The failure of a well-known, experienced business journalist to successfully save and invest for his own retirement is boggling. You might say, without putting too fine a point on it, that the journalist, Joe Nocera of The New York Times, should have known better. He admits as much. He wrote a book, after all, back in the mid-90s about the changing landscape of personal investing (A Piece of the Action).
Friday the Times published Nocera’s op-ed “My Faith-Based Retirement.” He explains that he started his 401(k) modestly on a writer’s salary and that it grew during the 80s and 90s. He became increasingly flush. Then the tech crash of 2000 cut his account in half.
He doesn’t say, but apparently either he cashed out or perhaps his gains simply vanished when the dust settled. Consider the Super Bowl commercial from that era with the doctor exclaiming, “He has money coming out the wazoo!” That was ETrade in 2000. ETrade is still very much with us—which should give investors some pause—though the guy’s money has long since stopped gushing from his wazoo.
Then a few years later Nocera got divorced, cutting his account in half again. That’s roughly about the time of the 2008 crash, so divorce or not, if you were in the market, you can feel his pain. Then he bought a house that needed fixing up, and he used some more of his 401(k).
Anyway, he tells us the situation is now pretty simple. He can’t retire. He can’t afford to.
He goes on to talk about how “most human beings lack the skill and emotional wherewithal to be good investors,” along with some hapless behavioral finance truisms about selling low, buying high, and investor overconfidence.
We should be careful not to draw too many conclusions from his column, where too little is said about things that are both more complicated than they appear and yet transparently wrongheaded at the same time. It is, after all, a very personal situation.
His ‘public service’ admonishments from a behavioral economist, and her assertion that 401(k)s are “a failed experiment” seem like a smoke screen. Anybody who had any money in a mutual fund—millions of people—suffered through the big market drawdowns during 2000-2001 and 2008-2009. If you rode it out, your holdings are probably at a lifetime max today. Not the fraction of a fraction that Nocera describes.
Yes, poor personal financial literacy is a serious problem across the economic spectrum. But personal finance at its core is not that complicated. Like those anti-smoking commercials (“Don’t smoke!”), you can sum it up pretty easily: Save money. Spend less than you earn. Invest sensibly and diversify for the long-term. Because you’re going to need it some day.
401(k)s don’t kill retirements. Failing to fund and manage them sensibly causes them to fail.
Maybe his real message is that we all know what we should do, we just can’t seem to do it. Too many options, too hard to choose, too many temptations, too busy, too many distractions. If this sounds familiar, find a good fiduciary advisor. Use your advisor as a coach or a quarterback, whichever suits you best. Let him or her help you with your game, get on and stay on track.
As for Nocera, hopefully he’ll be able to keep working as productively as he plans, though the top of the pyramid gets smaller and smaller as you get older. Hoping against hope—this is what he means by a ‘faith-based’ retirement.