The Great 401(k) Hoax: What You Need to Know to Protect Your Family and Your Future [Hardcover]

Bill Wolman (Author), Anne Colamosca (Author), William Wolman (Author)

Book Description

Publication Date: May 7, 2002

According to business and finance journalists Bill Wolman and Anne Colamosca, the American public has been hoodwinked: 401(k)s, the most popular mechanism for retirement investing, were established to satisfy corporate, not individual, interests. They are replacing defined benefit-pension plans at an alarming rate and are vulnerable to the vicissitudes of the market, which--if history serves as our guide--is destined for at least a decade of lackluster performance. Drawing on primary historical and contemporary data, Wolman and Colamosca build a compelling case against the 401(k) as a tool for ensuring long-term financial security. They urge individuals and families to diversify their savings and investments, building conservative portfolios that include bonds, high-dividend stocks, and savings. In the process, they explore the colorful social history of our love-hate relationship with the stock market and address many key questions facing any family today, such as: How do I accumulate enough wealth to educate my children and retire comfortably? How secure are my sources of income and how can I anticipate change? Timely and incisive, The Great 401(k) Hoax is guaranteed to inspire debate and action from the water cooler to the boardroom to the voting booth.

Editorial Reviews

Amazon.com Review

"The 401(k) will turn out to be the greatest systemic financial hoax ever perpetrated on an unsuspecting public," write William Wolman and Anne Colamosca in the opening pages of this book of financial muckraking. They compare this popular form of retirement planning with the Dutch tulip mania of the 17th century, the South Sea Bubble of the 18th century, and the stock-market crash of 1929--and suggest that something worse is on the horizon for people who are planning to live their golden years off the proceeds of 401(k) investing. Wrongly believing that the boom years of the 1990s were typical, "most Americans do not have the resources to ride out the bad markets of the kind that we believe will prevail for the next decade," write Wolman (former chief economist for BusinessWeek) and Colamosca (a veteran journalist). They advise current investors to put their 401(k) money into bonds and believe companies should be banned from matching employee contributions with its own stock (a lesson they draw from the Enron debacle). The authors want even more, however: "What is needed is an FDR-style New Deal for the nation's pension system." The Great 401(k) Hoax is a piece of investment populism, potentially doing for the CNBC crowd what Donald L. Barlett and James B. Steele did for political junkies. --John Miller

From Publishers Weekly

Often considered an empowering way for employees to save for retirement, 401(k) plans began losing popularity with the recent bear market and took a harder hit after the Enron debacle. With stock prices declining, many employees face an uncertain retirement with no savings cushion to support them. Wolman, formerly Business Week's chief economist, and writer Colamosca say that 401(k) plans have always been an unfair deal for employees, but they're only now receiving negative press because of the Enron scandal. In fact, they believe the vast number of Americans counting on their 401(k) and other retirement plans will almost all be disappointed, and the country's economy is likely to suffer because of the overreliance on these plans. In effect, 401(k)s ask American workers to ape the investment behavior of the rich, even though they obviously do not have the resources to ride out bad markets of the kind we believe will prevail for the next decade. According to Wolman and Colamosca, the plans don't offer enough investment choices, and corporations reap substantial tax benefits while workers often end up with sizable tax bills related to plan withdrawals. Using historical references, the authors explain the stock market and common misunderstandings about retirement plans in easy-to-understand terms. Alas, the book's most important and practical part disappoints. Advice on alternate investment options for retirement is squeezed into two chapters. The authors' case is persuasive and will undoubtedly generate debate, but many readers, especially those whose portfolios have shrunk, may lament the lack of detailed investment counsel.
Copyright 2002 Cahners Business Information, Inc.

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Product Details

• Hardcover: 256 pages
• Publisher: Basic Books; 1st edition (May 7, 2002)
• Language: English
• ISBN-10: 0738206350
• ISBN-13: 978-0738206356
• Product Dimensions: 9.2 x 6.2 x 1 inches
• Shipping Weight: 1 pounds
• Average Customer Review: 2.9 out of 5 stars  See all reviews (24 customer reviews)
• Amazon Best Sellers Rank: #303,812 in Books (See Top 100 in Books)

Customer Reviews

Most Helpful Customer Reviews

35 of 41 people found the following review helpful:

2.0 out of 5 stars Accurate, Relevant, Poorly Written, June 4, 2002

By 

Richard Thomas (washington, dc) - See all my reviews
(REAL NAME)   

This review is from: The Great 401(k) Hoax: What You Need to Know to Protect Your Family and Your Future (Hardcover)

"The Great 401(k) Hoax" offers an accurate, well-researched analysis of what has become an fallacious bit of common wisdom in the United States: that the Stock Market is a means by which average Americans can amass wealth. It is a lie, perpetrated by the US financial industry to divert funds that would have gone into traditional, safer long-term investment options like bonds, start-up businesses or real estate into mutual funds and small-investor portfolios.

A part of this transfer is the 401(k) plan, where the weight of a pension plan is supposed to rest on stock investment rather than defined benefits (pensions where retirees receive fixed payments). The authors do an excellent job of explaining why companies in America switched from defined benefit pensions, and why using the Stock Market as a basis for them is a terrible idea. Readers of "One Market Under God" will find this information and argument very familiar, but the specific focus on the 401(k) plan and it's impact on the future retirement of millions of Americans is enlightening.

The major failure of the book is in its writing style. I've edited MA Theses and Dissertations that were vastly superior in terms of diction and command of the language than this book. Frankly, whoever edited this book should be fired. Also, I have to seriously wonder if the authors did not enjoy reading "The Starr Report" a little too much. Clearly they have a bone to pick with Bill Clinton, which is fine with me. However, by the middle of the book, I wanted to strangle them both if I had to read that Clinton blew another opportunity to do great things because he had "Monica's thong wrapped around his head." Their efforts at sarcastic humor detract from what is a very serious subject - the future retirement of millions of Americans - and their every sarcastic effort comes across as the work of a witless junior high schooler obsessed with potty jokes.

20 of 23 people found the following review helpful:

5.0 out of 5 stars an eye opener, June 10, 2002

By 

Livia (Rochester ny) - See all my reviews

This review is from: The Great 401(k) Hoax: What You Need to Know to Protect Your Family and Your Future (Hardcover)

I have wondered for a long time why my 401(k) has not fufilled my hopes and expectations. Now I know the answer!

To begin with, the book explains why most employers hand the maagement of their 401(k) plans to financial institutions that have less of a financial interest in good 401(k) mamagment than they do in performing many other finnacial services, like investment banking, for my employer.

The result is that most 401k)s did not perform very well even during the the stock market boom of the 1980s and 1990s. Indeed, the book also shows that the average money manager is a looser
not a winner. That losing record may be why, as Wolman and Colamosca show, many 401(k) managers send out statments that are almost impossible to understand. Money managers do everything they can, partly through deceptive advertizing, to conceal their miserable record. But the book reveals the real record for all to see.

It also provides sensible advice. First that workers should get together in what are in effect 401(k) clubs to pressure the bosses to do a better job. It is a great idea that will enable people to pressure the bosses to do a better job.

The book also offers sound investment advice for the difficult decade ahead.

11 of 13 people found the following review helpful:

5.0 out of 5 stars finally, the real story!, May 30, 2002

By 

"cathlin14" (New York, New York United States) - See all my reviews

This review is from: The Great 401(k) Hoax: What You Need to Know to Protect Your Family and Your Future (Hardcover)

Just consider what we read in the papers: the economy is recovering; unemployment is rising; housing starts are up; so are mortgage foreclosures; consumer confidence is improving; credit card debt has never been higher. So much conflicting information. What are we to believe? Is the economy really recovering as the administration would have us believe? For many workers the answer is No. In general, economic analysis in the media favors people who are prosperous (about 20 percent of the population.) while the fate of the vast majority -- the 80 percent -- is often overlooked. The Great 401 K Hoax judges society by what is happening to working class Americans and the news is not good. Thank God, Wolman and Colamosca are reminding Americans that the boom years are followed by lean years and the 401 K plan will not solve Americas pension fund crisis. Their advice to everyday Americans is honest, clear and prudent. Definitely worth the read.