John Bogle on fixing our retirement system

I'm not a Boglehead, but I vacillate between thinking that no one can beat the market (and so you should put all your money in index funds) and thinking that there are star fund managers who of course can beat the market (and so you should invest in actively managed funds). It all depends on which of my funds is doing better at that particular time, I guess. I have taken an interest in Jack Bogle's ideas to fix our retirement system (I leave it up to the reader to decide if the system is broken and needs fixing).

The financial system, he charges, is too far skewed toward Wall Street and money management firms. At the same time, he says, individual investors have far too much freedom to make ruinous decisions with their retirement accounts.

So how would he fix things? Bogle proposes the creation of a federal retirement board to simplify and clarify the retirement-savings process. The board would oversee a new kind of defined-contribution account to replace the salad bowl of options—401(k), IRA, Roth IRA, Roth 401(k), 403(b)—that currently confront and confound investors. It would also monitor savers' investment choices to help them determine just how much risk they can tolerate and would emphasize low-fee mutual funds over pricier ones. Just as important, Bogle is urging Washington to require retirement plan providers—and all money managers, for that matter—to meet basic client protection standards. He wants fuller and clearer disclosures of all potential conflicts of interest and any other information that might affect investing decisions.

What I like about this: I agree that fees are too high and some of our retirement system is designed to enrich the fund managers. There is way too little accountability for poor performance from the fund managers.

What I don't like about this: I may be reading this wrong, but it seems like this proposed federal board would determine what we could invest our retirement funds in. I worry that the choices would be so conservative that it would be impossible to get the returns needed for a nice retirement. I don't mind someone overseeing investment suitability and pointing out investment risks, but it should be up to the individual to say if he or she wants to take those risks to get bigger rewards.

Sadly, the article says that Mr. Bogle has failing health. More of his investing philosophies can be found here.