401Ks The Undoing of America?
A generation from now, we may very look back at 401Ks as America's financial undoing. There are so many things contributing to America's fast approaching sunset as an economic superpower, but not since the trojan horse has such an unassuming menace managed to so effectively and quietly condemn a nation's future to rubble. Unfortunately, even as report after report comes out showing how dire the Baby Boomer generation's retirement prospects are, it seems I'm the only one reaching the conclusion. The very people lamenting how the Baby Boomers have been ruined by 401K's are doubling down on their endorsement of funneling still more money into 401Ks.
In an effort to cut costs, the American business community sold the clueless, nonunion American workforce into giving up a defined-benefit pension and into a plan where the worker paid for his own retirement but management still got to advertise it as a company retirement plan. From there, Wall Street barons were like sharks in a feeding frenzy taking advantage of a newly created amateur investor class looking to become millionaires as quickly as possible. Wall Street cleverly blew up all kinds of phony and unsustainable bubbles, reaped the short-lived uberprofits, and then left Joe Sixpack and taxpayers to lose their hair in the nuclear fallout. Twice this has happened now....in a little over 10 years....and with each new round of evidence that the 401K breeds foolhardy investment policy, it becomes all the more popular in contrast to defined-benefit pensions where the return on investment is a bastion of stability by contrast.
So here we are, a nation full of Baby Boomers approaching retirement age...with 401Ks that have lost 50% of their value since their 1999 peak, and which are almost assuredly overvalued right now in the post-TARP bubble that has no bearing on real-world economic conditions which continue to look disastrous. Yet here we are....insisting that still more workers join the 401K bandwagon so they can get caught in the next whirlpool. The definition of insanity is doing the same thing over and over and expecting a different result.
In an effort to cut costs, the American business community sold the clueless, nonunion American workforce into giving up a defined-benefit pension and into a plan where the worker paid for his own retirement but management still got to advertise it as a company retirement plan. From there, Wall Street barons were like sharks in a feeding frenzy taking advantage of a newly created amateur investor class looking to become millionaires as quickly as possible. Wall Street cleverly blew up all kinds of phony and unsustainable bubbles, reaped the short-lived uberprofits, and then left Joe Sixpack and taxpayers to lose their hair in the nuclear fallout. Twice this has happened now....in a little over 10 years....and with each new round of evidence that the 401K breeds foolhardy investment policy, it becomes all the more popular in contrast to defined-benefit pensions where the return on investment is a bastion of stability by contrast.
So here we are, a nation full of Baby Boomers approaching retirement age...with 401Ks that have lost 50% of their value since their 1999 peak, and which are almost assuredly overvalued right now in the post-TARP bubble that has no bearing on real-world economic conditions which continue to look disastrous. Yet here we are....insisting that still more workers join the 401K bandwagon so they can get caught in the next whirlpool. The definition of insanity is doing the same thing over and over and expecting a different result.
posted by Mark at 8:54 PM
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