Dear Mr. Berko: 

I am 36 and make about $45,000 a year. For 14 years, I have contributed 6 percent of my salary to Wal-Mart’s 401(k) plan, and Wal-Mart matches that amount. My 401(k) statement from Merrill Lynch (enclosed) shows a balance of $82,000. I’m confused. I have no idea what I am doing, so the investment information it presents is meaningless to me. I don’t understand what I own or why I own it or what products the companies make or sell or what industries they’re in. I just picked a bunch of stuff and let it ride. I need your help because I’d like to retire with a decent amount of money. Will this 401(k) account earn me enough money to live modestly?

H.T., Jonesboro, Ark.



Dear H.T.: 

No, never and absolutely, not unless you continue working.

Since 1999, you and Wal-Mart Stores Inc. (WMT-$78.91) have contributed about $64,000 to this 401(k) account, and it’s now worth $82,000. At that rate, by the time you’re 70, this account may grow to $520,000, but only if you’re lucky. That’s a respectable cash stash today, but 34 years hence, when you hang up your tools, inflation will implode its purchasing power by at least 60 percent. In other words, $520,000 in 2038 may purchase only $210,000 worth of today’s beer, pizza and cellphone minutes. And it could be even less because you’ll pay taxes on the money you withdraw. So unless a rich aunt dies and leaves you her fortune, you need to invest about $10,000 more a year. If you can’t, then prepare for a hardscrabble retirement of pinching pennies because there won’t be any Social Security for you.

Frankly, the investments in your WMT retirement account are gibberish, and with the exception of the iShares Russell 1000 Index, I’ve never heard of any of them. And you’re as right as light; all I see is a strange collection of proprietary products that doesn’t make any sense to me. I can’t comment on the investment performance, because those quarterly statements are prepared for the benefit of the brokerage, not the interested party. And I can’t comment on the suitability of the individual issues because I’m not familiar with any of the investments in that account. No wonder you are confused; Merrill Lynch even spelled the Wal-Mart name incorrectly on the statements. Meanwhile, Merrill makes a bleeding fortune from fees, while you and other confused WMT employees (from whom I’ve heard) are making hardly more than bupkis.

The problem with your retirement account isn’t Merrill Lynch. Rather, it’s the stingy bureaucracy of cockeyed idiots who run WMT’s human resources. There’s no reason to be confused except that obscuration is the safe harbor protecting their cushy jobs. Those comparison ratios, accounting terms, percentage variations, performance measures, investment goals (data necessary to make informed investment decisions) must be translated from that ivory-tower mumbo-jumbo into everyday English. It’s as simple as Simon. I do it every day for millions of readers. Retirement planning is not rocket science - although brokerages and corporate HR departments want you to believe it’s complicated, because it justifies their jobs and fees. Meanwhile, the silly mutual funds in your 401(k) are not publicly traded but were created by Merrill Lynch for WMT accounts. Frankly, I can’t imagine a single advantage for a WMT employee who owns Merrill’s proprietary funds such as WMU45, WMTX3, WMU30, ZBGRIT, ZBDCFT and BGNNT. It makes much more sense to invest with Vanguard, Fidelity, Dreyfus, Dodge & Cox, T. Rowe Price, etc., all of which have established and published track records and have been serving investors for more than five decades. Do we really need more mutual funds?

If you can find another $10,000 to $14,000 a year to invest (wife’s employment or a second job), open a Roth IRA, but stay away from those goofy Merrill funds. The above fund families have excellent commission-free mutual funds that are light-years superior to that Merrill trash.