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||Expanded401k May Not Help Workers
- Despite the promise of higher 401(k) plan
contribution limits in a bill that passed the House on Wednesday, few workers
may actually be able to take advantage of them, experts say.
- The bill also contains a provision to help
older workers catch up on their retirement savings. It allows workers 50
and older to contribute up to $20,000 a year.
- The purpose of the non-discrimination test
is not to punish high-income workers but to prompt employers to do more to
encourage the rank and file to participate in a 401(k) plan.
- [Give me a break.--RSB]
||401k Losing Money
- For the first time in the 20-year history of the popular 401(k)
retirement savings plan, the average account lost money last year, even after
thousands of dollars of new contributions.
- Let's be clear who we mean by middle Americans. They are not the
20 percent of all households whose breadwinners are paid $75,000 a year or
more. Those households have increased their total wealth since 1983, the
starting point of Mr. Wolff's study. Many have never been richer. That is
not the case for the median household, with an annual income of $50,000 or
- He calculates that the median wealth was $162,800 in 1998, the last
year for which government wealth data is available. Adjusted for inflation,
the same calculation for that age group in 1983 produced $188,100 in wealth
at the median. (Half the households had more, half less.) That is a 13.5
percent decline in wealth, and the loss was similar for almost all the households
with annual incomes of $35,000 to $75,000, Mr. Wolff found.
- Mr. Wolff contends, for example, that a 50-year-old expecting a $20,000
annual company pension at the age of 65, and suddenly forced to fund it himself,
would have to have accumulated $200,000 in savings by now. Ergo, a $20,000
future company pension represents $200,000 in present wealth. The 401(k)
savings of households in the 47-to-64 age group, in contrast, average only
- Whatever the caveats, Mr. Wolff's main point is now widely accepted:
The swing from company-guaranteed pensions to 401(k)-style plans has definitely
lessened wealth and also relieved employers of billions of dollars
in pension obligations.
heartbreak, however, lies in the self-delusion that silences protest. Mesmerized
by 401(k)'s, too many households fail to notice what's missing.
- The Enron trustees are hardly alone. Although few cases are likely
to result in an Enron-style debacle, industry executives say plan trustees
at many companies are ill-equipped for their jobs as fiduciaries, either
on account of potential conflicts of interest or ignorance about their
||The 401(k): A rip-off of workers or a savior?
- The 401(k) isn't just taking a beating from the stock market. There's
increasing criticism that the rise of the savings plan and the decline of
the traditional pension will leave more people in financial straits in
- the 401(k) benefited the wealthy, who have more disposable income
to salt away in the plans. But the 401(k) led to an 11 percent drop in retirement
wealth for the typical household from 1983 to 1998, despite the bull
- As of 1998, nearly one in five households faced the prospect that
their retirement income will be below the poverty line,
||What's better: A pension or a 401(k)?
- Still, 401(k) investors with years to retire
might have the last laugh.
- Now, the majority of American
workers -- 58 million people -- have a 401(k). About 42 million have pensions.
- The shift to do-it-yourself retirement plans has been a mixed
- (Remember, it doesn't matter how the market is performing because
he's guaranteed the benefit.) [GET REAL--"doesn't matter how the market is
performing"--ask the people in 1933 about market performance and pensions.]
if he has a company pension and saves the 6 percent? $32,488+$34,000=$66,488.
Duh. See below]
- But a fair mathematical analysis is virtually impossible.
- [These cancel out for both pensions and 401(k)--if you
die, you don't get to take with you either a pension or a 401(k)]
- [Is this not true of a private investment
in addition to a pension?]
- he Charles Schwab Corporation, which is struggling through the worst
slump in its history, yesterday became the latest company to tell employees
that it would stop making matching contributions to their retirement
- Other companies that have said they are reducing or halting such
contributions include Goodyear Tire and Rubber, Great Northern Paper, Tech
Data, the El Paso Corporation and the CMS Energy Company.
- As more companies eliminate their contributions, the rate at which
Americans save for retirement already considered inadequate
may drop even further.
- The Department of Labor expects to propose a regulation by year's
end that will encourage companies to automatically enroll their workers in
- Once the regulation is proposed, the public will be able to comment
on it before it becomes final. The regulation could affect millions of workers
in 450,000 retirement plans
- The number of private-sector pension plans fell
nearly 50% in the last decade to 31,238 last year
||15 Million Brits Losing Savings in Blair's Supposed Safe Bet
- About 15 million British citizens who were
forced to invest in the domestic bond market are losing their savings, and
the government is telling them: Too bad!
||Pension reform: Boon for 401(k)s
- The reform President Bush signed into law could mean increased worker
savings. But it won't stop the move away from pensions.
- A majority of workers 45 and older have less than $50,000 in savings,
according to a survey by the Employee Benefit Research Institute (EBRI).
What's more, almost 40 percent of workers over 40 don't participate in a
401(k) when they are eligible.
- The new legislation encourages companies to automatically enroll
401(k)-eligible employees and to automatically increase worker contributions
every year. It also allows the plan provider chosen by the employer to offer
investment advice to workers.
- Automatic enrollment is expected to boost the participation rate
in 401(k) plans beyond 90 percent.
- Several provisions in the bill are not related to retirement per
se, including one that makes permanent the tax-free status of withdrawals
from state-sponsored 529 college savings plans.
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||President Bush Signs New Pension Bill
- President Bush on Thursday signed new rules to
prod companies into shoring up their pension plans and offered strong words
for corporate America: ''Set aside enough money now.''
||On Making Enrollment in a 401(k) Automatic
- Employers and the financial services industry that manages the 401(k)
plans for them have joined in the conspiracy.
- What about automatic enrollment? a new hire might ask.
Can you give some advice on the funds? The typical response has
been no. Corporate lawyers contend giving advice isnt legal. They might
as well say: You are on your own. Good luck.
- The Pension Protection Act, signed this week by President Bush, gives
companies no more room for excuses. They will be allowed to stick their employees
into a 401(k)
||Cash-strapped Americans raiding their 401(k)s -- chicagotribune.com
- Despite potential tax and investment problems, more
investors have been borrowing from their 401(k) plans or taking hardship
withdrawals in recent months, some retirement plan providers
||New regulation expected to raise 401(k) participation
- A finalized regulation to be issued by the Labor Department on Tuesday
is expected to significantly boost employee participation in 401(k) retirement
- One aspect of the regulation will also give companies a green light
to automatically enroll existing employee
- The regulation will provide a "meaningful increase" in participation
at a time when automatic enrollment is already gaining popularity, says Pamela
Hess, director of retirement research at Hewitt Associates, a human-resources
consulting firm. Automatic enrollment increases participation because instead
of having to sign up, employees have to take action to opt out.
- Since 2005, the percentage of employers that automatically enrolled
workers in 401(k)s surged from 19% to 34%, according to Hewit
- Overall, the Labor Department estimates that workers will add $70
billion to $134 billion to their retirement savings in the next 27 years
because of automatic enrollment, which received a boost from last year's
passage of the Pension Protection Act.
- The regulation also clarifies that employers that have previously
put worker contributions in stable value funds which guarantee a rate
of return and have been the standard default investment for automatically
enrolled employees won't be subject to legal liability.
||Over Time, Hidden Fees Snatch Big Percentages From 401(k)s
- The latest blow came in September. Schneider found that undisclosed
expenses for securities trades, administration and advisory services were
driving the cost of Elcon's plan to at least 3.5 percent of the amount he
invested. He said he was furious because Elcon's vice president, Kinh Pham,
had told workers in a February 2007 memo that Elcon had cut fees to 0.10
- Hidden fees amounting to 1 percent can reduce a worker's 401(k) returns
by about 15 percent over 30 years
||Retirement Wreck: Are 401(k)s Still Viable for Saving?
- For many Americans, 401(k) plans were supposed to be their own little
golden parachutes into retirement. Now, it seems, those parachutes may not
open in time.
||More Companies May End401k Match
- As the economic slump deepens, more companies are expected to join
General Motors in suspending matches of contributions to their employees'
401(k) retirement accounts.
- Also among them are Goodyear, Frontier Airlines, commercial real
estate firm Cushman & Wakefield, broadcast group Entercom and rental
car agency Dollar Thrifty Automotive Group.
||In Need of Cash, More Companies Cut 401(k) Match - NYTimes.com
- Companies eager to conserve cash are trimming their contributions
to their workers 401(k) retirement plans, putting a new strain on
Americas tattered safety net at the very moment when many workers are
watching their accounts plummet along with the stock market.
- Many of the latest 401(k) cutbacks are turning up in industries with
obvious financial problems, like the auto industry, health care and newspaper
publishing. Industries that depend on free-spending consumers, like resorts
and casinos, are also seeing cuts. Often when one company in an industry
cuts its benefits others will follow, to keep their labor costs
- Motorola, struggling to stay competitive, stopped contributions to
its 401(k) plan this month and froze its pension plan as well.
||Don't Count On Your 401(k)
- Americans lost almost a quarter of their retirement savings last
- According to Bogle's numbers, the median IRA has $55,000 in it. By
his calculations, that's enough to provide a steady income of $2,200 a year
-- less than $200 a month. That's it.
- And 401(k)s? The typical 401(k) holds only $15,000.