Isn't a 401k enough?

I got the annuity which let me roll my IRA money over tax free.  It works just like any other rollover IRA.  In case you don't know, a rollover IRA is when I move my old 401k money from a former employer to an IRA, or Individual Retirement Account, that I can manage myself.  A funny thing about all these IRAs and 401k's; they are both based on investing in mutual funds and similar security-based vehicles.  Take a look at the Dow Jones Average over the last 40 years. 

Before 1980, a worker had limited choices for saving for retirement.  He had Social Security as some protection, but that was never intended to be the total amount needed.  As I said earlier, many large employers had pensions for employees.  Some were generous while others were not so, but all had the same thing in common.  They provided a retired worker with a lifelong paycheck.  Trouble was businesses didn't like having to keep so much money around that they couldn't use.  In fact, the AICPA, the folks who do all the external audits of corporate books, wouldn't even allow businesses to put the balances on their financials; at least, not as an asset or even a potential liability.  Meaning they couldn't tell investors that they were worth possibly billions more than they could show as their value as a business.  The reason was because companies were not allowed by the federal government to touch such funds.

One group, a union, got in trouble back then for spending the money on expenses other than retirement, while a few other pensions just disappeared over night.  The government, back when regulation was considered something good for the country, made it very difficult for companies to play with that money.  To this day, companies with pensions have very strict rules as to how to invest and spend pensions.  Then suddenly, businesses got a Get Out Of Jail card.  Along came the 401k.

Pensions allowed companies to reward their employees with free money after doing a number of years of service.  As the pension was based on salaries, everyone was able to get substantial lifetime benefits.  The money was saved tax free until it was paid out to the retiree. 
Then a lightbulb went off.  I am not sure where, but someone suddenly realized that companies could get rid of pensions altogether.  A pension had to be held by the company but a 401k was managed by a third party.  That meant that they could dump pensions forever and leave the employees on their own to figure out how to invest.  On paper that sounds very good, I suppose.  Do you have any idea what that did to the market?  Take a look at the Dow Jones Industrial Average, DJIA, from 1950 to now.

The DJIA is used as the baseline for the market.  We hear about it every day.  The Dow is up today, the Dow is flat, the Dow is plummeting.  From the 30's to 1980, the Dow went from 200 points to 900.  In that 50 years, the market increased by 7% per year (that is ((200-900/200)*100)/50).  Not bad.  From 1980 to 2000, it grew to almost 11,000 or about 56% per year (same math).  How did that happen?  401k's. Before 1980, only large companies like insurance companies and pensions were the major buyers in the market.  Ordinary people were just small potatoes.  We might buy a few hundred or a few thousand shares.  Some might have bought even more, but they didn't have any real effect on the market.  Only the big buyers had any influence.  And since the big buyers wanted stability and growth, the market slowly moved up.  Buying a stock and following required a certain level of sophistication and knowledge to do well.  Most small investors were lucky to make any money.  When I was growing up, we talked about the market like we talked about Las Vegas.  Investing was a gamble. 

401k's started a whole new game for Wall Street.  Suddenly millions, then billions than trillions of dollars were being thrown at their feet by unwitting buyers who only wanted to have something for their old age.  Wall Street exploded and the market grew exponentially.  And the market suddenly became far more volatile. 

After the big growth in 2000, the market crashed down to 9000 in 2002, the time after 9/11.  Again by 2007, it almost hit 14,000 when it all came tumbling down again.  Where were the 401k's during all that?  They were riding this roller coaster of value every day.  In 2009, it was down below 8,000.  All this volatility hurt millions of Americans of every age.  I lost almost half my money in a few days.  From 2000 to 2010, my balance stayed exactly the same value even though I had been adding to it all along.  The Rule of 72 says that I will never see my money double.  According to a fellow I know who is pretty good at investing, in any market, someone is making money.  Just not folks like me.

Throughout all this, one type of company has managed to survive and grow.  And the reason for this is because they have only one job....to protect the people who buy their products.  Insurance companies.  I want somebody on my side.