401(k)s Aren't Working
Nation's 'grand experiment' has been an alarming failure: Duncan Black
By John Johnson, Newser Staff
Posted Feb 6, 2013 12:05 PM CST

(Newser) – We're just now seeing the results of the nation's "grand experiment" with 401(k) plans as the first generation of workers to embrace the concept reaches retirement age. The results are "truly alarming," writes Duncan Black in USA Today. Many people don't have nearly enough money to pay the bills. One Boston College study shows that the median retirement balance for people ages 55 to 64 is $120,000, a "trivial" supplement to Social Security benefits. What's more, a third of households have no retirement account.

We can try to improve the system—making 401(k) contributions be opt-out instead of opt-in, for example—but tweaks aren't enough, both for workers near retirement age and for their debt-burdened younger counterparts, writes Black. "We need an across the board increase in Social Security retirement benefits of 20% or more. We need it to happen right now, even if that means raising taxes on high incomes or removing the salary cap in Social Security taxes." Click for Black's full column.

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Feb 7, 2013 10:55 AM CST
The problem with this article is that it does not reflect on the double-standards in the Country. Many Government employees have lucrative pension plans while so many in the private sector have none or the 401ks or 403bs which have replaced the traditional pension plan. Too many lower paid employees have no understanding of the investments in a 401k or 403b and are either afraid to put money away into something they cannot understand -- Or, they cannot or will not give up that weekly pizza, daily cup of Mr. Donut, or pack of cigarettes to put into their retirement plan. Furthermore, too many plans have loan provisions which the lower paid employees too often access. These problems, with the habit of American Workers changing jobs and taking their retirement savings in cash and spending the balance, all are part of this age groups' troubles. We can go further and add the fact that many were forced to cash out their retirement savings because of job losses. While we will probably never see it, the Traditional Pension Plan's reintroduction is required to provide for many more Americans to have adequate savings for retirement. Today's private sector employment retirement plans (401ks and 403bs) are maximized by the highly paid and most educated individuals. The majority of Americans who have such plans or only IRAs (traditional and Roth) still do not use such vehicles enough for future retirement. Too many older workers, especially in the private sector, are finding out that retirement planning should have been a lifelong effort. For whatever reasons, plans have gone awry and the dream of retirement is fading. This retirement savings failure will have serious long range consequences for this Country and the younger population. Unfortunately, Government appears to be handling this well-known problem in it's usual way -- "kick the can down the road"!!
Feb 7, 2013 7:14 AM CST
My employer matches 50% of my weekly contribution, I'd say that is a pretty good return on my investment no matter what the stock market does.
Feb 6, 2013 11:26 PM CST
I stopped putting money into my 401K years ago, because I decided it was a better investment to pay off my house. I don't trust the stock market, and don't see the point of investing money into bonds when I can simply pay down an outstanding loan with the same money. I suppose if I successfully speculated on interest rates that might work, but I've seen a lot more people who thought they could do that kind of thing than people who actually did.