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401(k) plans: 'The Smartest 401(k) Book You'll Ever Read' offers insight

401(k) plans can often be a better deal for your employer than for you. This book gives advice on navigating a 401(k) system that's sometimes unfair.

By Guest blogger / April 25, 2011

A woman calculates her finances in this photo illustration. The book, The Smartest 401(k) Book You'll Ever Read, gives tips on how to make the most of your 401(k) and retirement planning.

Photo illustration/imago/stock&people/Newscom


Every Sunday, The Simple Dollar reviews a personal finance or other book of interest. Also available is a complete list of the hundreds of book reviews that have appeared on The Simple Dollar over the years.

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About a year ago, I reviewed Daniel Solin’s The Smartest Retirement Book You’ll Ever Read and concluded that it was a strong book to read if you’re a high income earner and concerned about retirement.

It was good enough, though, that I decided to keep an eye out for Solin’s other books and read them over time. Last month, I picked up Solin’s The Smartest 401(k) Book You’ll Ever Read in an effort to take a deeper look at the realities of retirement plans that many people use.

Does the book offer any real advice, or does it just rehash information that can easily be found elsewhere? Let’s dig in and find out.

Rules for All Investments
Solin’s real focus in this book, much like his other books, is that a successful investor focuses heavily on minimizing costs. You shouldn’t worry so much about short term return numbers on the investments you’re looking at. Look instead at things like expense ratios and the fees you’re charged. You’ll find that investments like index funds tend to stand out from the pack. Also, Solin urges people to avoid the hype for various funds out there in the financial media and instead focus on just the numbers.

401(k) Plans: Rigged to Rob Your Nest Egg
Here, Solin argues (quite well) that 401(k)s are fraught with risks. For starters, your employer often chooses a 401(k) plan that benefits them the most, not the plan that benefits you the most. In short, you’re usually going to get the short end of the stick with your work plan compared to what you could get on an open market. Companies know you’re restricted in your 401(k) choices, so they offer up relatively poor investment choices inside those plans. They’re expensive, fraught with conflicts of interest, and can make things even worse if you make poor investment choices.

How to Beat a Rigged 401(k) System
So what’s the solution? Lobby your employer for better options. Minimize the portion of your investment portfolio that’s actually in a 401(k) plan. Look for the lowest cost investments in the plan. Invest only enough to get all of your employer’s match, then look for other options. In short, don’t buy into the idea that your only way to save for retirement is through whatever options the “advisor” at work tells you to invest in your 401(k).