This is completely false. For the lump sum, they already discount the future payment values to the present, so you get a significantly less amount. The people at the lotto are not stupid.

And you’re definitely right that you can lose money in a qualified retirement account. Regardless, if you lose or gain money, i think the idea is that SOMETHING is being put away for the future and you’re building yourself a nice nest egg through a diversification of investment vehicles.

Ultimately, I understand completely why you’d want to go post-tax.

@Lucas530 – “long time reader”. We have only been up and running for 2 months!

To note on the above comment by Chih, I know where you’re coming from as I am in my early 30s too and my retirement accounts went no where fast in the past 10 years! I feel your pain brother.

It seems like your investment knowledge is much more sophisticated than your average investor so I’ll play to that. Your IRR probably was negative like 95% investors in the nation but it seems you still were able to mitigate some of the downside risks which is probably better than many others can say.

I believe the idea behind this post is more so for your average Joe that have no idea what investment options are out there for them. And the best way to mask their investment ignorance is by socking away money into a retirement account that is essentially automatic and out of sight. Also if you have an investment horizon longer than 10 years, then there will always be hiccups in the market cycle that you will inevitably encounter. For your average Joe, they’re best bet is to ride out the wave and dollar-cost average the entire way.
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I hate to be the pessimist but when you look at how the equity market has done over the past 10 years, the annualized returns over this period are nowhere near the historical long term averages over the 20-30+ years time horiaon of 7-9%. I forgot where I read this but I think the annualized return over last 10 years, was less than bond returns and even flat or negative depending on the index and time period you are averaging. To make matters worse, for those of us that have only been working for about 10 years (like myself who is in my early 30’s), I get this crap market on top of the fact that my contributions increased overtime and so my account balances were higher in the more recent years and thus performance is more heavily weighted in the later years (if you factor in cash flows). Therefore, I didn’t benfit as much when markets were doing well in 2005-2006 as I got hurt in 2007 so on a IRR perspecitive, I was probably negative. If I hadn’t put everything into a shortterm bond fund in 2008, I probably would have lost more, but my point is…it isn’t unrealistic to have losses in a qualified retirement account like 401k. So, under a market scenario where one experience losses…I think I would rather pay taxes later or ask uncle sam to please give me some tax credit for my losses. At least I didn’t put all my 401K in IndyMac Bank (my previous employer) like some people did and got completely wiped out…in that case they pretty much lost everything.