Tuesday, February 24, 2009

Is 401k a Ponzi scheme?

It might be a bit hard to digest but several workers have seen their 401(k) balances shrivel over the past year and if we believe the estimates of Employee Benefits Research Institute then workers with at least ten years of job tenure have witnessed losses of between 20% and 30% in their account balances since the start of 2008. This makes me feel whether 401(k) plans are just to play havoc with your retirement?

Many of us may feel it is some kind of a Ponzi Scheme but even before 401(k) came into existence a number of companies were offering traditional pension plans which would ensure that they had a comfortable life even after their retirement and it was up to the employer to ensure that workers got the best deal.

Some may feel there is some grand conspiracy behind it and it has some serious flaws which helps the employers to get the monkey off their back but let me tell you at the end of the day you would be better off than some of the traditional pensions as government agencies backing employer pensions are already facing huge deficit and could witness their losses mount in the future. So stay cool as this shall also pass!!

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