The 401(k) S(k)am
I was hoping that Columbus Day would mean a stock-market break, but alas, the markets are open, free to continue their assault on my 401(k).
I’ve been doing more than a little thinking about the 401(k) concept lately — mainly about how much of a scam it is. While driving around today, I heard a report on KNX-1070 about how Americans are starting to realize they’ve been duped as far as 401(k)s are concerned:
- Wall Street financiers heavily promoted 401(k)s as a way for people to have control over their financial futures. Just put money in the stock market, they told us, and your retirement will be secure.
- What Wall Street failed to say is that 75% of professional money managers fail to outperform the market. Yet somehow, your average Jane or Joe Employee is supposed to be able to manage a retirement nest egg.
- Financial companies rake in $28 billion a year in 401(k) fees, ensuring that no matter how your 401(k) performs, they will still get paid.
So we all start 401(k)s — what choice did we have?– and guess what: The financial companies take down the entire U.S. economy, and our 401(k)s go along for the ride. Oh, and the financial geniuses weren’t content with the billions they got from our retirement accounts; they went after our homes, too.
So now millions of Americans have no home equity — or, in many cases, negative home equity — and their retirement accounts are in shambles. So what do you suppose the money managers are doing? Standing in unemployment lines? Keeping a low profile? Hanging their heads in shame?
Uh, no. In fact, L.A. Times consumer columnist David Lazarus writes that while Wachovia Corp. was waiting to see how many billions it was going to get from taxpayers, it didn’t see any problem with treating 75 of its employees to an all-expenses-paid trip to the Greek Isles.
And senior executives of bankrupt insurance behemoth AIG, recipient of an $85 billion taxpayer bailout, thought nothing of sending its execs to a $440,000 retreat at St. Regis Resort in Monarch Beach. And AIG has no plans to cancel a three-day get-together for employees at the Ritz-Carlton in Half Moon Bay.
“This is an annual affair,” said AIG’s Joe Norton. “It’s a key meeting.”
Such five-star shindigs have long been a standard practice for the U.S. financial industry. They serve as incentives and rewards for top performers, and as regular get-togethers for senior execs.
Stories like these make you understand why people kept their money under their mattresses following the Great Depression.
Let’s be honest: Employees were way better off with pension plans. But employers didn’t like them; they were expensive. Enter the 401(k), which solved their problem. Who benefits from a 401(k)? Employers and Wall Street, for sure. Employees, not so much.
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