'401k Manifesto' advocates a shift to ETFs

Consider the typical 401(k) experience, with Joe Employee. Joe is 30 years old and his companyis offering a 401(k) plan. Joe sits though an initial 60 minute educationalseminar where he is instructed on how to enroll in the company 401(k); determine,set and adjust his contribution rate; analyze pick and manage his investments; access,use, and understand his retirement calculator; assess, examine and monitor hisfinancial plan and make all necessary adjustments over time to each variable asconditions change.

This process is tedious and dated. Nearly all of these tasksrequire the employee to perform numerous manual processes because the technology,behind the 401(k) plan, lacks the ability to perform these tasks in anefficient and simple manner.

Realistically, the retirement industryhas been suspended in a time warp, operating and building on top of antiquatedsystems, whose origins date back to the 70s. [i] Retirement plans simplyhave not evolved in a way that makes them satisfactory to today's modernstandards of ease, simplicity and power; and this excessive lack of change resultsin a firmly entrenched conditioning.

This paradigm has become so developed that the ideas abouthow to change for the better mirror more like what Christian monks discussed inthe middle ages, pouring over questions like 'How many angels can dance on apin?'

It's not that bad of course, but the monks' pondering doesreflect, in terms of importance, what's being discussed and what grabsheadlines. What you see is a continuous cycle of the same topic; participantsmust be educated, despite numerous studies which reveal that educatingparticipants is failing to produce positive results. [ii] This emphasis on educating participants is a direct result of outdated technology which requires that participantsmust be 'educated' or trained in using these antiquated systems due to thenumerous manual processes a participant must go through before an instructionfrom the participant can be implemented; otherwise the plan does absolutely nothing.

So industry magazines print stories like: '10 secrets toeducating on investment selection' or '5 best practices for examiningprospectuses;' engaging in a constant struggle to teach the old dog new tricks.Very few people have the opportunity to consider real, fundamental change.

Ignoring the fact that America workers are in great need of modern401(k) technology, [iii] the retirement industry wants to live in the dark ages. Why? Simply because these antiquated systemscannot evolve at the pace consistent with modern standards of interaction.

Sometimes it takes an entrepreneurial company to make thatgiant leap forward. By using low-cost investment vehicles, Exchange TradedFunds (ETFs), Invest n Retire, LLC, a record keeper in Portland, Ore., quicklyrealized that the record keeping systems of yesterday, which were built totrade mutual funds, were inadequate for trading ETFs. That one simple factrequired new modern technology.

Facts:ETFs trade like stocks, throughout the day at marketprice, and can only be purchased and sold in whole shares. In contrast, mutualfunds trade at net asset value ( NAV ) closing price and can be purchased or soldin whole and fractional shares. Since old legacy record keeping systems werebuilt to trade mutual funds in dollar certain orders, these antique systemshave no ability to:

- (a) buy in sharecertain orders or

- (b) track residual cash [iv]

Going forward, Invest n Retire ( INR ) ignored the promotersof mutual funds who claimed that no one wanted ETFs in defined contribution plansand INR proceeded to build its patented system and method for record keepingand trading ETFs in tax-deferred retirement plans (pat. US 8,060,428). This whitepaper is the road map for a new way forward:

'401k Manifesto - The New Standard'




[ii]Is there any ROI for 401k Education Policy Statements? by Sanders Booze, Capital Advisors,Oct 2011

'ERISA, the federal law governing private-sector retirement plans, requiresthat the participants receive certain information about their plan, but doesnot require that the participants receive education.'

[iii] Anderson, Nancy, 'The 401(k) is not working for Gen Y, but it can,' ForbesMagazine, October, 2011:

[iv] Abrahamson, Darwin, 'Can exchange traded funds (ETFs) be traded just likemutual funds?' November, 2011:

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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