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.
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.