'How do you run a pension fund into the ground while stock markets are hitting record highs?' asks BrettArends . 'Simple. You don’t invest in any stocks.'
Simple. You don’t invest in any stocks.
Here are the four most common mistakes people make with their 401s, which end up costing them tens of thousands of dollars over the course of their careers. They all play a part. But they ignore something simpler. And this isn’t an accident. It’s a deliberate choice. The fund is required by its federal mandate to invest only in low-yielding, ultra-“safe” securities backed by the U.S. Treasury. And that, note analysts, produces low returns.
“The fate of the Social Security trust fund shows how bad the situation of pension funds would be today without Erisa,” he says. “Unfortunately, by forgetting to change the rules for the Social Security trust fund, Congress is endangering a cornerstone of our social safety net.” There is nothing unduly radical about the idea of investing some or most of the Social Security trust fund in the stock market. Norway and other countries invest their gigantic “sovereign-wealth funds” in stocks. So do many U.S. state pension funds. The Massachusetts state fund owns stocks, bonds, timberland, other real estate, and some alternatives such as private-equity and hedge funds. Over the past 10 years it’s earned an average 9.1%—more than twice the rate, per year, as Social Security.
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