Ted Benna invented the retirement savings plan in 1980 and his company -- now called Johnson Kendall and Johnson -- adopted it. So I was curious as to what he had to say.
From the Wall Street Journal:
Companies embraced the 401(k) because it was less expensive and more predictable to fund than pensions. Company pay-ins ended when an employee left or retired.
Employees, for their part, were drawn to an option that could provide more than a company’s pension ever would. Two bull-market runs in the 1980s and 1990s pushed 401(k) accounts higher.
Economist Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis, says she offered assurances at union board meetings and congressional hearings that employees would have enough to retire if they set aside just 3% of their paychecks in a 401(k). That assumed investments would rise by 7% a year.Hmm. Put it in a stock index fund and yes, you can do 7% pretty easily.
But 3% is unrealistically low to put aside for retirement.
Two recessions in the 2000s erased those gains and prompted second thoughts from some early 401(k) champions. Markets have since recovered, but many savers are still behind where they need to be.Well, the worst thing you can do is turn a paper loss into a real loss.
The article quoted economist Teresa Ghilarducci, who is a Big Labor proponent of government-run pension programs having served on the Advisory Board of the Pension Benefit Guaranty Corporation.
From the article:
Ms. Ghilarducci says she came to realize the 401(k) math she used in the 1980s and 1990s no longer works. The 7% annual compounded investing returns, a pillar of the concept, now seems too rosy. She now believes setting aside 3% of salary isn’t enough.However, most state pension plans assume 7% returns on investment.
Some initial believers in the 401(k) think those measures don’t go far enough. Ms. Ghilarducci wants to ditch the 401(k) altogether. She and Blackstone Group President Tony James are recommending a mandated, government-run savings system that would be administered by the Social Security Administration and managed by investment professionals. While both are Democrats, they believe their solution has bipartisan appeal.You see what is going on?
An aspect of life is not perfect.
Therefore, we must have the government run it.
Just like it runs Social Security.
Which is scheduled to go broke in 17 years.
Leave 401(k) plans alone. Do not mandate it. We already mandate Social Security.
To be sure, not everyone understands 401(k).
I remember trying to tell people in the 1980s to invest in the stock market instead of T-bills. One woman did listen and when she retired, thanked me publicly.
But what do I know?
Please read "Trump the Press," in which I skewer media experts who wrongly predicted Trump would lose the Republican nomination. "Trump the Press" is available as a paperback, and on Kindle.
It covers the nomination process only. The general election will be covered in a sequel.
For an autographed copy, email me at DonSurber@GMail.com
Be deplorable. Follow me on Twitter.