The market meltdown of 2008 has left many 401(k) investors treading in deep water and looking for answers to the mind-boggling question of how to plan for retirement and how to make up for staggering losses, and perhaps exchange traded funds (ETFs) are the answer.

According to the Boston College Research Center, the market meltdown of 2008 cost 401(k) holders more than $1 trillion and $2 trillion if one includes IRAs.  Take a look at this graph provided by the Wall Street Journal:

401ks ETFs

The most obvious pitfall with the current 401(k) system is that shifts all planning risks to those who don’t have the time or knowledge of markets to be successful pension-fund managers. 

Another major problem with the current 401(k) market is that it doesn’t give workers straightforward low cost options that track market indexes; this is where ETFs come into the picture. 

To ameliorate this situation, Congress has been throwing around several ideas.  One such idea, is to automatically allocate contributions to an index fund that holds stocks and bonds, states Eleanor Laise of The Wall Street Journal.

The financial crisis has forced many 401(k) investors to shift assets away from stocks and toward safer bets such as cash and bonds.  The problem with this strategy is that the returns are generally not large enough to significantly increase a worker’s nest egg.  The only viable solution is to better education and offer more options to the average investor.

 We know that times are tight, but people should not stop saving. Always continue to contribute to your 401(k), and if you rode your 401(k) to the bottom, don’t go to cash now. This period will pass, and there will be fantastic bargains in the rebound that could help you later.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.