Out to Steal Your Pension The 401(k) Could Prove a History-Making Fiasco

TheStreet.com ^ | 4/08/2002 | K. C. Swanson

[B. A. Conservative]

Hang on folks. This type of hype has always been the prelude to a major assault by Democrats and other liberals to steal your wealth so they can use it to buy the votes of their constituents.

Democrats are flat evil, and pose a far greater threat to the United States than the likes of Osama bin Laden or anyone else but China. In the absence of Democrats, China would not have been a threat in our life times.

Interested in Fighting Back?

[knarf]

bump

[CJ Wolf]

A sucker born every minute. The 401(k) scam.

Hey buddy, give me 15% of your paycheck. In 30 years I'll give you a million dollars. ok?

Oh you want your money now? Well you will have to pay a penalty and outragous taxes.

SCAM SCAM SCAM!!!!

[Tauzero]

Well, I'm always suspicious of statistics like "between/from 19xx to 19xx." The arbitrary period cited is invariably one that agrees with the author's presumptions. But the author is probably right that 401(k)'s are not appropriate for most people. I predict that in, say, 10 years' time participation in 401(k)'s will greatly decline and defined benefit plans will make a big comeback.

[Musket]

and then the company providing the pension payouts goes bankrupt and what do you get? Nothin. I'm stickin' with 401k.

[Tauzero]

Bear market mass psychology ping.

[Tauzero]

TANSTAAFL. Also true of 401(k)s.

[Tymesup]

Social Security takes 15.3% of your paycheck (up to the Wage Base) and gives you a magnificent rate of return of maybe 2%. It's probably the worst deal, compared to corporate defined benefit and defined contribution plans.

[Sci Fi Guy]

In 2001, fewer than 7% of 401(k) participants contributed the maximum allowed amount to their plans,

Oh brother, at my last job I could have saved up to 16% of my income. Who says that 16%(plus company matching) is the minimum that people need to save?

[Tymesup]

Corporate defined benefit plan contributions are deposited in a trust. The corporation is not allowed to touch the money once it's in the trust. The corporation is subject to penalties if it does not put enough money into the trust. Finally, if there is not enough money in the trust to pay benefits, the Pension Benefit Guaranty Corporation will pay for them.

[Looper]

This article's spin and paternalism are annoying. So the poor, stupid worker who doesn't know that he's supposed to save and can't handle those confusing investments needs someone--the government, perhaps--to step in and take car of him. The real story is that the returns on a 401k blow away "returns" on our Social Security "investments" (Clinton-speak for "taxes"). Give me ownership of MY SS, put in my account, the supposed "lockbox," and I'll make out just fine, thank you. I'll take the freedom and accept the responsibility.

[Gig]

Hi Looper. No argument from me with devolving social security back to the individual, if it is done correctly: 1) the individual must control, 2) must be mandatory withholding that the individual self-directs, 3) investment options are pre-defined within certain catagories that can be "re-balanced" periodically, and 4)the account assets are owned by the individual and can be transferred upon death to beneficiaries.

These would be the major provisions for a new social security program, IMHO.

Now, so far as the private citizen being responsible for their future? They already are. Social Security is not much to live on in your retirement years and, as far as I kow, no one is forcing anyone to contribute to ANYTHING except the SSA.

[rohry]

I guess two years of flat market indexes has finally got people's attention...

Granted, not everyone has lost out with 401(k) plans. Employees with high incomes, financial know-how and an interest in investments stand to benefit from a system of self-managed retirement accounts. But few people fit that profile.

We managed to invest our way to $250,000 in 12 years despite not fitting that profile...

Is anyone here familiar with the Steel industry bailout? The primary reason for that was to continue to be able to fund retired Steel-workers pensions...

[Tauzero]

"The real story is that the returns on a 401k blow away 'returns' on our Social Security 'investments' (Clinton-speak for "taxes")."

In a few years the real story might be quite different.

[Tauzero]

"1) the individual must control, 2) must be mandatory withholding that the individual self-directs, 3) investment options are pre-defined within certain catagories that can be "re-balanced" periodically, and 4)the account assets are owned by the individual and can be transferred upon death to beneficiaries."

Oh yeah, that sounds like a really attractive program. </sarcasm>

[Poohbah]

Yes, we must protect people from their own weakness, because only WE represent the People's Will!

It wasn't any fun with Robespierre, and it got less and less fun with each rerun.

[Lazamataz]

Granted, not everyone has lost out with 401(k) plans. Employees with high incomes, financial know-how and an interest in investments stand to benefit from a system of self-managed retirement accounts. But few people fit that profile.

Hell, I'm a financial moron and I even *I* put a bunch of money away in my 401(k).

Pensions won't work any more -- nobody stays employed at the same company these days....

[Lazamataz]

A sucker born every minute. The 401(k) scam. Hey buddy, give me 15% of your paycheck. In 30 years I'll give you a million dollars. ok? Oh you want your money now? Well you will have to pay a penalty and outragous taxes. SCAM SCAM SCAM!!!!

If you come to us in thirty years with your tin cup held out, plaintively begging for your rent, I will tell you very politely to go away.

[wjcsux]

We ought to have a system similar to what is in place in Chile. Agusto Pinochet had one of his advisors (one of Milton Friedman's students), set their retirement system up based on free market principles. The government mandates 10% of a persons gross wages be contributed to a retirement plan that has been approved by the government. The investor can move his/ her money around and has control of it. This investment isn't taxed. This system has been in place since the mid 70's, and has replaced their version of SSI. The result? The citizens of Chile have their own secure retirement system that isn't under government control.