The author says that the 401K is designed to encourage us all to keep our money for a long time. He claims this benefits the banks who keep their cash--which is our cash--liquid and give us 3-5% percent while charging others to borrow the money at 6 or whatever percent is the going rate.
Well, those numbers don't apply anymore. The 401(k) wasn't designed to encourage us to keep our money for a long time - it originated as a means of executive compensation. It just applies to more of us now. Yes, the rules are such that you should keep your money in it for a long time. It only benefits the banks if the money is held at a bank (which is a bad place to do any investing).
He seems to object to that banks make a profit. Not sure what he expects the bank to do: hold your money for free and keep it entirely there?
I find a lot of fault with the book.
The faults you point out are correct. Rental property is nice... if you maintain it well, keep it occupied, and don't have problem tenants. There's also the issue of "do you want to be a landlord"? Some people do, some don't. If you have no desire to be a landlord, don't get into buying property with the intent of renting it out. Yes, there are management companies, but using one will eat significantly into your return.
Yes, the ROI on your own business is higher... if it succeeds. What's the success rate on that? And how much work does it take to maintain that? And that's taxed
now - it doesn't grow tax free.
I have to say that the book is making me wonder if I should reduce the percentage I put in there and direct it into Vanguard.
The general advice for priority on tax-advantaged savings is to put enough into the 401(k) to get the employer match, then max out your Roth IRA, then add more to the 401(k). This changes if you plan to leave employer at some point in the near future, or if your 401(k) has great investment options.
Similarly, once you leave an employer, if the 401(k) wasn't fantastic (and I mean ERs better than you can get at Vanguard as an individual) and the next one isn't either, you roll it over to Vanguard and any problems with the investment menu disappear promptly.
He also mentions the tax "advantage" and points out that you might NOT be in a lower tax bracket when you retire. So much of the sales-y part of the 401K relies on "you will be a lower tax bracket so the deferred tax is better" idea.
Forget people in general; their situations don't apply to you. Will you be in a lower tax bracket when you retire? Probably, unless you're super spendy. If taxes at my retirement are equal to today's (adjusted for spending power, so let's talk in 2013 dollars), I will be in a far lower bracket. My annual expenses
including mortgage is about $35,000. When that mortgage is all or mostly paid off, as it will be when I'm able to withdraw from my IRA (formed mostly by 401(k)s), it will be about $18,000 - even without
any deductions, that's a lot lower than my current taxes (28% federal marginal, 9.3% state marginal).