IRAs Vs. The Company or Government Plans

When I started working for a living 40 years ago, companies and governments gave very good retirement plans to employees. That was the time when you started working for a government or company and 45 years later you retired from that company or government. That practice stopped in the 1980s when the heads of companies started shipping our jobs to other countries. But the City, County, State, and Federal Governments still had good retirement plans. However, next came the downsizing of governments because we had less people making good money. So the big taxes were not rolling in to maintain governments. The politicians started doing away with retirement programs.

Today, more and more companies and governments are turning to programs design to have employees save for retirement with an outside investment or mutual fund company. No longer will the employer give matching funds to the employee. This is the big pay cut that many people have taken without knowing it.

Not only have employees taken a big pay cut but they also have switched from a guaranteed retirement account to a self directed retirement account that is not insured in most cases. Employers introduced employees to Investment Advisors who represent banks, investment firms, or insurance companies. They act as advisors but really represent the interest of their firm. In reality, they act as “bookie” for the employee. With the “bookie” come various hidden fees for the advisor, the mutual funds, and the firm they represents. The “bookie” gets paid no matter if the employee makes money or not.

This is why employees must consider using such plans or go outside their employer and set up IRA plans where you the investing employee can buy individual stocks and bonds, directing your own investment strategy. The overall idea is to cut down on fees that you pay to firms and make the most money off your money. This is what you must weight when deciding to use your employer’s plan or your own plan. You need time to build up enough money to live on once you retire. Reducing expenses and starting early is the only way to do that for most people.