Customer Reviews

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

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"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.

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.

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.

The authors (or publisher) positions this book as a guide "to protect your future." Hardly! It rehashes stock market history that is covered far better by Shiller(Irrational Exuberance). It gives virtually no personal financial principles that you can apply to selecting your investments. The authors discuss many statistics but do so with appalling amateurism. Truly, this book shows its colors as a highly biased political tract. Of course, Wall Street hypesters and corporate chiefs do put their spin on the wonders of the 401k. Nevertheless, when I read a book that promises to help me personally, I don't want screaming bias in the other direction. I want reasoned and factually accurate information that I can use. What is amazing to me, the authors do not cite-- and appear not to have read -- a superior treatment of the 401k, What If Boomers Can't Retire? by Thornton Parker. In sum, if you want investing advice you've got hundreds of more useful books to choose from. If you want to learn about stock history and future market performance, read Shiller or Parker. This book fails on both counts.

This book examines what the authors' contend are the many foundational weaknesses of the 401k. Informative book, but could have used more proofing and editing. As for the "K," one of the first to voice the cracks in it was Edward N. Wolf, and now others have hopped on the band-wagon. The creation, history, and current conditions are discussed. Many reasons are provided as to why Americans are bemused with this fund. Although the "traditional" pension is rapidly becoming a thing of the past, the 401k is still only a supplement to retirement--even if that's the only thing most Americans will have. It's a supplement, pure and simple. For most it'll provide some enjoyment and/or cut down on fixed-income living expenses, or maybe reduce the shock of those prescription medicine bills that are rising year after year. If people diversify the 401k supplement over domestic and international stock index funds, micro, small, medium, large cap, growth, value, and balanced funds etc., they may benefit from long-term tax-deferred compound interest. Hey, I forgot to throw additional money markets, bonds and REITs, for additional diversification. The average American doesn't have the net worth, resources, time, and life-time--to recover from such massive losses after a certain age. And, that age is quite young. For many but not all of those that did want to re-allocate, they were bound by corporate rules and regulations that hindered them from doing so--if they were a worker, and many lost years worth of potential earnings and savings. Management wasn't bound by these rules, they were free to do what they wanted, and many of them posted enormous profits from these preferential rules.

The E.R.I.S.A. act in 1974 was a scheme to "empower" the "average" American to have financial control over their future. About 20 years later, the financial industry benefitted tremendously from 1990s market boom. The CFPs and brokers, brokerage houses, and investment bankers rode the wave, understandably, and successfully promoted a fantastic advertising and marketing campaign. Guru newsletters, financial magazines, traveling seminars, contradictory radio and TV pundits, and book writers did great business as well.

Who benefits from the 401k? The employer does. If this wasn't the case it would never have been allowed to exist at all by Congressional legislation.

The first 30 pages of this book were actually pretty useful. After that however.. it went down hill. I suppose that for someone who knew nothing about 401(k)'s, the book could be somewhat enlightening(for the first 30 pages anyways). After the first 30 pages.. it truly goes way off topic.. at about page 90 I just couldn't take it anymore. Perhaps it gets better after that but I didn't have the will power to find out.

Dear gentle reader, Save your time and your money. These authors think the fount of political wisdom comes from the British Socialists G.B. Shaw and R.H. Tawney--plus other usual leftist writers. Indeed, anyone who doesn't adopt the the maxim--the bigger the government, the better the government is labled "a far right winger." The authors spend most of the book indicting the so-called "laissez faire, free market ideology of Reagan, Bush, Clinton, and BushII." They spend very little time actually discusing the intricacies of 401(k) plans--contrary to what their title implies. As to investment advice, Sell stocks, buy bonds. That's it! I found the book a great disappointment. And unless you're a devout subscriber to The Nation or In These Times, you probably will too.

If you want to know why 401k's are a hoax, don't buy this book. I happen to agree that there is a lot of misconceptions about the 401k to the detriment of the American worker and I bought this book to solidify my thoughts as well as gain insight from a well known name in Mr. Wollman.
I was shocked to find that of the 250 or so pages, the content could be summed up in about 25 pages. The rest of the book contains ramblings by the author as well as repetition. At times I thought I was re-reading, but it was indeed repeated information. I also could have done without their poorly written history lessons. Worst of all, Mr. Wollman criticizes every politician since FDR with the exception of Al Gore, who he appears to idolize. His not so hidden digs at GW Bush are insulting and have nothing to do with the topic.
If your looking for factual information and well thought solutions and warnings about 401k's look elsewhere. If you are a big fan of Al Gore, this is the book for you. I'll never look at CNBC the same again.

The Title of the book states "Why your family is at risk, what you can do about it?" After nearly 188 pages on the first part of this phrase, the authors talk about "stillwater" investing which seems to be "random walk" by another name. The authors complain loudly and convincingly (with some irritants mentioned by other reviewers), but I'd have expected similar vigor and greater clarity in listing out the solutions....disappointed.

If you are looking for the ultimate debunking of the 401(k), this does not quite cut it. But as an earlier reviewer mentioned, used as a companion piece to Thomas Frank's ONE MARKET UNDER GOD (a classic and *highly* recommended) and his Harper's essay on the attempts to privatize Social Security this book provides invaluable context for the shift in the mentality of the country from viewing economic matters from a social perspective (our forebears who pushed for radical social change and got stuck with Social Security instead) to an alienated, individuated (bowling alone and/or we only have individual responsibility, i.e., there is NO social world) one -- a shift that has taken place in the last 25 years.

The history of this shift and the Wall Street numbers of other downturns were very instructive and persuasively clear to this reader.

Unfortunately, the writing really became rather opaque and not particularly clear about prescriptive measures to optimize one's investments, i.e., what "stillwater investing" really means and what options one has as an investor. I had to reread sections fairly closely to figure out what advice they were trying to pass along to the reader and even then it was not spelled out very well. You have to say that it is an editorial blunder to lead readers to such a pessimistic assessment and then stumble around in providing answers. The steps needed in creating an investor's movement for change seemed to be more tacked on at the end than any sort of useful manifesto.

Regardless, their perspective was useful and taken to heart with my recent 401(k) rollover.