May 14, 2011
Subject: File Number 4–626
From: Edward J. Bright
Location: Camp Hill, PA 17011
Affiliation: Retired Engineer
May 14, 2011
Submission to SEC Investor Education Request for Comments
As a retiree who made my first minimum required distribution from my 401k, you can put me in the uneducated crowd. My opinion is that you are wasting your time and money trying to educate the investor to save for retirement due to the complexity of the present system. It will become the Great American Pastime for everyone to attempt to understand and follow todays Market and investment choices.
I think that I am representative of the average investor. I joined my companys 401k plan due to the trust that I had in my company and it offered a tax break plus some matching funds to start a retirement account. Since this was the early eighties, the plan choices were a bond fund or the company stock. The investment options today have morphed into an incredible amount of choices and the only common denominator is Past performance is not indicative of future performance. Yes, we are all gambling with our pensions and paying from a one half to a two percent annual fee from our savings each year for the privelege. This money goes to individuals who are making obscene amounts of money to place our bets and their shills, the Financial Advisors. Also these individuals have no accountability for any losses that are incurred.
I was not interested in learning about the stock market or the additional choices that were added to my companys 401k Plan over the years. The labels ranging from Conservative to Aggressive were sufficient for me and basically I stayed with the original conservative bond fund until it was removed from the plan then switched to another bond fund. As a result, I survived both the DotCom and Mortgage crashes unscathed. However I did suffer a serious loss when my companys stock dropped 85%. Unfortunately, watching the bewilderment and the emotional toll on my colleagues after the crashes was very sad and difficult to handle. Hallmark does not make a card for this situation. I was very fortunate but a few of my colleaugues that were my age and preparing to retire had to delay their plans.
Speaking as a survivor of the present system, I find it insane that no fund is offered that is a Sure Thing. The best investment that I have in my portfolio are my USA Savings Bonds that I purchased through the Payroll Savings Plan and also when I had some extra cash. Most of those bonds are still earning 4% interest. Unfortunately, the present the bond interest rate is too low to be even considered as an investment. It appears that bond interest rates have been lowered to prop up the Stock Market and subsequently our pensions. Another industry that is Too Big to Fail.
As an alternative, how about adding one fund to the 401k Plan that will not be a gamble? I would buy into a US Government Retirement Savings Bond Fund that would be patterned after the I Saving Bonds and offer a realistic interest rate. Sweeten the deal by not taxing the withdrawal if the holder is over the retirement age and only taking the minimum required withdrawal. Granted, you get a double tax break but it encourages saving for the long term that is safe and the final amount can be easily calculated. Market it as a fund that you can Invest in it and forget it. The money will be there when you retire. I realize that this naive idea has no chance of flying but I can dream. I am sure there are a few billion reasons for not doing it and most of them will be spent as donations to the various PACs that support the finance industry.
One other reason to offer a Savings Bond Fund in the 401k Plan is if 15% of the total funds invested in mutual funds were invested into a government bond fund, it would exceed Chinas investment in USA Bonds.