James Altucher thinks 401k retirement plans are scams.

In a video that went viral after being posted last year on Business Insider, the 48-year old hedge fund manager, entrepreneur and best-selling author says that “I honestly think that you should just take your money out of 401ks.”

His reasons?

He lists three. You’ll have no idea what’s happening to your money when it’s tied up in a 401k. You won’t be able to touch it for years, maybe even decades, without paying a penalty. And, his most serious condemnation: “I mean, the average 401 k, they won’t really tell you this, probably returns maybe 0.5% a year.”

Don’t get me wrong, Altucher is a brilliant guy. But this is wrongheaded analysis, pure and simple, for reasons I’ll share below. Even so, there’s a grain of truth to his warning.

And that’s what we’re going to talk about today.

If you don’t understand 401ks “Total Wealth-Style,” you’ll probably fall victim to the kinds of dire returns Altucher predicts.

Here’s what you need to know about planning for retirement.

“Buy and Hold” Isn’t a Viable Investment Strategy – Even for Retirement

Altucher makes a fabulous living by saying and writing things that see him pilloried by the masses. He’s witty, obviously highly intelligent, and very entertaining. I love the fact that we both believe you have to break free of the old ways of doing things in order to succeed in today’s world.

But that’s where we part company.

It’s almost too easy to knock down Altucher’s arguments against 401ks one by one.

First of all, there’s nothing hidden when it comes to 401k’s.

Anybody with the desire to learn what’s in them can do so at the touch of a button. The index funds that are part of many funds, for example, are required to show investors what companies they invest in. There’s even a tool from Morningstar called “X-Ray” that will allow you to compare your holdings in great detail if you’d like. There’s nothing hidden about it.

That said, you should never put money into a fund without knowing what its holdings are, even if the fund has a pretty good track record over the last few years. Past performance never guarantees future results, so the fact that a fund beat the markets over the last few years doesn’t mean you should concentrate all your money there, wait a few decades, and expect it to continue to outperform.