Written By — David Shafer

History has pointed out that those who sell mutual funds [and stocks in general] tend toward an idealized view of the future that can be rightly called Pollyannaism [having an overly positive view]. While those selling Life Insurance tend to be exactly the opposite, perhaps alarmist in viewpoint. I try to stay in the middle of those two extremes by cementing my strategy into real life experience and data. This “middle-way” will provide the basis for this post.

When comparing two different retirement strategies it is best that we strip away as much of the hyperbole as possible, so I will not demonize those that push either side. 401Ks were originally designed as an avenue to get additional compensation to corporate upper level management. As such it was thought as simply one of many points of compensation, but one that took special consideration about immediate taxation. Long-term tax issues were best dealt with by strategies designed by tax accountants and attorneys. Since those meager beginnings, 401Ks have become the only retirement plans for the majority of workers. Note, that they were not designed to be the majority retirement plans that they have become. So as a retirement tool, they will always be a little off. Most people fund their 401Ks with mutual funds. The mutual funds offered within corporate plans are both limited and have high expenses. In fact, among corporate offered mutual funds the expenses are extremely high, 3% on average. [Read more...]