Workers in France are taking to the streets to protest the fact that they will have to stay in the workforce for a few more years -- as opposed to Americans, most of whom have to keep plodding along for a couple of decades but don't realize it.
Ironically enough many public sector workers in the U.S. observe National Save for Retirement Week Oct. 17 to 23, despite the fact that most of them don't have to save much because they are covered by a pension, as opposed to only the "pretend pension" known as the 401(k) plan. More than 80% of the public sector is still covered by a pension, as opposed to less than 10% of the private sector.
While the Pew Center on the States recently issued a report entitled "The Trillion Dollar Gap" contending that most of the state pension plans are under water, AFSCME Secretary-Treasurer Lee Saunders insists that the combined deficit represents less than 2% of state and local government spending and will remedy itself once the economy rebounds.
Saunders is also one of the few Americans that understands that it's the "underfunding" of 401(k) plans that is the train wreck that nobody's talking about. As Saunders points out in his recent blog post, the median 401(k) account balance is less than $13,000. As I've pointed out, the scarier statistic is that the first wave of Boomers who are scheduled to start retiring next year have only accumulated one fifth of the "ten times final pay" in their accounts that pension actuaries say savers should aim for.
Saunders says we should consider fixing 401(k) plans by looking at strategies that "combine the portability features of 401(k) plans with professional investment management." While I still think the most important fix to the savings shortfall is to triple the measly 3% employer contribution (which these days is likely to be "suspended"), maybe we should also consider firing the folks that manage 401(k) assets as well.
How about offering 401(k) savers an option to invest their funds in a government run 401(k) plan similar to the Thrift Plan, which manages low-cost index funds for three million federal and civil servants? Maybe we ought to go a step further and pool the assets, rather than have individual accounts, in which participants often make poor investment decisions.
Frankly, this shift to passive management would be a good fix for private sector workers AND state workers. Let's face it, "professional management" is an oxymoron when it comes to many state plans.
Just a few examples:
While the folks who manage 401(k) assets most likely won't be doing any perp walks, it's worth debating whether the fees participants pay them are worth it. Countless studies have demonstrated that managed funds can't beat passively managed index funds. What's more, while campaign contributions may not fit the strict definition of "pay to play," I wouldn't be surprised if the reason why Rep. George Miller, the go-to-guy on pensions, can't get legislation passed that would require every employer to offer index funds isn't a lack of interest but because the mutual fund industry showered big bucks on his colleagues to vote against it.
The even more reckless behavior by many mutual fund managers is their management of target date funds, which are supposed to automatically shift 401(k) participants' assets mix from stocks to fixed income investments as participants approach retirement age. Virtually every mutual fund outside of the Vanguard Group instead kept these investors scheduled to retire this year dangerously over-allocated in stocks -- more than 50% of their portfolios. As a result, in 2008 the average return of the four largest target funds in that category was minus 25.8%, almost as bad as the overall market slump for the S&P 500 that year of minus 38%. Finally, the fact that none of the mutual fund companies' leadership realize that most of their customers can't afford to retire is downright reprehensible.
Whatever the fix to our 401(k) disaster, time's a wasting to find and implement a remedy. Got more ideas? I'm all ears: please post your comments and let's crowdsource a remedy!
Wait, pool the assets? So you're going to take the money that I earned and contributed to my retirement, and give it to someone else for their retirement instead? It's not even like social security, where what you get out is proportional to what you put in, it's going to be what *you* get out is proportional to what *I* put in?
No. Just no. No no no no no, and absolutely not. Get out of my wallet. Right. Now.
I don't immediately favor pooling, because it makes the investment management process more opaque. Better to have 50 million involved watchdogs, IMHO.
You want to make a well-managed fund, but that can't be done. The fund will still have to be run by somebody, who will make investments based on what trips they are offered. A solution offering another layer of oversight, when we have not shown the ability to make any oversight work, is no solution.
As the saying goes, twice nothing is still nothing.
You been had, again and again and again.........................
There is no way to legislate retirement responsibility, it takes actual work and savings.
Now you're talking.
How about mandating a min. 5% employer match?
Sadly, not everyone earns enough to save enough for even a modest retirement.
Everyone's situation is different.
Be proud of your accomplishment.
But try to show a little understanding and compassion for others.
I think what we really need to look at is the facts about retirement:
1. Most people can't save for it, 401k or not.
2. Generous pensions are not feasible.
3. Social Security can't do more than supplement retirement and keep the poorest people afloat.
4. Most people can work longer, but some people can't.
5. Life after retirement is unpredictable and likely full of crises.
I don't know how this lends to an answer... but we have to face these facts to even begin to find one.
I really don't think 401k's will ever work without also fixing Social Security... and by all means keeping it from being privatized (turned into a 401k itself).
Some others here should take notice.
See, the move to make 401k and IRA investments a federally conceived scheme must have been a huge lobbying effort by the big investment companies. How else could you FORCE 100's of millions of Americans to take their diversity and cram it into ONE area, where the wolves can play personal piggybank with it?
Beware, the capitalistic model of this country was predators going after us individuals. Now, it is much more efficient to get all of us sheep together as a herd so they can fleece the whole flock. Much more efficient, they don't have to hunt us all down individually and find new and novel ways to bleed you.
They are going after these fat targets. Pool everything into one place, then devour it. Gather all the home loans, then make them worthless, and raid the treasury on their way out....left it without a single penny in the vaults.
There is no end to their ravening hunger. There is no amount too big to steal. Right now our whole system of property is foundering as the banks willy nilly decide who's home titles are valid, foreclose on whomever they wish, claim your paper is worthless, change your locks.
The greed of the 90s, buying companies and selling off departments/divisions, was the start of the adverse effects on 401(k) plans and employers have not recovered mentally from the 3% of pay to these plans.
A solution is to reduce taxes on business to get back to 5% of pay by both the ER and EE; which means reducing Defense or other federal budgets, which also means getting out of Iraq and Afghan or limiting the war on terror with satellite guided weapons.
An Employer required contribution rate of 9% of Pay would be ideal (for employees), heck I would be happy with 5%, but you and I know that the CEOs and Shareholders would object and use the requirement to either reduce compensation or even terminate the Plan.
Generosity? I've always said that the Employer's mentality in the USA is so different from the European and Australia. I equated with a slave-owner mentality.
US paid vacation is 2 weeks; and Europe, Australia, Canada is 6 weeks?!!!
US unemployment is up to 6 moths; and the others are twice that amount.
US healthcare is paid by an individual and subject to discontinuance at a moments notice; the others have government paid healthcare.
But I guess you can say we, as individual taxpayers, pay less taxes than these other countries.
Di
Under the administration of Presidents Ronald R. Regan and Geroge H. Bush, the DBPP came under attack with all kinds of restrictions; i.e, restrictions in the benefit amount, interest rates, mortality tables, etc). Why? Regan had cut taxes on personal income, and then restricted the Employer's tax-deductible contributions to DBPP in order to re-coop the loss in the general public taxes. As a results of these federal restrictions, the DBPP became expensive to administer with IRS compliance issues and a dying dinosaur. Employers terminated their DBPP and opted for 401(k) begnning in the late 80s. Today, the only entities who can afford a DBPP are local, state & federal governments b/c taxpayers' funds the contributions and pays the administrative expenses. Glup! The Truth has been Told!
My point is the American workers in the private sector have been hood-wink b/c of wealthy GOPs interest in their own wealth and less taxes (the Regan tax-cuts) that it even affected their DBPP, and they don't even know it.
Republicans seem to be very bad at math. They just keep saying: save more money. HOW DO YOU SAVE WHEN THE SALARIES ARE SO DAMN LOW?
Republicans are going to have a fun time, as they wander around their towns, tripping over homeless seniors laying on the sidewalks and parks. Yep, your redneck unregulated Reagan, Bush, Teaparty economics sure worked out well.