You mean the 401(k) isn’t an absolutely perfect retirement savings vehicle? Shocked! First Suze Orman and now this guy. While Jim Cramer concedes in an interview Friday that a 401(k) is important, he bemoans it’s “downsides,” adding that there are plenty of them. Cramer specifically points high fees, to a lack of control over the investment assets and lack of choice over where to invest as his biggest complaints.
The “Mad Money” host’s ideal would be to have workers “buy a diversified portfolio of individual stocks and do the homework on each one of them—ideally one hour per week per stock—so you know when it is time to buy more, when it is time to sell something, and when it is time to sell everything,”
It’s almost as if the gregarious television personality has never heard of the country’s dismal savings rate, lack of financial literacy and, you know, jobs and/or family that might eat up some of their time. It might come as a surprise to know that not all (or even a majority) have hours on end each week to research a “diversified portfolio of individual stocks.” If they did, there’d be no need for these pesky people called financial advisors. (And just how many stocks does he think should constitute a diversified portfolio; 10, 20, 40?)
Jim Cramer’s recommendation is to contribute as much money to your 401(k) that is needed to get the full company match, and then stop. At that point, the rest of retirement savings should go into an IRA until that is maxed out, in order to take advantage of the lower management fees and higher investor control. Thankfully, it’s not bad advice; but again, time permitting.
Cramer has, of course, failed to keep pace with the S&P 500 in his picks, and he once referred to Lenny Dykstra as one of the great money managers. That’s the ex-baseball player nicknamed “Nails” who went to prison for bankruptcy fraud, having also been accused of grand theft auto and money laundering before accepting a plea agreement.
As if responsible 401(k) advisors haven’t got enough on their plates, they also have to deal with nonsense like this from the consumer press and Cramer. We just thought you should have an idea of so-called information you might have to dispel in your next client meeting. Happy Monday.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
