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Tuesday, January 03, 2017

Liberals want to seize 401(k) plans

The headline in the Wall Street Journal was intriguing: "The Champions of the 401(k) Lament the Revolution They Started."

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?


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  1. Thomas Sowell asked why it is greed to desire to retain one's own earnings, but not greed when you want to take the earnings of another. The libs want to take the earnings of others and punish monetary prudence.
    I think that anyone advocating the taking of the property of others should be declared an outlaw. No prosecution for anyone who dispatches them.
    Problem solved.
    For those who say that breaking up the tech robber barons companies is the same thing, keep in mind that we aren't taking anything for public use.

  2. Some countries have already "nationalized" (seized) private investment accounts. I wouldn't put it past the Feds. They could pay off the national debt and just print money for your monthly retirement stipend as needed. - Elric

  3. For those of us behind the pay wall, what percentage of income are they now recommending for retirement?

  4. I note all the stories I've read about how all those government union pensions are waaaaaay underfunded due to waaaaaaaay overoptimistic promises of annual gains.

  5. Not only was (and still is) the 7% ROI vastly over estimated, but the 3% figure was vastly underestimated. Starting back in the early 80s, a typical worker who might earn an average salary of, say, $50K a year for 40 years would end up with slightly less than $1M in savings at retirement. But all of that money is taxable at ordinary rates, and historically we know that income tax rates under the Democrats tend to go UP, not down, over, the cost of living also goes up in response to what have become traditional national fiscal and economic policies.

    If someone wants to retire with a comfortable standard of living in their old age, they should religiously set aside no less than 10% of their annual income, every year, no exceptions. Period. That means showing discipline about budgeting and personal spending and living frugally. The Democrats have sold Americans falsehoods every year starting with the adoption of Social Security. We know they want to grab the money in everyone's retirement fund so they can use it to buy votes today, leaving the payment in return of that debt to others in the far future. The demographics of the country is killing Social Security; it will do the same to any other harebrained government retirement/pension scheme the Democrats can concoct.

  6. Government can't manage money. At this point, there should be no argument about that. I managed my retirement account pretty well. My wife will start drawing SocSec in June, at 62 while the money's still there, And I got a cold hard truth for the Progs: If you even dare to mess with my 401k, you're gonna be staring at the barrel end of a CZ-75. It will not go well for you.

  7. Bu...bu...but it's not fair that some people have all of that money in 401-Ks while the poor have nothing. We need to take that money for the common good.

    Make no mistake, if we ever give the Dimocrats as much power as we did in 2008, and the country will, this will happen. Do you hear that Republicans? If you mess up again like you did between 2000-2006 and go on a spending spree and allow Dimocrats to run as fiscal conservatives (that would be funny if it weren't so serious) like they did in 2006 and 2008 this will happen. That 401-K and IRA money is way too much money for politicians of both parties to keep their sticky fingers off of.

  8. If they ever do try to seize our IRAs etc I hope I have the courage to turn all mine into cash and set fire to it before I let them have it. Life on their stipend wouldn't be worth living anyhow, so why let them have it.

  9. Just a little paranoia and hyperbole going on here. No politician in their right mind would advocate seizing IRA and 401K money. That said, few people are capable emotionally or fiscally or voluntarily saving 10% of their income. Should we turn our backs on that reality and create a huge burden on society as these folks lose their ability to work in old age and need some type of income to survive? That would simply be ignorant.

    Social security has worked well since 1940. Adjustments made under Reagan and the Democratic congress in the 80's extended its viability. We are living longer so more adjustments need to be made. Descending into "over my dead body" rants will not lead to constructive discussions on how to deal with this reality.

  10. Thanks for sharing Nice Post... Keep posting

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