Oh My God! The problem is the 401K!!

Suddenly, there are bloggers and writers popping out of the woodwork claiming that there is something very wrong with a retirement system built around a 401K.  It’s like a collective light bulb going on.  How did they miss it when it was staring them in the face all along??

Yes, many of our problems, from insufficient retirement funds to lack of labor protection to massive layoffs to wildly irrational corporate greed and testosterone fueled gambling at the global casino by the finance industry leading to global market catastrophes can be traced back to the 401K.  I am not being hyperbolic here.  I’ve been writing about the 401K monstrosity for several years and have been highly suspicious about it for many years before that.  Here are just a few of the many, many posts I’ve done on the recklessness of the 401K.

Is the 401K system a Ponzi Scheme? Discuss.

And now for something Radical and Extreme: Get rid of the 401K 

Convergence: Reckless Endangerment, Can you afford to Retire?

By the way, although Atrios is right about increasing social security benefits, he is wrong about having people invest more of their money in 401Ks.  The 401K should not be an opt out default retirement account.  It should be stepped down and offered as a supplement to a regular boring pension.  It’s not that the politics of abolishing the 401K as a primary retirement fund is very difficult.  It’s that we don’t really have a choice if we want to reign in the runaway finance industry’s ability to carelessly destroy economies and people’s lives.  I mean, what does a banker care if he loses a billion here or there?  For one thing, the money will get replenished in the next payroll cycle and for another, the US government will frantically cover all loses in order to prevent nationwide insurrection.  Go ask Neil Barofsky about the trillions of dollars in government funds that banks have access to in order to cover their losses and make themselves look healthy.

But wait! There’s more!

You can’t touch your 401K before you’re almost 60 without a heavy excise tax.  Oh sure, there are some hardship exceptions but just paying your bills because you’ve been out of work or using the funds to start your own business (to buy hardware and software licenses for example), not possible.  Now, I suppose this is the benevolent governmental entities preventing you from spending your retirement before you retire and in normal economic circumstances, this would be perfectly understandable.

But these are not normal economic circumstances and with the House controlled by a bunch of hardass Republicans bent on a new Civil War against Americans using stinginess and closing the tap on the money supply to people who desperately need it, the fact that the finance industry is able to sit on our nest eggs and play with them to their heart’s content while there are people out here who are losing everything so they don’t have to pay a crazy excise tax, well, I’m sorry but that’s just immoral.  Sure, you can’t spend your pension in this manner but you know what you’re going to get at the end of 40 years of work with a pension.  With a 401K, the only people who are going to make out for sure are the financiers.  Why should the rest of us be paying for that?

401K’s are bad investments with insidious consequences.  They have to go.

See Jon Stewart’s interview with Helaine Olen on her book Pound Foolish for more about what havoc has been wrecked by the 401K.

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10 Responses

  1. A defined benefit plan assured a given sum at retirement, but they wanted to gamble using our money without having to pay the money back when they lost. Hence, the 401k plan. Heads, they win. Tails, we lose. Sort of defeats the whole purpose of saving for retirement, doesn’t it? It was a scam from Day 1.

    They will go after everything that isn’t nailed down. Charter schools? Just a way to make money off education. Same with the chained CPI and all that other nonsense. Most of us don’t have any money left for much discretionary spending, but they must still have their fix. So we get less and less. (BTW, no-fault auto insurance is also another scam.)

    This is unfettered capitalism and it is as ghastly as those nasty socialists always said. “Empathy” becomes a bad word and stealing (not a loaf of bread, but someone’s home or life savings) is to be rewarded with more money and no restrictions on its use.

    • How is “no fault” auto insurance a scam? It hasn’t been considered a scam here in Michigan. And it is the profit chiseling insurance companies and their Republican Governor who want to destroy it.

      “Find fault” insurance was certainly a lucrative jobs program for lawyers. I can see why they would want to bring back “find fault” car insurance.

      • Because it was supposed to bring down rates (ha ha ha) and it didn’t. Not even close. Because insurers do not have a duty of good faith and fair dealing if you are not the policy holder, so that you simply cannot receive just compensation from the tortfeasor’s insurer (unless you want to give over half your recovery to a lawyer). And because self-insurance is far more practical; you deal with your own insurer, which is liable for treble damages if it screws you over.

        I’ve learned from my many accidents that were not my fault that it is best if the jerk who crashes into me has no insurance. Then I can deal with my own insurer under the uninsured motorist provision (which is, of course, essentially self insurance). That’s when I get treated fairly.

  2. Corporations have also underfunded retirement payments. When the stock market was going up, the 401-K enabled the corporate rats to pay less into retirement funds and raid the “surplus” to redistribute to investors. When the stock market went down the workers were out of luck.

    Meanwhile, the Republican Governor of North Carolina cut both the length and the amount paid to unemployed workers because he wanted to lower taxes on businesses. NC is fifth in the nation in the percentage officially unemployed. NC will be turning back millions in federal funds as it hurts its own people. The weekly benefit paid out will be reduced by one third.

    A couple of side points. An increasing number of Republicans in the House are from the South (now 105). Many of the rest are due to either gerrymander or come from hard a** states in the Plains and northern Rockies. Democrats won just 58.5% of the House seats in states carried by Obama while Republicans won 75.3% of the seats in states carried by Romney.

    Among the most gerrymandered states: PA (13-5, Republican), Florida (17-10 Republican), Virginia (8-3 Republican), Ohio (12-4 Republican), Michigan (9-5 Republican). The only state carried by Romney with a Democratic House majority was Arizona at 5-4.

    Meanwhile the difference between conservative Republicans and moderates is increasingly that the conservatives have bigger mouths and say more outrageous things while the moderates stay mum and vote like Scrooge.

  3. Right RD,

    We have lovingly fed and watered the beast with 401K’s.

  4. Better the light bulb go on late than go on never. Young people who even have or even get jobs can avoid putting any money into 401ks to begin with. At least they won’t be providing their social class enemies the means and money to destroy their own future and survival.

    One can only hope that those young people who refuse to step into the 401k leghold trap use the money to invest in accelerated debt-paydown, health, neo-subsistence survivalism, etc. But even if they don’t, even withholding their money from the Social Class Enemy is a victory right there.

  5. 401ks are a gimmick that the rich came up with to pit the working class people against one another. Woohoo, my stock portfolio went up(nevermind that it went up because the company laid off 2000 people.) Yippee, look how much my portfolio jumped now that half the multinationals I’m invested in have outsourced to Bangladesh. I’m up a full 10 grand thanks to the savings that companies have been to pour into profits by not paying living wages or providing benefits to it’s employees (nevermind that I’ll have to make up the difference by paying taxes to provide social programs for these people and their children.) Suckers! We got you to invest into screwing each other for a few bucks.

    *shakes head*
    I never could understand why people didn’t see through it.

  6. Hi, I haven’t checked out this blog in quite a while. I was wondering if you ever found a job. In the last few posts I read, you were describing your efforts. You are such a good writer, I thought maybe you would try to go that direction instead of the drug industry.

    • Thanks for asking. I do work on a part time basis for an academic lab. I like working in the area of drug design. It’s just a broken industry right now.
      As for writing, people have to be willing to pay in order to make a living at it, just like everything else.

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