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.

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.

401(k) Follies

Well, what did workers EXPECT with 401(k)s? Why did companies get rid of their defined benefit plans and put these shit plans in? To save money on pension costs and to transfer the risk to the WORKER, not the employer.

It takes one hell of a lot of money to save to approach anything like a defined benefit plan, since the difference between a defined benefit plan and a defined contribution plan is the former pays you a set amount every month for the rest of your life while you live off the latter as long as the money is there, but is likely to run out long before you die. Therefore, 401(k)s are a giant ripoff.

They're not federally insured, either.

"The current 401(k) system has not turned out to be as secure as we want it to be," said Rep. George Miller (D-Martinez), chairman of the House Education and Labor Committee. "It has not provided the returns that we want it to. And it's not provided the level of savings that we want it to. It's kind of failing on a number of fronts.

"Should there be a serious reassessment? Absolutely," he said.

Miller's committee already has held two hearings on the effects of the financial crisis on retirement savings plans. At one, a professor from New York's New School for Social Research called for creating government-backed retirement savings accounts that would offer a guaranteed, inflation-adjusted 3% return. The government would contribute to the accounts, using money gained by eliminating about $80 billion in annual tax breaks for 401(k) savings.

Frankly, they can get rid of the tax break if it means the accounts are federally insured. It's a tradeoff that's much better.

Better yet, let's require companies through tax incentives to provide true pensions and not these pieces of shit they have forced upon unsuspecting workers.

We ALL Know

we have been sold a bill of goods about 401(k)s, that they are better than defined benefit plans, you know, the kind that guarantee a fixed income every month for as long as you live. God, how anybody who is not already rich could throw their money away on these frauds is beyond me.

The WHOLE point of 401(k)s is to SAVE COMPANIES MONEY on pension costs. A traditional pension plan is VERY expensive, something like 6% of operating costs, while these scam accounts--which they aren't even required to contribute--cost around 1%. All the while they have been pilfering and destroying traditional pensions.

And then you have these privatizing bastards wanting to get their filthy hands on Social Security using the exact same lies that they are using for 401(k)s.

Thank God I am now a public employee and will get a decent pension. I did sign up for a 403(b), a counterpart to the 401(k)s, but that's going to be put aside for vacations and stuff.