Big Slide in 401(k)s Spurs Calls for Change

The stock-market rout has ignited a crisis of confidence for millions of Americans who manage their own retirement savings through 401(k) plans.

After watching her account drop 44% last year, Kristine Gardner, a 35-year-old information-technology project manager in Longview, Wash., feels no sense of security. "There's just no guarantee that when you're ready to retire you're going to have the money," she says. "You either put it in a money market which pays 1%, which isn't enough to retire, or you expose yourself to huge market risk and you can lose half your retirement in one year."

Many retirement experts have come to a similar conclusion: The 401(k) system, which has turned countless amateurs like Ms. Gardner into their own pension-fund managers, has serious shortcomings.

"This is the biggest test that the 401(k) plan has seen to date, and it has failed," says Robyn Credico, head of defined-contribution consulting at Watson Wyatt Worldwide, noting that many baby boomers are ready to retire. "We've put people close to retirement in a very challenging position."

The most obvious pitfall is that 401(k) plans shift all retirement-planning risks -- not saving enough, making poor investment choices, outliving savings -- to untrained individuals, who often don't have the time, inclination or know-how to manage them. But even when workers make good choices, a market meltdown near the end of their working careers can still blow their savings to smithereens.http://online.wsj.com/article/SB123137714796462913.html