The trouble with 401(k)s

West Virginia school teachers just returned to a traditional pension system, says Jennifer Levitz in The Wall Street Journal, after an unhappy 17-year experiment with 401(k)-type plans. Their experience, marked by too-safe investment choices that left too-small nest eggs, is “a cautionary tale for employers and employees.” It’s true that “many workers with retirement accounts have built nest eggs far bigger than they ever imagined possible,” but “unknowledgeable ones” often fall short, and traditional pension plans on average perform better than individual worker-managed retirement accounts. One problem, a lack of investment knowledge, is curable, but the lack of “fiscal discipline” might be harder to fix.

How to gain 401(k) investment knowledge

Part of the problem with 401(k)s, says Money’s Walter Updegrave in, is that 21 percent of Americans “turn to friends and relatives for advice” in picking their 401(k) allocations. There’s way too much at stake to have your “retirement prospects riding on odd Uncle Otto’s mutual fund picks.” You can hire a money manager to advise you, but the fees may make that unprofitable—unless your employer picks up part of the cost. But you can manage on your own, too, if you do “two key things: create a diversified blend of stock and bond funds and then rebalance annually.” You usually get free advice and other tools online. At the very least, try a target-date fund.