The secret truth about 401(k)s

Ever wonder why your boss always pushes so hard to get everybody to enroll in the company 401(k)?

It’s not just because there are very few old-fashioned “pensions” of yore. True, a 401(k) is better  than nothing at all. But if they’re honest, many experts will admit that a 401(k) has always been a pretty lousy way for employees to save for retirement.

Then why the push? Because it’s better for the boss, of course. If enough employees participate, employers are allowed to sock away a boatload of their own compensation, pre-tax.

They’re “a tax shelter for end-of-the-year bonuses for bankers,” says Nancy Hwa, spokeswoman for Retirement USA, a group working to improve retirement plans. “The 401(k) was never even intended to be a retirement plan.”

Balances are shrinking due to the stock market bust. Hardship withdrawals are increasing. And fewer companies offer any matching funds at all.

“I am an adamant believer that the 401(k) is going to be one of the biggest debacles in our history,” says Bill Schultheis, author of The New Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get on with Your Life.

More grim news here: Workers discover 401(k) plans are failing them in retirement