Sunday, January 27, 2013

What Else Do You Expect from 401(k)s?

They were never designed to be replacements for pensions anyway but as savings plans for high-paid executives. It's once again another example of how corporations exploited loopholes in ERISA, while our idiot politicians were clueless about what happened.

Corporations had no intention of setting these defined contribution plans as a way to make their workers rich. It was all about cost saving and cost shifting while at the same time gutting the pensions.

It's little wonder millions of people are screwed:

“A good pension plan helps people accumulate money, helps them invest money appropriately, and helps people pay out your pension for life, and the 401(k) fails at all three of those dimensions,” Ghilarducci said.

Her plan would require that employers deduct 2.5 percent of their employees’ pay, a contribution that businesses could match if they chose. Employee contributions would be mandatory. The money would be set aside in a fund that pays a guaranteed, modest rate of return to supplement Social Security. The return could be guaranteed by a paid fund or an insurance company, and it would be paid out after a worker retired in the form of an annuity for the rest of that person’s life.

“What people put in and what they earn is what they’re going to get out, so it’s a safe and secure savings account that’s only there for retirement purposes,” Ghilarducci said.

Defined contribution plans need to be abolished.

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