Customer Reviews

The Smartest 401k Book You'll Ever Read: Maximize Your Retirement Savings...the Smart Way!

5 star:		(16)
4 star:		(4)
3 star:		(2)
2 star:		(0)
1 star:		(1)

 

 

I bought the updated edition (Feb. 2010) from my local Costco store and read the entire book from cover to cover in two hours. (I have a background in investment, but currently unemployed.) I feel rather ambivalent about the author and the book.

On the one hand, I totally agree with his claim that the entire 401(k) system is corrupt, as is the entire investment management industry, and the U.S. government is a willing and active cohort in this scam to rob American employees of their retirement savings. My own 401(k) plans have seen paltry returns over the last 15 years, despite my effort at picking the "best" funds that were available to me. (No, I don't chase past year's performance.) Call me bitter, but from talking to my friends and former coworkers, this seems a commonplace experience, and this book explains why it's the case. The action chapters, esp. in part 3, are also decent, although as another reviewer has said, the entire action plan can be summarized in two sentences: diversify your portfolio, and only invest in low-cost index funds. The author does provide a list of funds to consider, although your plans may not offer them at all (see the "cheat sheet" in chap. 24 of the 2010 edition).

On the other hand, I'm not sure what the author's true motive in writing this book is. Is it really to help us worker bees to save for our (gloomy) retirement? As I was reading the book, I got the feeling that he was writing the book primary to sell the book, kind of doing what the mutual funds he criticizes are doing. For example, he cherry-picks on certain numbers, such as quoting historical returns without mentioning the significant inflationary effect of survivor bias (i.e., only companies that survive get included in calculating market returns).* He compares accumulative returns (using a 40-year horizon -- man, how many readers of this book have that many years to contribute to a 401(k) plan???) between a 2% expense ratio fund and a 0.3 expense ratio fund, but neglects to tell you that the difference is partially tempered by taxation. He does provide a bibliography, which is good, but who knows if he only picked the "research" that he agreed with and omitted anything that contradicts his belief?

The 2010 paperback edition also suffers from certain logic lapses, such as the first chapter about "Wan Ba Shi," as well as typos and grammatical errors.

One warning I should give is, the book's website appears to be mostly a marketing gimmick for his IFA products. I took the 25-question survey. At the end of the survey, I *HAD TO* give them my name, state, home *and* work phone numbers, and e-mail address, in order to see the survey results. The result page itself is titled "Investment policy statement" and contains numerous references to his IFA company and also contains a signature section for me to sign!!! Not a good thing, Mr. Solin, for someone who claims to be impartial and to expose a rigged system.

* He mentions the evil effect of survivorship bias in tabulating active manager returns, but nothing about it when it comes to calculating market returns.

Dan Solin's book, "The Smartest 401(k) Book You'll Ever Read", is a winner. His thesis is that investing should be simple, and he walks this talk by writing about investing in such a manner as to make it simple, fun, and easy to understand for the reader.

He offers far more than another book about how Wall Street and the insurance industry are ripping us off in our 401(k) and 403(b) retirement accounts. Though Mr. Solin does explain how our hard earned money is siphoned off by the "experts" that provide these plans, he also explains practical easy steps we can take to minimize the impact. These steps include:

* Using an IRA with better options.
* Rolling the 401(K) to the IRA when you leave an employer.
* Picking the "least bad" funds within a poor retirement plan.
* Choosing assets that fit with the rest of our nest egg.
* Joining the investment committee of our employer's plan.

Albert Einstein once said "if you can't explain it simply, you don't understand it well enough." Dan Solin gets it and explains it with brilliant simplicity!

If you want financial independence years earlier, "The Smartest 401(k) Book You'll Ever Read" is for you. It will give you sound and simple advice that's equally simple to implement.

For those who make their fortunes from providing these outrageously expensive plans, you'll hate this book. Read it anyway.

With tens of millions of Americans depending on the 401K, "The Smartest 401K Book You'll Ever Read" can help beginners or those who need to increase their knowledge of their 401K plans. With the 4-O-1 (with or without employer matching), the US worker today is on his/her own to understand, manage, and shift asset allocation as efficiently as possible. The 401 is littered with numerous problems that are a disadvantage to the worker. Part of this is because of the lack of Congressional laws. The investment industry is comprised of leeches that feed off of your investments throughout your 40+ years of work.

Author Dan Solin provides helpful and necessary information for those who are currently in a 401, who will be, and also those who'll be switching jobs. After leaving an employer there are a multitude of options of where to put your 401K money. Solin does note the latent gimmicks and tricks that take your hard-earned money in hidden fees.

Ten of millions of Americans are now relying on Defined Contribution Plans (401Ks) as Defined Benefit Pension plans (Pensions) are now nearly extinct. How much of your 401K will go toward your medical and pharmaceutical drug costs when you're old? Will the old rule of withdrawing 4% of your principle without eating into the principle be enough for you to live off of? Tax-deferred means - deferred - not tax free. Will Congress change the rules on taxes, again and again, as they so often have? What will the average rate of return per annum be? What will the average rate of inflation be? We must make a variety assumptions and calculations.

Solin's advice and info is critical because those with 401Ks are statistically putting all of their eggs into 1 Financial Market Basket. This, is 1 basket contrary to what is often advocated: "diversify." You're in mutual funds with an allocation of stock, bonds, and money markets, and yes you can diversify, but within your limited plan provided to your by your employer and fiduciary. Solin wisely promotes rolling over 401K retirement money in IRAs for more control and more choices. And this, can only be done, when an employee leaves a company. Is the solution to resign from a company - quit your job say, every 5 years, just to roll over your 401K? Obviously, not. (The Roth 401K was enacted in January, 2006.)

In addition to the 401K, non tax-deferred Index Funds provide the freedom of withdraw and movement with out penalty, limitations, age restrictions, and index funds also have low tax rates as there is less churning. In addition to this book by Solin, "The Great 401K Hoax" is worthy of a read. "The Smartest 401K Book You'll Ever Read" is an informative and important book by Dan Solin. Heavily recommended.

The book gave very good advise for long term investing, and ways to reduce the fees charged by various investment companies. I gave each of my three children (young adults) a copy of the book so they can start securing their retirement funds.

I really enjoyed Solin's little Smartest Investment book, so I decided to check out his 401K book also.

Solin is a DFA advisor so he promotes DFA index funds. He cites some papers which show that investing in DFA funds gives higher returns than using Vanguard Index funds. He forgets to mention that DFA advisors usually charge a 1% ER, so the return of DFA funds must be incrementally higher by 1% over the return of Vanguard index funds invested by the do-it-yourselfer.

Solin correctly rails that 403B's are terrible investment plans for teachers. He cites the case where the NEA was sued for collecting $50M in fees from investment providers.

Solin also points out that the Supreme Court said it was ok for Congress to retroactively change the tax laws for 10 years! This could be the justification Congress needs to begin taxing your IRA's, 401K's, and Roth IRA's not only on the current date, but 10 years retroactively! Very interesting food for thought.

Solin also correctly advocates that 401K funds should have to divulge actual expenses incurred versus hiding them so the investor can't find them.

One thing that Solin did not provide was a rule of thumb for deciding whether to invest in a high cost 401K investment or use a low cost taxable investment. I have seen some rules-of-thumb saying that if the 401K investment has total expenses over about 2% ER, then skip the 401K and go to a low cost taxable investment in index mutual funds.

Other than recommending DFA funds over Vanguard funds, I don't disagree with any of the 401K advice Solin gives in his book. If a DFA advisor with the 1% fee is what you need to control your behavioral finance tendencies to sell low and buy high.......then the 1% fee is probably worth it.

All in all, a very educational and short read for 401K investors.

In this age of full disclosure, it can be noted that I am the author and publisher of the book INDEX MUTUAL FUNDS: HOW TO SIMPLIFY YOUR LIFE AND BEAT THE PROS. This book is an introduction to the concept of index funds is and is sold on Amazon. I am also a contributing author to the book THE BOGLEHEADS GUIDE TO RETIREMENT PLANNING available from Amazon with an estimated release date of October 2009. I have also written 21 short stories on investing which are also available on Amazon.

If you want practical ideas on long term passive investing, read some of the books below:

The Richest Man in Babylon
Bogle on Mutual Funds: New Perspectives for the Intelligent Investor
The Millionaire Next Door
The Four Pillars of Investing: Lessons for Building a Winning Portfolio
A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, Ninth Edition
The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On With Your Life
The Bogleheads' Guide to Investing
Wealth: Grow It, Protect It, Spend It, and Share It
Retirement Income Redesigned: Master Plans for Distribution: An Adviser's Guide for Funding Boomers' Best Years

Book concentrates on how retirement advisers benefit themselves. It is probably all true. It is also a book that can be written about anyone who provides advice and services of any kind. Caveat emptor.

[To those convinced that 401Ks are a rip-off, look at your returns in conventional stock, ETF, mutual fund investments over the last 2-3 years, or even 10 years. I would maintain that I lost far less in my 401K during the downturn of 2008 (the last year of the Bush administration) than in my Schwab account or Roth. AARP is one of the few retirement guides that makes note of the abuses by those who encourage you to "rollover" and who stand to profit big by you're doing so. For now, I'm hanging tight with my variable annuity.]

Even though I thought I had become somewhat of an amateur expert on the stock market, I confess that I didn't know the difference between a 401K and a 403K, wasn't sure if the retirement fund I'd amassed was good only until I died, had little to no notion of the tax consequences of activating an annuity of some sort. It seemed a lot easier to save for retirement than to confront that stage of life and to begin spending down the money I had so cleverly managed to collect (like everybody else, losing a lot of it in 2008 but, thankfully, not 50%).

If you're in a similar state, or even if you're younger and smarter than I am, this could still be a handy, timely little book. It has reader-friendly prose, the chapters are concise and clear, and the price (especially Amazon's currently displayed price, representing a 70% reduction from list) is not the least of its charms. Were the price higher, I might withhold a star, but at its present single-digit figure the book exemplifies the cost-cutting approach that it espouses. Still, the reader should be forewarned that much of the book is devoted to common financial definitions--T-Bills (of varying duration), CDs, stocks--with the long-term effects of "slightly" smaller or greater interest rates producing eye-opening results. Still, "Bogleheads" are likely to find the information in this book repetitious and all too familiar.

The author does make some judgements and criticisms of retirement plans (or scams) that he finds non-profitable, ill-advised, or highly questionable. Why that should provoke charges from some reviewers that he's too "political" or (horrors!) even "liberal," I have no idea. Apparently these critics know things about the author that are not apparent from reading the book, which strikes me as mainstream, practical, commonsensical wisdom applicable to all genders, religions, classes, ethnicities, and even political parties. If the author has "opinions," so much the better I say.

More than likely, it's the finance industry that would rather have you disregard the advice of this book, by now becoming causing savvy investors to forego the pricey services of financial planners. The author simply encourages readers to follow the example of John Bogle at Vanguard funds, who eschews expensive, actively-managed funds in favor of index funds. If, as the author's figures show, even the legendary Bill Miller cannot match the benchmarks, the average investor is wasting his time and money paying other people to lose it for him. Now is the time to follow the statistics and cold truth rather than gut-feelings that tell everyone they can, or somehow deserve to, "beat the markets." It simply makes more sense to pay expense ratios of .3% to passively-managed funds 3% of many actively managed funds: more than likely, you, not your financial planner, will be the winner after 40 years. (It's amazing how Cramer manages to crow away an hour each night without either: 1. talking about options, puts, derivatives, etc.; or 2. warning against the high sales and expense fees of many brokers and mutual funds. Rather than education, he entertains, merely feeding into the public's naivete about their ability to somehow defeat the system, which is an "efficient" market where all known information and variables are in place well before the news gets to the individual investor.

As I said, the book has some style, and the author indeed does have a "voice." If you find something to disagree with, do so. But chances are that instead you'll find this a retirement book that holds your interest better than many of the other top sellers, managing to be provocative, engaging, and extremely informative at the same time--but a whole lot calmer than some of the shows on CNBC. (If that's what it takes to get young people to save for retirement, good; but I can think of many more productive uses of time than swearing allegiance to either the over-the-top manic eruptions of Cramer or the glib, reassuring proclamations of Kudlow that capitalism and the American way are beyond reproach, and failure.)

Warren Buffett may think much the same as the aforementioned pair, but he too can be wrong, or at least misleading, concerning the modern individual investor's degree of power. The difference is that, right or wrong, he doesn't feel compelled to expend hours covering his back, and he quickly admits his mistakes. Within the game called capitalism, he plays it the old-fashioned way and makes it sound feasible and simple. And he remains always a gentleman, a nice guy, and a cherry Coke fan.

I have been financially advising investors for 30 yrs. Consistently, at least 90% of the time, the worst performing investment people own are their 401-K's and IRA plans!! This book does an outstanding job at exposing 401-K plans as having high costs and poor performance, which our firm agrees with. I do not agree however, that Index Funds, ETF's or passive managed funds are the best investment solution or options just because they are inexpensive to own. That by its self does not increase your odds at making more $ on your 401-K. I do agree that the majority of actively managed funds can and do have terrible performance records.
However, I have found the top 5-10% of these actively managed funds are very well managed. They offer low fees and they have outperformed his recommendations 98% of the time. I own a RIA firm, and this book recommends to work with RIA's not Broker's or Insurance agents. He is right on with that advice! There are good actively managed funds out their! You just need an honest RIA Fiduciary to help you find them. [...]

What an eye-opener this book is! I checked the fees and sales charges associated with my 403b plan and discovered that 75% of the funds charge in excess of 1% management fee PLUS a sales load of up to 5.25%. I intentionally compared the funds performance with their related indices and discovered that none beat the underlying index!!! So why pay for these ??? Thankfully our plan offers 3 index funds (large, mid, small).
Thank you, Mr. Solin, for the easy-to-read informative book.

This book was SO easy to read. I learned a lot in a short amount of time. If there is one thing that I learned, it was the power of low cost index funds. I don't believe in accepting everything without getting alternate opinions on good investment methods so I have been trying to read this Gary Eldred book and it has been a little boring. This book really spoiled me. The chapters are short, the methods concise, and the proofs overwhelming.