With the provocative title, “Time to Retire the 401(k),” the cover story of today’s issue of TIME is a must-read. The article provides a stinging indictment of the do-it-yourself savings plan that has come to dominate our patchwork retirement system. Author Stephen Gandel writes
If you have even peeked at your account statements in the past year, it’s painfully obvious that something is wrong with the way we save. The tax-deferred 401(k) plan, and others like it, such as the 403(b) and the IRA, have become our nation’s go-to retirement piggy bank. Invented nearly 30 years ago as an executive perk — one more way to dodge Uncle Sam — the 401(k) was never meant to replace the employer-guaranteed pension fund, supplemented by Social Security, as the cornerstone of our nation’s retirement system.
The ugly truth, though, is that the 401(k) is a lousy idea, a financial flop, a rotten repository for our retirement reserves.
Gandel goes on to document the weaknesses of the 401(k) plan – the low amounts that most people save, the risks posed to your savings by a volatile stock market, and the difficulties of making the right investment choices. One of the most compelling ways that he makes his case is by using real-life examples: a group of retirees from Occidental Petroleum, which was one of the first major employers to drop its traditional pension plan and switch to a 401(k). “Some said they were very happy with their 401(k),” Gandel writes. “But all the people who shared their financials with us would have been better off in a pension. And nearly all of them…do not have the resources they need to live another 20 years in financial comfort.”
The article couldn’t be more timely. It ties directly into the Retirement USA initiative, which is working for a universal, secure, and adequate retirement system for the future. Gandel features three proposals for new types of retirement plans. All three will be discussed at the Retirement USA conference on “Re-Envisioning Retirement Security.” The conference will be an opportunity for policy experts, pension professionals, academics, union representatives, and grassroots activists to examine several proposals for a new system.
The Re-Envisioning Retirement Security conference will be held on October 21, from 9:30 a.m. to 4:30 p.m., at the Kaiser Family Foundation, 1330 G Street, N.W. (one block from Metro Center) in Washington, D.C. Labor Secretary Hilda Solis is scheduled to deliver the keynote address. Conference conveners are the AFL-CIO, the Economic Policy Institute, the National Committee to Preserve Social Security and Medicare, the Pension Rights Center, and the Service Employees International Union.