Radical thinking from…BusinessWeek?

Radical thinking from…BusinessWeek?

A timely and provocative op-ed by BusinessWeek‘s contributing economics editor Chris Farrell flatly states, “Keep Wall Street Out of the Retirement Business.”  Farrell goes on to ask:

Question is, in light of the current turmoil in the financial markets, should Wall Street manage any of our long-term retirement savings funds? Is the 401(k) plan, which has become the main retirement savings vehicle for the American worker over the past three decades, a mistake? The case for rethinking the 401(k) as a pillar of retirement savings is compelling.

Farrell makes several good points that show up the weaknesses of relying too heavily on 401(k) plans — including the average worker’s inability to save enough or to make the right  investment decisions to earn high enough returns; the exorbitant fees charged by 401(k) providers; and investment advisers’ conflicts of interest.  He hints at an interesting  alternative:  “annuity-like products that would guarantee workers a steady, inflation-protected income during their golden years but would be less expensive for companies to offer than the traditional defined-benefit pension fund.”

I can’t say that we agree with all of what Farrell says, but it’s an interesting read.   Check it out.

By the way, whatever an “academic quant jock” is, I want to meet one!