Re: Overhaul 401k's???
Its amazing, isnt it?
My girlfriends works in a hospital where she and her co-workers all pull in a great income.
They have an automatic pension that I looked at; it'll pay a 40 year worker about 40% of their current after tax income when they retire. They have a pretax plan that virtually nobody participates in, even though they're mostly older than she is (40's-60's). Of course she's maxed out on the work plans and a Roth. When she asks people about whether they're contributing beyond the pension plan, they seem very unworried about their retirement income and feel that it'll just "be fine".
On investment knowledge, I think it was Nords who said in another thread that he has many very smart, educated friends that simply cannot grasp the intricacies of education.
It makes complete sense. Besides a boatload of complexity and avenues, there is a bigger boatload of misinformation, opinion and magical hand waving.
I do like the idea of the "automatic 401k", although rather than setting it at the max and letting someone opt out, I might set it at a moderate level and allow someone to reduce to the minimum. I think landing someone with the max deduction is just asking for them to pull out the form to reduce, and thats asking for them to opt out completely if they have the option...especially with lower income people.
First thing I told the kids I hired out of college: open the 401k with the company, put aside the minimum 2% and put it the vanguard s&p500 index in the plan. Then when we had the annual salary reviews, after we talked about the next years development and education plans, I prodded them to increase the percentage, and we'd talk about diversifying. By the time they were with me for 3 years they were all signed up and most contributing the max. Now 10 or 15 years later, they always thank me for doing that, more than anything else, because they now have a nice nestegg for retirement already built and they're just now realizing the importance of it. A lot better than playing catchup when you hit 35 or 40 and realize you've got nothing and not enough time to get there.
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.