This is true. 401ks are needlessly complex yet at the same time not good enough for most people.
Problems are as follows, IMO.
- Many plans have very little choice, usually pushing high cost plans and over-complicated plans. I suspect there are more than a few employers who get kickbacks for this.
- The idea of shifting the social safety net of retirement benefits to each individual, allowing them to make choices, is great, except most are not nearly knowledgeable enough to even understand that they don't understand the choices, let alone to understand the choices.
- They allow people to borrow money against them, which is often done for dumb-ass reasons, and there are no checks to ensure people aren't fucking themselves (see above).
- They give the most tax breaks to people who don't need them (like myself.)
- There's no education about them - not at the corporate level (usually), nor in standard education.
- They've become political-ized.
- People are not encouraged to use them; default is opt-out at many places. Default opt-in might be as low as 3%, often rising 1% a year until a maximum of just enough to get employer match if any.
And so on.
I absolutely utterly love the idea of allowing people to have control over their retirement accounts. But I believe that the default should be bog-standard, government run; and the government should be mostly invested in total market stock funds with some government bonds and cash on hand to smooth over dips; perhaps less aggressive that I do today (100% stocks), but more aggressive than most people do at age 60 (often 40%, 60%, or even more bonds, and lots of cash.) It should be uncoupled from where you work - corporate 401k, government 403b, etc. If someone wants to take it into their own hands, they can, but must jump through a fairly simple hoop (basically sign a paper outlining the risks of self-management, and sign that they understand what they're doing.) It should also default to something like 10% pre-tax salary, minimum 5% (unless doing it yourself), with a maximum of $xxxxx or yy% (whichever is greater).
My opinion.
With that said, the current system works fantastically well for the savvy investor, especially one who starts early.