It's Always Our Fault We Are Poor in Old Age

This video about drove me crazy because it blames women especially for being destitute in old age, that they got that way because they were stupid about finances:



It is simply not reality as the vast majority of women, especially women who have never been married, have lived it. You can do all the right things and still wind up destitute. So many of these "how-to be financially stable" vids are by married people, who already have for the most part a big lifestyle and more options than never-married people. Even being married doesn't shield people from catastrophic illness or job loss. I completely disregard such advice as not only clueless, but cruel. Many, many people cannot EVER retire and must work until they can no longer do so. This is because pensions in the private sector (U.S.) have been eliminated in favor of do-it-yourself "savings plans" (401ks) which were NEVER designed to replace pensions, but loopholes in the federal ERISA law gave companies a way to destroy their pension systems. The vast majority of people can never, ever save enough on their own what an even small pension provides. For example, I have a $360 a month pension from a public employer (Nevada PERS). I would have had to save at least a couple hundred grand to tide me over for 30 or 40 years on that amount. Not realistically possible. The problem is systematic and not a problem of personal failure.


A lot of this advice comes from sources connected in some way to the financial services market, and of course they want you to spend money on their services by catering to your worst fears.

It is not the way of the real world. Pensions are necessary, yet they are rare outside the public sector in the United States these days.

I warned people about the 401(k) scam over 30 years ago because I did the research. Companies put them in and ditched the pensions because of cost. They shift the cost and the risk all on employees, who simply don't have the resources to fund an adequate retirement without decent pensions.

401(k)s a Flop

As if that hadn't been apparent all along.

They were never designed to replace pensions, but thanks to loopholes in ERISA, that is just what many private companies did.

Now people bitch about public employees still having pensions, but they never did a goddamned thing back in the 1980s, when the shit savings plans began to take hold.

I was railing against them for years, and I was right.

In an article published by the Wall Street Journal this week, the creators of the 401(k) reflected on the consequences of the product they promoted. The takeaway: many of the early advocates of 401(k)s now regret the “revolution” they helped to start. As you know if you are a regular reader of this blog, 401(k)s were never designed to be the primary retirement savings vehicle for working families. They were supposed to be a supplement to retirement savings through Social Security and a defined benefit pension. Gerald Facciani, a former head of the American Society of Pension Actuaries, lays it out: “The great lie is that the 401(k) was capable of replacing the old system of pensions.”

Those of us women who didn't prostitute ourselves by getting married will likely have to work until we die.

401(k)s Are a Complete Failure

Of course it is no surprise more people than ever before are vulnerable in their old age. That is because of federal policies that made it easy for companies to ditch pensions and replace them--if at all--with those useless 401(k)s.

link

Of course never married or single women fare the worst of all, thanks to a system that denigrates women's work assuming as it does that they don't need as much money as men do because they are supported by men, reality to the contrary:

Single people and women face particular challenges. Single people tend to be less prepared for retirement than their married counterparts. Even among those approaching retirement (age 56–61), most single men and women do not have any retirement account savings (not shown on chart). In the past, married women were less likely to be covered through their own employers than were single women, but married women’s participation increased as their earnings grew (Morrissey and Sabadish 2013). In the new millennium, the biggest change has been the decline in the share of single men with retirement account savings and in the amount single men have saved in these accounts (Figures 14–15).

Though declines for single men closed savings gaps between single men and women, women generally remain more vulnerable than men because they live longer and are more likely to outlive their savings—and, in the case of married women, their spouses. Women can expect to live around 2.3 years longer than men in retirement (Social Security Trustees 2015). Because women earn less and accumulate less retirement savings and benefits than men, never-married, divorced, and widowed women are at greater risk of experiencing hardship in retirement than their male counterparts.

Yet people like Hillary Clinton still believe women in the top one percent of households should get Social Security "credit" because they can afford to stay home while the rest of us are totally fucked over since we as women are underpaid.

She, like many elites, doesn't understand the problem.

To update this post, here is another article stating the obvious that 401(k)s are an abysmal failure.

Unlike rich people who save and invest anyway because they have the disposable income to do so, most people cannot save the literally hundreds of thousands dollars to equal even a modest pension.

Of Course 401(k)s Are Crap

Thanks to loopholes in ERISA, companies ditched their pensions and put these scams in their place.

They are being used to save companies money on pensions. Nothing more, nothing less. Defined contribution plans were originally set up for high-paid executives to augment pensions. They were NEVER designed to replace them. Loopholes in ERISA guaranteed companies would shaft their workers by forcing them to go without any kind of savings plan or in these worthless 401(k)s while the companies saved a tremendous amount of money in pension costs by ditching them altogether.

People peddling these scams either are stupid or they refuse to tell people how much money you would have to save to have anything even remotely comparable to a pension. Hint: It is literally in the hundreds of thousands of dollars to save enough to be equivalent to even a small pension. With the job market the way it is, few people work for one employer their entire career or make enough that they can save enough money for it to be comparable to a pension.

It Bears Repeating They Are Scams

I probably have linked this 2013 article before, and if so, it is worth linking again.

It should be evident by now 401(k)s are among the biggest scams ever created. They were never designed to help workers to get a secure retirement but instead were designed to save companies money when they ditched traditional pensions in favor of these sham accounts. They also are another form of wealth transfer, this time to the banksters while the little guys are left holding the bag.

People have no idea how much they would have to save to even approach a piddling pension like what I am getting now. It would be well over $100,000 just to have a monthly pension like mine of $306 and last thirty years. Of course, my pension will snowball thanks to cost of living raises.

About the only "wealth" most individuals and families have is tied up in homes, assuming they can afford them in the first place and have any equity in them at all.

Yes, 401(k)s Are Scams

I have been saying this for 30 years, and I have been right. They are better than nothing, but not much.

Most people have no idea how much money they would need to save in these scam accounts to come close to the worth of a pension.

Snip:

Thirty years ago, as laissez-faire fanaticism took hold of America, misguided policy-makers decided that do-it-yourself retirement plans, otherwise known as 401(k)s, would magically secure our financial future in the face of gyrating markets, economic crises, unpredictable life events, stagnant wages and rampant job insecurity. It was an extraordinary shift in thinking about public policy: Instead of having predictable streams of income from traditional pensions, ordinary people with little financial expertise would suddenly transform themselves into financial gurus, putting money aside and managing complicated investments in tax-deferred accounts.

There were red flags along the way. 401(k)s were originally supposed to supplement pensions, but clever corporate cost-cutters decided that voluntary individual accounts would replace them. Big difference! Meanwhile, throughout the 1990s, the national savings rate fell. Real wages dropped. As Helaine Olen details in her book Pound Foolish, Americans started borrowing against retirement plans to pay the mortgage or send the kids to college. The media was basically out to lunch, and politicians went on claiming the nonsense that individual retirement accounts would encourage savings and turn us all into professional money managers. The stock market would bring us double-digit returns. Whoopie!

You can thank our worthless politicians in Washington for providing a loophole big enough to drive an 18-wheeler through regarding defined contribution plans.

The only people who benefit from these scams are the hedge fund crooks and financial service managers who foisted this shit on workers.

The Golden Years Are Now All Tarnished

thanks to our wonderful Washington politicians who didn't do one goddamned thing to discourage companies from ditching pensions in favor of 401(k) scams.

From a few months ago is this Frontline episode:

link


You might just as well buy a lottery ticket or throw the money in a slot machine rather than throwing money into a scam account that was never designed to replace pensions.

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.

Snip:

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.

You Bet They Are a Disaster

401(k)s are one of the biggest scams of all time, but you can thank Congress for allowing this mess by having loopholes in ERISA large enough to drive a semi through.

Hell, my pension, as small as it is, is a hell of a lot better than what the average household "account" is:

But none of these ideas will help people who are nearing retirement. Only the possibility of several decades of compound returns make the personal financing of retirement a realistic idea for most people; those with only a few working years left cannot benefit from this. Absent an unexpected windfall, such as lottery winnings or inheritances, most 60-year-olds lack any capacity to significantly increase their savings.

Even if we do find ways to improve the framework for self-funding retirement, how, exactly, do we expect younger workers, who might benefit from these improvements, to start saving significantly for their retirement? Soaring tuition and fees at universities, combined with the associated soaring student loan borrowing, have led many people to start their working lives already deeply in debt. According to the Project on Student Debt, the members of the class of 2011 with student loans had an average of $26,000 outstanding.

Pensions in fact should be brought back. Increasing Social Security benefits would also be a great help.

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.

Public Employee Pensions

Lots of lies are circulating about public employees and how "rich" they are with their "generous" pensions. That's to create envy and class divisions since private sector workers have been screwed royally by corporations that ditched defined benefit pensions in favor of useless 401(k)s. Banksters are salivating at the prospect of stealing billions if not trillions of dollars in public pensions so they can screw up and retire in luxury.

This is an excellent column laying out those lies.

Note this about how much people would have to save to get a halfway decent retirement in a 401(k):

There is a well-financed effort to force 401(k) plans as the solution because Wall Street firms stand to earn billions of dollars in fees if pensions are converted to 401(k)s.

But the momentum of that effort is dwindling because 401(k)s have provided investors with a paltry return over time. Think about what has happened to your own 401(k) since 2008 and whether the money in that account would be enough to sustain you in retirement.

A 60-year-old who worked for 30 years has an average 401(k) account balance of $172,555, according to the Employee Benefits Research Institute. That will provide retirement income of only $575.18 per month. It would take a 401(k) account balance of $1,000,000 to provide $40,000 annually over one's lifetime. To achieve a $1,000,000 account balance, you would need to contribute $1,000 a month every month for 30 years and earn a 6 percent return [after fees]. With an estimated 20 million Americans unemployed or underemployed and with real wages stagnant for decades -- average hourly earnings for all private-sector production and nonsupervisory workers across the economy have risen just 5.3% to $19.72 since 2000, according to the Bureau of Labor Statistics -- those who work for a living in this country over the past 30 years, not many have $1,000 to save every month after paying their bills.

The real retirement crisis is not in the public sector. It is in the private sector. The average 401(k) balance today is just $71,500, according to Fidelity Investments. Americans whose retirement security relies on Social Security supplemented by such small balances in 401(k)s must consider how they will avoid falling into poverty in their retirement years and states will need to figure out how they will provide welfare to those who do.

As Schaitberger notes, 401(k)s were NEVER designed to be retirement plans in the first place but instead were supplementary to pensions and Social Security. Corporate America decided to abandon the social contract with workers. It's long since time to reverse this destructive course.

What Starts With an "F" and Ends in a "K," Etc.

More proof if any more is need about the utter scam of 401(k)s.

Chances are you wind up with about what you put in, at best. Forget the imaginary "returns" or "employer matches." It was all a bunch of hogwash.

For investors who haven't been paying attention, the disclosures will be all the more startling. AARP recently asked 800 workers with 401(k)s what they thought they paid in fees. A stunning 70% responded that they weren't being charged anything. That figure is more believable when you consider that the typical 401(k) investor is the opposite of a day-trading CNBC junkie: He or she is 45, has an average of $60,000 in his or her account, and has little investing experience outside of retirement savings.

Sure the "investor" has that much money in one. These "investors" have utterly no clue how much they would need in these "accounts" to be able to get what I get in a very small monthly pension. It is astronomical, in the hundreds of thousands of dollars when figuring in the increases after the third year of the pension.

Of course mine was actually deferred compensation, but it is a hell of a lot better than those junk defined contribution plans which weren't originally designed to BE retirement plans.

Put Your Money in a Matress

It would do better there than in one of those fake 401(k) plans.

They were designed for high-paid executives as savings plans to supplement their golden parachute retirement deals, but good ol' Congress fucked up again and opened the floodgates, not realizing or perhaps realizing, as Friedmanite/neoliberal religion was just getting a foothold there, to destroying the private pension system in this country:

Here’s a question that you probably don’t want to answer honestly: What fees are you being charged by your 401(k) plan?

Don’t feel bad if you haven’t got a clue, because that puts you in the majority. An AARP study a few years back found that 65 percent of 401(k) account-holders didn’t know they were even paying fees.

This ignorance is no small thing, it turns out, because such fees take a huge bite out of our retirement savings over the long term. According to a new Demos study by my colleague Robert Hiltonsmith, the ordinary American household “will pay, on average, nearly $155,000 over the course of their lifetime in effective total fees.”

That is serious money, especially given that many Americans haven’t stashed away nearly enough for retirement. How do financial firms manage to steer such a big slice of our nest eggs into their own pockets? By hitting us with a blizzard of costs that are difficult to identify and track. A typical 401(k) plan charges administrative fees, asset management fees, and trading fees. Investors even pick up the tab for "marketing fees," paying for all those pesky fund brochures and indecipherable financial statements that your 401(k) provider constantly sends to you.

The fact of the matter is you can NEVER save enough unless you are in the top one or two percent of wage earners. One would have to have a couple of million saved to even get 50k a year to live on for twenty or thirty years. Even then, you'd most likely outlive your savings unlike a pension, which is guaranteed until you die.

Of course, you are supposed to have Social Security on top of the that and a pension, but neolibs are working overtime to gut both.

Retirement Goes Out the Window

for millions of Americans, thanks to ripoff 401(k)s. Their fees make matters even worse.

The median 401(k) balance was a scant $23,000 at the end of the first quarter this year among Fidelity Investments’ 11.8 million accounts.

The higher your income, the greater the absolute value you pay in fees.

A dual-earning household in which each partner earns an income greater than three-quarters of Americans each year over their lifetime can expect to pay as much as $277,969.

Robert Hiltonsmith, policy analyst at Demos, said the most surprising finding was how much of a retirement balance can be lost to fees.

“I knew it was going to be a lot I didn’t realize it was going to be more than 30 percent of what your retirement nest egg would have been,” he said.

You're better off with a savings account. And to think people on Wall Street want to grab Social Security.

The Biggest Scam Ever Devised

Yes, 401(k)s are the biggest ripoffs ever devised for retirement security, but the kicker is they were never designed to replace traditional pensions in the first place. This piece, from last summer, gives some good alternatives to the current unworkable system:

A generation ago, retirement investing didn’t worry Americans because most had a defined-benefit pension plan that pooled investments by professional outside managers to ensure a fixed payment based on salary and years of service. Now defined-contribution plans like 401(k)s, 403(b)s and 457 plans are the dominant form of employer-sponsored programs. They were never meant to be mainstream pensions.

Not only are they more expensive for participants, but neither employer nor worker contributions are mandatory in 401(k)s and are much smaller than under the old-style pensions. And unlike Social Security or private annuity payments, nothing is guaranteed in 401(k) land. You’re handed a lump sum at retirement and you’re on your own nearly every step of the way.

“The financial crisis has dramatically demonstrated how a collapse in equity prices can decimate retirement savings,” writes Alicia Munnell, director of the Center for Retirement Research at Boston College, in an upcoming book. “The crisis has also highlighted the fragility of existing retirement system, where 401(k) plans serve as the primary supplement to Social Security.”

They aren't any good. That's the bottom line, despite some idiotic comments following the article from people who have utterly no clue as to how much money people would have to save to be able to keep the same standard of living on top of Social Security.

At least one person commenting there had a clue:

(1) Never in all of human history have any but the top 5% been able to ‘retire’ as we understand it. The other 90-95% either
(a) worked until they died
(b) or if unable to work were
(i) supported SOLELY by their younger relatives (yeah, clueless txgadfly, do YOU personally want to pay all the bills for all your parents, grandparents and aunts and uncles?) or
(ii) died in a ditch or went to the county poorhouse (19th century)
Social Security and its offshoot Medicare are merely the second option with the burden spread across all the younger population. That keeps 1 person from having to support 3 or 5 or more elderly relatives while the person next door has no such responsiblities because all theri older relatives died.
My grandparents worked and paid in and their money went to my great-grandparents. My parents paid in and their money went to my grandparents and great-grandparents. I paid in through working and my money went to my parents and grandparents.
It is an INTERGENERATIONAL CONTRACT – so you clueless txgadfly won’t have to pay all your parents living expenses or heart surgery.
Then in the mid-70s the amount paid in was raised (the % of payroll tax) and I paid in more and it was set aside to help cover the bulge of those born between 1946-64/65 aka ‘the trust fund.’ Unfortuantely the conservatives beloved nitwit Reagan raided the trust fund and gave other politicians the bright idea of borrowing the money and giving Soc Sec Treasury bonds. Time to pay it back.
Soc Sec can never end unless an entire generation stops breeding or working.
(2) Here is why 401ks really can’t work.
(a) 50% of workers are offered NOTHING in the way of retirement benefits – neither a 401K or pension
(b) average worker makes $32,000. And they are supposed to save out of that – an amount that can’t pay the necessities?
(c) Assuming someone is making the average wage at age 66/67 of $32,000 or after taxes about $28,000. They would get the average Soc Security of $1200 or $14400 a year. They would need at least another $13000 + the heavy costs of Medicare of around $5500 a year per person.) That means they need another $18,500 a year. (After all on $32,000 a year it is doubtful they own a house would still have rent)
$18500 a year for 25 years adjusted for inflation over that time means they would need to have $658,000……
$658,000 would be equal to every penny in their take home pay of $28,000 for 23 1/2 years .

Like I said, you'd have to be a millionaire to be able to retire decently with a 401(k).

A Couple of Good Reads About Two of the Biggest Scams Ever

Our education policies are a complete sham designed to help corporations like Pearson to rake in huge profits.
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Somebody who peddled the virtues of those ripoff 401(k)s now feels he can NEVER retire.

Well, he's lucky he has a job so that he can't retire. Some of us were retired YEARS before we could afford it and can't get jobs.

What, then, will people do when they retire? I asked Ghilarducci. “Their retirement plan is faith based,” she replied. “They have faith that it will somehow work out.”

I laughed, but it’s not funny. “The 401(k),” she concluded, “is a failed experiment. It is time to rethink it.”

In truth, I’m one of the lucky ones. I do work that I love, which requires no heavy lifting and has no mandatory retirement age. If I become incapacitated, I will have assisted-living insurance. Otherwise, I can keep writing till I drop.

But, for the millions of others who have discovered, as I have, that their original enthusiasm for investing was unwarranted, their faith-based retirement plan is all they’ve got left.

Thank God for my dinky-assed pension. 401(k)s can never be as good as pensions and weren't designed to be retirement plans in the first place.

A couple of good comments following the piece:

My goodness, I love this article. Love it!!! I've been saying for years that the 401k idea that was foisted upon the American public was a sham; 401s were never meant to finance a retirement, as pensions were , but just to supplement retirements, just an additional amount in a portfolio which includes (or at least used to include) defined-benefit pensions, Social Security, and Medicare. As soon as the corporations found this little jewel of a way they could shed pension plans, and then when they realized that a significant number of folks would be naive enough to go along with 401s, which maybe should have been renamed "Madoffs" once Wall Street, Madison Avenue and corporations sunk their hooks into them, it was off to the races for the small investor to actually believe that he could actually "save" enough at the Wall Street casinos to get through retirement.

I'd be willing to vote for any politician who has the guts to tell the American public how much they have been duped by 401s over the past 30 years, especially if that same politician would also say that it's high time that American workers (and unions) started advocating and agitating for Wall Street and the corporate world to loosen up with that $3 trillion they have in their coffers right now and establish pensions for retirees, and for those companies that still do offer pensions, be required to fully fund them. Pensions should be part and parcel of the cost of doing business, the same as getting a paycheck.

A tall order for sure, but the pension system needs to return. It is the best deal for workers.

Another comment:

About four years ago, a friend (then age 58) lost his job and shortly thereafter his spouse decided to seek a divorce, forcing them to sell their home of 20 years. In the interim, he has lived month to month in short term stay, furnished hotels, with the bulk of his possessions in a storage locker. (By the way, during the recession, these storage facilities are enjoying incredible occupancy growth).

After his unemployment compensation ran out, he began to dip into his share of the proceeds from the house sale, which was his primary revenue stream for what has now been 2.5 years. About 50% went for rent, another 35% for health insurance. When the house sale proceeds ran out, he reluctantly stopped paying for health insurance, which was costing him over $800 per month, despite the fact that other than annual checkups and med checks, he has not made a claim in over ten years.

Now he is looking at his retirement plan, and beginning to siphon off a few thousand as infrequently as possible. While also hoping that the market continues to climb, so that he is in essence "profit taking."

Hard to believe that after decades of hard work, he has to begin considering a significant decrease in an already frugal lifestyle.

Welcome to the New America.

Another:

401K/403B's were meant to be the third leg in the retirement stool. They were meant to close the income gap between the last year of earnings, and pension and social security benefits. Wall Street loved them because they were automatic commission/fee machines, employees loved them because they maintained their pre-retirement living standard, and employers loved them because they provided a way to differentiate themselves to the workforce. Employers changed, however, and now love them because they released them from their pension obligations. Now everyone could successfully fend for themselves.

Unfortunately, that's not true. People don't fend for themselves, they live on a hope and a prayer, or decide to substantially lower their standard of living to retire. My partner and I will have approximately $1.5 million saved when we retire at 63 and 67. That's not enough for us to live on for the 15-30 years we'll still be around after we retire. Fortunately, both of us are in public pension systems. They are NOT free. We both pay into our pensions. I pay nearly $900 a month into my pension. I'm not funding it completely, but it's definitely not the public assistance handout pension-gutters want us to believe it is.

With our pension, our savings, and our reduced Social Security (public pensioners' SS is reduced), we will be OK in retirement, but it takes all three legs to make the retirement stool sturdy. Everyone needs, and deserves, a sturdy retirement stool.

I hope the poster realizes he or she must be in a very, very high income bracket to save that much money, unless he or she has substantial equity in real estate. I suspect the "savings" people supposedly have is actually equity in a house. It is almost impossible for the average person or family to save much for retirement because of job losses, medical bills, etc.


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Another Good Report by 60 Minutes

on our terrible economy. Steve Kroft has been reporting about our economic mess for the past several years.

This is about Lehman Brothers:




I think I linked this 2009 report about 401(k)s, but it is worth posting here again. They are complete ripoffs, frauds:

A Scam is a Scam

401(k)s were set up as a savings plan for a few executives and not originally created as a substitute for pensions. Unfortunately, loopholes in federal laws allowed companies to jettison the far superior defined benefit pensions to put in do-it-yourself "retirement plans" solely to shift the risk onto workers. They were also far cheaper for companies than traditional pensions. They certainly won't make workers rich, that's for sure.

It's even more the case now with few workers being able to stay with a company for very many years to build up any kind of savings through these scams. And of course companies can simply steal the money outright.

Few people realize just how much money they would have to save to even be able to have a monthly benefit like my meager 300-a-month pension.

"What starts with an 'f' and ends with a 'k' and means screw your employees?"

If you guessed 401(k)s, you are absolutely correct.

These mostly unregulated and uninsured plans were marketed as "get rich" schemes, and millions upon millions of Americans fell for it. Of course, companies which pushed these were gutting their defined benefit plans, which guaranteed a set amount of money each month for the rest of the workers' lives (like Social Security and state pensions).

Now millions of workers have found their supposed wealth not worth the paper it was written on, and they are finding themselves unable to retire, unless, like me, they are forced out of the labor force.

It's worth looking at the April report of 60 Minutes about the 401(k) fallout:




Frontline did a documentary three years ago about the problems with 401(k)s. It is excellent.

401(k) Scam

If people haven't read this and other articles from the latest issue of Mother Jones magazine, I strongly encourage people to do so.

It was all about money when it came to 401(k)s, as I have written in here repeatedly over the years. They were promoted as some kind of "get rich" schemes, but in fact the only ones getting money were the companies instituting these fake "pension" plans--these are not real pensions--because they shifted the cost and risk from themselves to their employees.

It soon became clear that 401(k)s were not going to supplement pensions, but replace them. (See "Scrambled Nest Eggs.") Congress did its part, raising premiums for defined-benefit plans (which had to contribute to the PBGC) and thus making 401(k)s (which did not) more attractive. As time went on, more and more companies froze their defined-benefit plans, creating a two-tiered system whereby longtime workers got to keep their traditional pensions while new employees were routed into 401(k) plans. In addition to their advantages for employers, 401(k)s favored wealthier workers in higher tax brackets, who stood to benefit more from being able to set aside a portion of their salaries tax free.

No one seemed much bothered by the move of a vast portion of Americans' retirement funds into risky securities-based funds. The Fed supported the 401(k) boom, just as it later would the housing boom, by championing deregulation and keeping interest rates low. Who would choose to invest their retirement funds in safe but low-interest bonds or T-bills when they could make 10, 15, or 20 percent in the market? In 1983, according to a survey conducted by two securities-industry groups, just 15.9 percent of American households owned equities; by 2005, the figure was 56.9 percent. More than half of households that owned stocks had first gotten into them through a 401(k) or similar account.

The plans are total trash.