson from A Wealth of Common Sense, on low­er­ing the costs of 401(k)s:

The 401(k) and 403(b) mar­kets are ripe for dis­rup­tion by a low-cost provider as most of these plans are filled with ter­ri­ble fund choic­es and high costs to plan users. […] Most com­pa­nies don’t have the exper­tise to under­stand these plans on their own so offer­ing a sim­ple, low-cost solu­tion would seem like an obvi­ous way for robo-advi­sors to gain mar­ket share. This is espe­cial­ly true among small busi­ness­es who are the most over-charged group in need of a bet­ter solu­tion.

The linked-to arti­cle is about robe-advi­sors and isn’t real­ly rel­e­vant to my point, except that in pass­ing to dis­cuss them, Ben talks about how poor­ly struc­tured the 401(k) mar­ket is from a client per­spec­tive. I know, I nev­er want to hear the phras­es “ter­ri­ble choic­es” or “over­charged” or “high costs” when it comes to how I buy things, finan­cial ser­vices or oth­er­wise.

* There of course aren’t any absolutes, so take what I say in the spir­it of how I’m say­ing it — put some small thought into your finan­cial health, as even minor invest­ments in doing so yield big returns.