The 401K Experiment Failed

I have been writing for a few years about the 401K scam (2006),

In the Reagan days, they sold people on the idea that 401Ks were somehow a good thing, and started moving everyone off of pensions. But a pension means your company puts the money away for you, on top of your pay. A 401K means it is entirely on the worker to fund retirement out of a shrinking paycheck. And people just can’t do that – take home pay goes almost entirely to the bills.
Meanwhile corporate profits are WAY up since pensions were replaced by 401Ks. Part of that if from the money that had been used for worker retirements and gave it out as profits instead.


. . . The primary “advantage” to workers is they don’t pay income taxes on money they set aside in a 401(k) . . . Another “advantage” is that workers decide for themselves where to invest the money – which is why everyone lost so much in the market crash. The benefit to employers is that workers think they have a retirement plan.
[. . .] Meanwhile the money previously going to workers’ pensions instead finds its way to the top of the economic ladder.

So, how has the 1981 401K experiment worked out? It’s 2009, and no one can afford to retire. Wealth is massively concentrated at the top. So maybe it didn’t work out so well – for us. Pretty well for those at the top, though.
But I’m not advocating a return to corporate-funded pensions for their workers. I think we should tax corporate profits and put money into greatly expanding Social Security so everyone – not just people who work for corporations – can afford to live well when they are old. That would be the solution a democracy would choose.
(PS another problem with 401Ks and the “individual” approach is that you don’t know how long you are going to live, so you don’t know how much to take out each month. When “pooled” as with a pension plan or Social Security actuaries can determine how much on average to pay out. The only plan that can work mathematically is a socialized plan.)

1 thought on “The 401K Experiment Failed

  1. What a democracy would choose is a perfect statement. Did a functioning democracy decide we needed liar loans? credit default swaps? Of course not. We got this and the massive redistribution of wealth to the wealthy because the wealthy have purchased the politicians who are supposed to “represent” us. We need to turn to citizen funded elections with a clean money system (see Public Citizens web site).

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