ClydeR
02-03-2009, 03:33 PM
According to the article below, "60% of all U.S. workers rely on 401(k)s as their primary retirement fund." With the stock market down 40% over the last 12 months, many people are understandably nervous about the security of their retirement. And some people are openly wondering if Congress made a mistake 30 years ago when it began encouraging 401(k) and similar retirement plans, instead of traditional pension plans.
Here's the problem: In 1978, when Congress amended the Internal Revenue Code to include Section 401(k), it envisioned the provision mainly as a way for workers to supplement their companies' traditional defined-benefit pension plans and Social Security. (Secondarily, it also was a nifty hideaway where highly paid executives could shelter income from taxes.)
Nobody at the time envisioned the 401(k) as something on which people would rely for their retirement.
But in the years that followed, more and more employers began to look for ways to get out of funding the pension and health plans that, up to then, had been regarded as part of the responsible capitalist social contract. Two innovations in political ideology -- one on the left and one on the right -- provided superb cover for the companies' greed.
For the Democrats, "choice" became a mantra, and the 401(k) suddenly became a mechanism through which working people could "choose" how to fund and manage their own retirement. On the Republican side, the notion of "an ownership society" came into vogue. There, the theory was that giving working people an ownership interest in the equities market would promote greater personal responsibility and make people better citizens.
More... (http://www.latimes.com/news/opinion/sunday/la-oe-rutten10-2009jan10,1,147265.column)
Here's the problem: In 1978, when Congress amended the Internal Revenue Code to include Section 401(k), it envisioned the provision mainly as a way for workers to supplement their companies' traditional defined-benefit pension plans and Social Security. (Secondarily, it also was a nifty hideaway where highly paid executives could shelter income from taxes.)
Nobody at the time envisioned the 401(k) as something on which people would rely for their retirement.
But in the years that followed, more and more employers began to look for ways to get out of funding the pension and health plans that, up to then, had been regarded as part of the responsible capitalist social contract. Two innovations in political ideology -- one on the left and one on the right -- provided superb cover for the companies' greed.
For the Democrats, "choice" became a mantra, and the 401(k) suddenly became a mechanism through which working people could "choose" how to fund and manage their own retirement. On the Republican side, the notion of "an ownership society" came into vogue. There, the theory was that giving working people an ownership interest in the equities market would promote greater personal responsibility and make people better citizens.
More... (http://www.latimes.com/news/opinion/sunday/la-oe-rutten10-2009jan10,1,147265.column)