"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.