Posted on 09/20/2012 4:36:51 PM PDT by Toddsterpatriot
It's been a third of a century since benefits consultant Ted Benna helped bring attention to a new but obscure provision of the federal tax code known as 401(k), which was meant to provide a tax break for folks with deferred income. As co-owner of the Johnson Cos., Benna was redesigning the retirement program for Philadelphia-based Cheltenham National Bank when he realized that the provision allowed employers to use salary deductions as tax-deferred contributions to employee retirement plans.
To be sure, Benna was not the only one looking at the possibilities afforded by the 401(k). Among other firms, healthcare-products giant Johnson & Johnson, advised by consultant Herbert Whitehouse, was also investigating. Indeed, J&J would become one of the first major industrial firms to adopt the 401(k).
Ironically, Cheltenham National initially declined Benna's proposal for such a plan. But other firms, starting with Benna's own, jumped at the opportunity. The 401(k) quickly became the retirement-savings plans of choice for millions of Americans, and Benna was dubbed the "father of the 401(k)." (The man some called the "godfather," Benna's partner Edwin Johnson, died last month at 82.)
But the 401(k) has evolved far beyond what Benna envisioned three decades ago, and not for the better, he thinks. Today, he says, the system has grown far too complicated for the people it was meant to benefit--rank-and-file employees who most likely aren't sophisticated investors.
We spoke with Benna recently about how he thinks the 401(k) could be improved.
(Excerpt) Read more at finance.yahoo.com ...
Ping!
Hmmmm. Taxed again on the Social Security. It doesn’t help the argument (in my case anyway) to wait until 65 to collect.
My 401K has a self-managed portion where I can buy indivdual stocks. I don’t want that to change. I’ve gotten a better return on my own rather than having everyting in targeted funds or the other offerings.
ut I’m getting close to getting out anyway. The markets are rigged by HFTs and other means. I’ve seen the hedge fund operatives up close and personal one too many times and they get away with it over and over again with no consequence. I’m waiting on one or two stocks to play out, then cashing in and getting out. I honestly don’t think there’s a big enough broom to clean out the corruption I’ve experienced first hand.
But some of them are really expensive. I'd like to see inexpensive ones that simply allocate among inexpensive index funds, like the S&P 500, Russell 3000, US Treasury Bond, etc.
That will keep expenses low. The only thing the fund manage would have to do is keep the assets balanced, and adjust the allocation as the target date approaches.
I may be wrong about this, but I believe the best way to keep expenses low is to have a large asset base in the plan for the entire company — which means participation rates and contribution percentages are high, and most employees have been in the plan for a long time.
A 401(k) “reset” is a sounding board for one of two things to occur.
1. To “protect” people and make the system “fair,” the government will provide an optional program where you can trade in your 401(k) or IRA for a guaranteed rate of return. This optional plan will quickly become mandatory, i.e. confiscation of retirement accounts with everyone stuck with retirement plans that will perform worse than Social Security (i.e. looted and empty immediately).
2. To “protect” the public, investment options will be “simplified” into “safe and secure” options. All 401(k) and IRA options will be reduced to a government selection of investments that include T-notes, U.S. savings bonds, and municipal bonds. Trading real assets for these worthless debt instruments is backdoor nationalization.
In other words, “change” and “reset” translates as government looting of your retirement piggy banks beyond what’s happened with Social Security.
No, I was referring to the mutual fund expense ratio.
It is extremely low for index funds, and there is no reason that a target-maturity fund couldn’t do the same.
I think you should read the article. I didn’t see any suggestion about forcing people to invest in government debt.
MORE investment choices are needed, not fewer, including low cost ETF's, commodities, and other narrower categories that will allow informed investors to escape the established Wall Street rape of the middle class.
I read the article. I also know what the Democrats have been looking at doing to retirement accounts since at least 2010.
Want to see a “reset” happen? It will end up being confiscation.
Argentina is just one example of how governments do this.
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