Over the last five, ten, fifteen and twenty years, what’s the relative rate of return for the average 401k and for Social Security? I suspect that above ten years out, the rate of return for 401ks is significantly better, despite the recent market swoon. Naturally, many people are angry that they have lost a good bit of retirement money in the past two years, and any of them blame it on the whole 401k system. But in the long term they may very well still be better off.
P.S. If most people followed the old rule of thumb that the percentage of one’s portfolio in cash and bonds should be equal to one’s age (ie: at 30 years old, one should have 30% cash and bonds, and at 60 one should have 60% cash and bonds), those nearing retirement ought not to have lost quite so much of late. Of course, it is probably unreasonable not to expect people to be, as a rule, greedy about such things, and therefore to take imprudent risks. But don’t we want to encourage responsibility? If so, why not let the prudent be rewarded and the greedy take a bigger hit?