Your 401(k) may be gone before you get to cash inSubmitted by George Strait on Sun, 10/14/2012 - 14:44
Millions of people depend on 401(k)s and Social Security almost exclusively for their retirement. Unfortunately, I think most of these people are in for a sad surprise when they go to cash in.
The 401(k) is vulnerable to the exact same Malthusian crisis that dooms Social Security and so many pension plans: too many retirees, not enough workers.
The fraction of income the 120 or so million US workers can afford to save for retirement is fixed. First, people have to pay their bills, buy food and pay for their cars, and then they can start thinking about saving for retirement. This pot of money can only get so big.
Necessarily, the 80 million future baby-boom retirees will have to sell their 401(k)s since Social Security isn't enough. The 120 million buyers (workers) will determine the price, and if everyone is selling at the same time, prices will be LOW. Unless the retirees can find buyers to pay similar prices for what they paid, their money is gone. Poof.
A safe strategy is to own something people truly need. Investing in housing, food or transportation guarantees some kind of value. People will always need to live somewhere, eat something and get around, but they don’t need Netflix stock, especially if Netflix ceases to exist.
If retirees own farm land or a commercial building, or even 600,000 gallons of bearing grease, they are no longer gunning for the same small slice of money that workers devote to retirement. They gain access to the entire remaining fraction of spending that workers need for essentials, like housing, food, or in some cases, bearing grease.