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> The worst thing is that you can't abstain from playing the game. Your retirement money is on the stock market and fund managers will take a big slice of it in fees whether you like it or not.

What are you talking about? There has never been a time where investing was cheaper and there were more options to invest without a fund manager getting a slice.

If you want to discount your pension benefit because you don't control the asset allocation (and I think you should, but that is an opinion) that is fine, but it isn't some sort of "rigged game" that you don't have options in.

Most of us doesn't have any disposable income to directly invest. Instead we have indirectly become investors thanks to the part of the salary set aside for us in the form of taxes and payments to pension plans. I don't have the numbers, and it differs from country to country, but it's a huge chunk of your salary. Like ~20% of your gross income is used to finance your retirement because you might live several decades after you retire.

The Swedish system (totally simplifying here) works so that once a year you get to allocate about half your tax collected savings to a list of funds selected by some government officials. Another part of your pension if paid by your employer through a pension broker and again you can select among a list of approved funds. All of the funds you can choose from charges a hefty fee to manage your capital.

Had I had the choice I would have withdrawn all my money and paid of my home loans which would have given me a completely risk free return of 3%/year. Instead I can only choose among these funds whose fund managers managed to grease some government official enough to put them on their approved list.

In that specific case, you do seem to be trapped, and I too would be frustrated about that, but it seems like you have the trapper wrong. The financial markets are providing the cheapest investment options ever, but your representative government is taking that away from you.

I'm not even willing to say that is a net bad thing (there may be all manner of benefits that come along with it), but place the blame where it belongs.

It's worth mentioning here, that since the money is effectively trapped in the mandatory Swedish Pension System (It's basically a locked US 401k with mandatory installments done through Pay As You Earn, ie. done automatically) the Swedish Pension Fund Board, who oversees the system - have negotiated brutal Fund Fee savings for each fund. Some of the mutual funds are almost free from fees.

This is why I detest all forms of social security/pensions. The government is not smarter than the individual. It's my money, not the government's. I don't need some elected or appointed official to be in charge of my investments. In the U.S., the government can't even balance a budget; something I do every month.

So you are blaming the fund managers for your government's problems?

The average 401k plan is a bag of crap, with lots of high cost, low performing investment options.

I'd love to see your source about the "average" on 401k plans. I've worked under so many 401k regimes I can't count them any more and have seen some bad ones. That said, there is normally at least 1 passive fund/etf in the mix even in the worst plans.

Further, 401k plans are easy to change. Make your displeasure with them known to HR (who frequently don't understand that the plan they have put together is bad) or discount the benefit accordingly when evaluating your compensation and invest outside of the plan in the ways you want.

I agree and disagree. I'm a reasonably savvy investor, this stuff isn't really an issue for me.

But most people aren't, and there is no evidence that they magically become good disciplined investors in the foreseeable future. The point is the employees in general are poor at investing and planning, and the 401k lowers the resistance level and gets people to invest. A poorly structured plan isn't an issue for you and me, but it for many (I would argue the majority) workers.

But there is also very little evidence (and quite a bit of counter evidence) that abdicating the investing and planning of these things to pension fund managers works out.

In cases where the investment fund is actually funded, and not raided by the business to meet cash shortfalls in the business or enrich corporate acquirers, things can work out well.

For example, the NYS Employee Pension fund is typically 90+% funded during any given year. That's because the law requires (quite onerous) funding contributions that spike when markets underperform, and makes it difficult to take money out.

That doesn't mean that NYS is perfect (far from perfect -- a few years ago the sole trustee of the fund was convicted of corruption relating to investments). But it is in a much better position than a state like Illinois, which is only 40-50% funded for future obligations, or New Jersey, where the budget is balanced by "skipping" annual contributions.

And If I want to move to a different school system to teach before I'm vested? How do they pay out?

Don't know about that. Leaving investments up to individuals results in a lot of individuals investing exactly $0 towards retirement. By providing an incentive to save, even a 401k that provides negative returns will leave them with a retirement fund greater than zero.

At a place I've worked at, the expense ratio was x10 compared to equivalent funds on the market. For example VTI had a 0.05% expense ratio while their S&P500 fund, the lowest expense ratio fund they had, was %0.5.

I asked HR multiple times if we could switch from 'great west retirement services' (now empower retirement) to something like schwab, fidelity or vanguard where the expense ratios are far lower. They never changed because it was cheaper for the company to stay on with GWRS than it would be with schwab for example.

So these crappy 401k services offer a cheap price to the company so they can make it up + more through their high expense ratio through the employees.

I would never argue that there aren't bad 401k plans. But you are not forced to use them and the market offers alternatives.

Those alternatives may be influenced by a lot of other factors such as regulatory environments (the 401k/IRA contribution difference is baffling) or your employers decisions.

But you can price that into your benefit evaluation. "You have a bad 401k plan, normally I'd take X in salary compensation, but you need to provide me X+Y". You do this when comparing health benefits right? Why wouldn't you do this for retirement benefits?

The op was claiming that he had no choice but to use high fee options, and he later qualified that with regulation based in Sweden which made that largely true. In the US, it is not true, for better or worse it can be inconvenient to use low cost providers, but you aren't forced into it.

Take a look at Paychexonline and let me know when you find a "good" passive ETF that isn't charging above 1.5-2%

>It's what has become of capitalism.

How is this a problem with capitalism? The problem is with centrally controlled public sector employee pensions, which has ALWAYS been rife with fraud and corruption as unions and municipal politicians all want a cut of that pie.

In a more "ownership society" solution, you take your 401k where you want to. You choose your investments, risk level, etc. Its certainly not perfect (sometimes some groups have high fees but you should be able to switch providers), but the larger issue here is how messed up big city pensions are. In Chicago, the city is going to go bankrupt next month if it can't find huge and new levels of funding/taxation. It has promised so much in pensions it can't remotely pay for via politicking and union corruption, that the taxpayers are shocked at how badly everything has been managed.

The larger issue is that the 60's and 70's radical leftist politics have come to roost. We handed unions and public sector workers the keys to the kingdom and now we just can't pay for it as they retire. Its not just fees and its not just Chicago, its going to be a lot of municipalities where pensions are going to do serious damage.

Capitalism has become incredibly abstract. You make a deposit of €1000 to your retirement account containing €10000 and hopefully, in a few years, due to investments the number will be larger than €11000. But I don't think anyone can trace exactly what happens with the money or what chain of middle men they go through before they come back at you with some profit.

Btw, "pension funds" are just an elaborate illusion. What you pay today funds this generation of pensioners. It's not money doing nothing in a bank account. We hope that the working generation coming after us will be nice enough to pay taxes to fund us after we have retired.

Surplus tax income used to be used by governments to build infrastructure, schools and housing. Building highways is a form of safe, long-term, high-yield investments. It's almost always profitable but it may take many decades before it becomes so. Nowadays, much less of the surplus is used for that kind of direct investments and we are instead giving it to fund managers and hoping that they will work their magic and give us back more money in the future.

I'm starting the fifth level: investing in the fund managers.

Hedge funds are not about returns. They're about hedging risk. Thus, hedge funds. The original purpose of hedge funds was to allow investors to decouple themselves from traditional sources of risk (stock market plunges, housing market crashes, etc. etc.) and diversify their assets in a way that would normalize returns and make things at worst more predictable, and at best stable and predictable. This is also why they enjoy lax regulation, as they often don't invest in traditional methods or securities (or at least they did, things have changed somewhat).

Granted, that hasn't been the MO of every hedge fund ever created, but that is the fundamental point of a hedge fund. Framing the debate by saying "they don't even beat index funds and get paid billions" ignores the reality that investing in a way that diversifies risk is an extremely difficult thing to do, and even if a fund loses money it can still technically succeed at it's purpose and have earned it's commission.