Many of us take for granted that our retirement is our own personal responsibility. Young professionals understand that they’re playing a game, competing against one another not just in a race for jobs but also for retirement strategies. The only trouble is that 401(k)s might be creating many more losers than winners.

THE IGNOBLE RISE OF THE 401(K)

As the United States’s manufacturing base declines, fewer young workers expect old-fashioned, long-term guarantees such as pensions, anyway. The rise of the 401(k) and concurrent decline in pensions emerged at a propitious moment in American history, when a strain of “free market” fundamentalism had seeped from the Goldwater and Friedman fringes of the Republican Party into the techno-libertarian mainstream. As the finance journalist Helaine Olen observes in her book Pound Foolish, the long boom of the 1990s, and its accompanying corporate focus on lean management and cost cutting, only amplified that trend.

This confluence of circumstances created a feedback loop in which each element exaggerates and entrenches the others. Between 1979 and 2012, pension enrollment rates dropped from 28% to 3% of employees.

All this would be fine if individual retirement accounts performed as well as or better than the old pension plans. But as reported by sources from Forbes to USA Today, 401(k) participants actually end up saving less money, not more—and certainly not enough to retire on securely. Managing and monitoring retirement saving accounts require a degree of financial acumen that is simply beyond that of the average person. (It’s actually beyond the capability of most advisers.) Commissions and financial fees—often obfuscated—account for the rest of the decline in returns.

In fact, as Olen reports, until the hard-won (but easily and regularly rescinded) banking reforms of 2012, retirement fund managers weren’t even required to report the fees they charged. That’s right: From the emergence of these plans in 1981 until the summer of 2012, there literally was no legal requirement to inform consumers how much they were paying for the privilege of having a retirement account. They could look up the fees internal to the mutual funds, but the financial firms administering the accounts were not required to disclose them.

And consumers were accordingly clueless. A 2011 AARP survey noted that 71% of 401(k) holders erroneously believed that they were not being charged any fees, while another 6% admitted they did not know whether they were being charged or not. As a result, according to Forbes, in 2011, pension-style plans performed at a 2.74% rate of return, while 401(k)s actually lost an average 0.22%.

MORE LIABILITY, FEWER SAVINGS

So personal retirement plans are sold as a means of empowering the individual investor to get in on the game, but in practice they more frequently exploit a person’s ignorance and lack of negotiating power. For a middle-class worker’s 401(k) to perform well enough to retire on, Olen observes, she must not only invest like a pro but also never get seriously ill, never get divorced, and never get laid off. In other words, it rarely, if ever, works in real life.

By tasking individuals with their own retirement savings, companies transferred risk to employees, shifted profits to shareholders, and created a tremendous new market for financial services—which in turn siphoned off more value from people to the banking sector.

Nevertheless, a majority of us still hold out hope that those upward graphs and pie charts about compound earnings are really true—even though our investments are not going up as advertised. Most of us believe the story told to us by our employer-assigned financial advisers and the business press: That over time, those of us keeping our money in the stock market will average 7% or 8% a year.

As Michael Shuman notes in his book Local Dollars, Local Sense, the MIT economist Zvi Bodie has looked at the composite of the S&P since 1915 and shown the true rate of return for any 44-year period of investment over the past century. The real average is about 3.8%. The best moment for a person to have retired would have been 1965, for an average gain of about 6%. Retire today, and you’re looking at having made under 3%—before fees, of course. So much for taking charge of our own finances.

Fully aware of these liabilities, the financial services industry became less concerned about helping people invest for their own futures than about finding ways to make money off that very need: To game the system itself, all the while finding new ways to make investors feel they were getting in on it.

This makes the typical pyramid scheme of the original stock market look honest by comparison. On the stock exchange, at least, those who get in early can win—albeit at the expense of those who come in later. That’s just the way investing works. You speculate on the future value of things—buy low, sell high. The patsy is the guy doing the opposite.

In the 401(k) game, the patsy is anyone who follows the advice of the human resources department and surrenders a portion of his or her paycheck to the retirement planning industry, all under the pretense of personal responsibility.