Skip to content


May 13, 2013


Once upon a time we were told that we should have an on-the-job freedom to determine our own retirement system, that we should be enabled to decide how our retirement funds should be invested, that we were the captains of our future destiny, and that the answer was for us to abandon defined benefit plans in favor of defined contribution plans. Wall Street and employers were all for it, and we succumbed to their pretended libertarian plans for our retirement future(s). We bought in to 401(k) (tax deferred – not forgiven) plans en masse. The “plan” is, was and will be an ongoing disaster for retirees and the rest of us as well.

Employers loved this result as they were removed from any responsibility to watch over employees’ retirement funds in the marketplace. The employee was on his/her own, cast adrift to the gentle clutches of Wall Street. Wall Street loved the result as well, since such pension funds were to be invested by individuals who didn’t have the smarts of professional investment managers, managers who were not so likely to be conned by Wall Street’s schedule of fees and commissions on investments they managed, in part because the professional investment managers had massive investments to make as opposed to a single individual, who had next to nothing to invest by comparison.

The Wall Street/employer push on employees to take on retirement via defined contribution plans rather than stay with defined benefit plans was an act of financial cruelty and perhaps the biggest scam of the century – and I predict that we will eventually have to increase social security payments and other social benefits such as food stamps to such retirees since the 401(k) “plan” most employees now have in their employment will guarantee massive poverty among such retirees down the road.

The dire situation will be more pronounced as baby boomers begin to retire in large numbers and run out of money soon thereafter. The result will be increasing pressure on food stamp resources, a sicker retiree population, and all the other ills of those in poverty. We the people will have to keep such tens of millions of poverty-stricken retirees afloat while Wall Street counts the money that should have been in the hands of such retirees. It’s the same old story: They get the money and we get the bills.

The situation is perhaps best set forth by Felix Salmon in, and I quote:

. . . . You couldn’t pick a worse metaphor for self-determination than the 401(k) plan. . . . The now ubiquitous deferred-tax savings plan amounts to a cruel instrument the government and corporations use “to disown you, and to leave your life savings to be raided by the financial-services industry and its plethora of hidden and invidious fees.” Old-fashioned pension funds do a much better job of generating returns for their beneficiaries, because they’re run by professionals who pool the resources of large numbers of workers and therefore “have a fair amount of negotiating leverage when they deal with Wall Street.” No so for 401(k) investors, who also don’t save enough. The average account balance for a 60- to 64-old at Fidelity last year was $133,100 – far less than the five to 10 times annual salary that experts say you’ll need if you live 20 or more years after retiring. If you’re merely middle class, “there’s almost no chance that your retirement savings will be enough.”

Others have noted that “giving people choices makes sense when they’re buying clothes or sandwiches, but that retirement savings are different.” Matthew Yglesias in Slate. Com writes that “We have abundant evidence that, left to their own devices, a very large share of middle-class savers will make the wrong choices,” spending now rather than saving for old age. We need a “much more forceful, much more statist approach” to retirement savings, either by raising taxes to pay for higher Social Security benefits or creating a “system where ‘private’ savings are pooled into a state-run investment fund.” For now, though, it looks like Planet 401(k) is where we’re headed, so here’s some sober advice: “You’ve got to save a lot of money for retirement. More than you think. More than you want to.”

I do not necessarily endorse the plan to rescue the soon-to-be tens of millions of poverty-stricken retirees as set forth by Yglesias, but something needs to be done, and soon. Every day more and more baby boomers are retiring, and the stream will soon become a flood. What to do? Perhaps the government could come up with some tax incentives or disincentives to employers to return to what used to be the norm – defined benefit plans, or require employers to pay more into Social Security than they are now if they opt not to readopt defined benefit plans, or whatever. There are many brighter than I who could brainstorm a way around the coming train wreck, and it’s time – we can see the train coming, and it is picking up speed.

If such an attempt were made, expect the usual hue and cry from Wall Street about having the government take over the peoples’ “rights” to do as they please with their “own” retirement funds. Such a libertarian cry is, of course, a cover for their own greed in ripping off unsophisticated soon-to-be retirees in the marketplace. The 401(k) “plan” was a Wall Street design and has been very profitable for (guess who?) Wall Street. They are paid big fees and commissions for the few clicks of a computer key. They have no interest in train wrecks; they are consumed by the profit motive and the greed that undergirds it. (They answer that they have no choice, given their fiduciary responsibility to shareholders – another convenient cover for an uncaring corporate culture.)

I will be writing Part II of this extended essay shortly which will deal with, among other things, government employment statistics, what they mean and don’t mean, and the failure of the ACA to address coverage in certain sectors of the economy, resulting in a two-tier health care plan for American workers. I will also be restating my strong preference for single payer health care, a system in place in every other industrialized country on the planet and one which would free up hundreds of billions of dollars from the parasitic health care corporations every year for real health care as opposed to executive bonuses and shareholder profits.  GERALD  E


From → Uncategorized

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: