Nowadays, there are increasing debates about 401(k) plan in U.S. As we now, 401(k)s are the largest and most common type of defined contribution plan, which is used by private sector and an employment-based retirement plan. 401(K) plans enrolled as a traditional pension in 1979. However, with the fast development of the markets and increasing number of types of investment products, 401(k) plans have been become unmanageable for an average U.S. employee. At this point, debates have started. 401(k) plan investors, or simply employees, are complaining about the returns of 401(k) plans.
Let’s look at the problems which are mostly talked by the experts and investors. From the view of employees,
- The plans are very complicated. Today’s investment world, everything is changing very fast and markets are very sensitive to the news flow. Thus, an average employee does not have enough information and time to follow the markets and to decide the distribution of its 401(k) funds. Therefore, employees are becoming more dependent on their financial consultants or 401(k) companies, but these companies firstly consider their profitability, not employees’ possible returns. Each year they reports high profits, but employees’ returns on funds are negative or very small . Don’t forget that big fish always eats small fish by collecting them in a pool. This is the one game of the wild capitalism over the world. All countries, not just the U.S.A, use their social systems to finance their debts because economic crisis repeats in very short time periods in today’s financial world. Thus countries need cash in hand to feed wild capitalism’s soldiers.
- 401(k) plans are very expensive due to the fees and other costs. If it is a required characteristic of social state, 401(k) plan fees should be at minimum levels, and all costs taken from employees’ retirement plans should be transparent. There should not be indirect costs for retirement plans. Please draw an imagine in your mind. You are an employee contributing to a retirement plan for a comfortable retirement life in the future. Due to the lack of information and bad management of your plan, you loss money, but the company which manages your plan reports profit each year, thanks to fees taken from you. It is not fair based on social state logic. There should be a reciprocal gain or loss, but we know that wild capitalism brings all systems to very complicated in order to survive itself. Otherwise, Ted Benna had created a innocent system for retirement, but year by year, this system has been transformed to a monster by the wildly development of capitalism. Thus, we can say “Don’t lament and feel guilty Mr. Benna. You had brought a baby into the world, but your baby was stolen and has been raised by capitalism, baby has become a monster which feeds its stepfather.”
- Participation rates to 401(k) plans are very low in lowest income groups. By increasing income levels, participation rates are getting high. According to the earning projections in 2015 made by U.S. Government Accountability Office, rate of participation to 401(k) retirement plans in the highest income level is almost 80%, but the rate is almost 35% in the lowest income level. That is, employees in the lowest income level just think about surviving in the life with their little income. They are spending all their time by working to eat and take a breath, however, high income group participants have a comfortable life by enjoying their time with little work and more fun today and in the future. Thus, there should be made some important changes in retirement system that support lower income groups. Since there is a large inequality between today’s income groups, this inequality should be reduced in retirement period. In this way, all people can have a comfortable retirement life under the same conditions. It is the debt of wild capitalism to the people in the lowest income groups in return for exploiting their youths.
Considering all these things we mentioned above, Ted Benna can be assumed the creator of 401(k) plans, but these plans have been raised by the developments of capitalism. Thus if these plans are mentioned as “monsters”, we should focus on the negative effects of wild capitalism and social state requirements.
Written by Fortune Gap