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This chapter examines the investment advice currently provided to participants in self-directed retirement plans (401k, 403b, etc.) by financial service firms and investment advisory services. It finds much of the advice to be logically flawed and dangerously misleading. There exists a strong bias in favor of investing retirement savings in the stock market without insurance against a market decline. The paper concludes that in view of the limited ability of the general public to handle the complex task of investing for retirement, financial firms will have to design safer products with a small number of choices that are easily understood.
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©2002 Pension Research Council of the Wharton School of the University of Pennsylvania. All Rights Reserved.
Date Posted: 06 September 2019