Thursday, August 08, 2013

You Bet They're Scams

401(k)s were never designed to be retirement vehicles in the first place, but good ole Congress made sure there were enough loopholes around that companies that had pensions could simply dump them in favor of these scam accounts.

And most of them did. The ONLY reasons they did so was to save money on pensions and to shift the risk of investments from them to employees.

What a goddamned outrage, but people thought they'd get rich over these scams.

A few people did, in fact, profit: the financial services industry.

Everybody else has pretty much gotten screwed.

We need to have an alternative, and preferably a return back to pensions.


The United States is on the verge of a retirement crisis. For the first time in living memory, it seems likely that living standards for those over the age of 65 will begin to decline as compared to those who came before them—and that’s without taking into account the possibility that Social Security benefits will be cut at some point in the future.

The culprit? That same thing Mathisen celebrated: the 401(k), along with the other instruments of do-it-yourself retirement. Not only did they not make us millionaires as self-appointed pundits like Mathisen promised, they left very many of us with very little at all.

You might be tempted to ask “what went wrong,” but a better question might be “why did we ever expect this to work at all?” It’s not, after all, like we weren’t warned. As early as 1986, only a few years after the widespread debut of the 401(k) and the idea that American workers should self-fund their own retirement accounts based on savings and stock market gains, Karen Ferguson who was then, as she is now, the head of the Pension Rights Institute, warned in an op-ed published in the New York Times, “Rank-and-file workers have nothing to spare from their paychecks to put into a voluntary plan.”

But her voice, and that of other critics like economist Teresa Ghilarducci, who is now at the New School and described our upcoming retirement crisis as “an abyss” in 1994 congressional hearings, were drowned out by the money and power of the financial services industry, combined with their enablers in the personal finance media who proclaim even today that if we don’t have enough money set aside for retirement, it is all our own fault.

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