America, We Need to Talk About 401(k)s

America is facing a retirement crisis. If you live and work in this country, you already know that and feel it as you and your family wonder how you're going to prepare for the future. But the cause of this crisis may not be what you think. Over the last few decades, there has been a deliberate push from Wall Street to gamble with Americans' retirement prospects in order to generate greater windfalls for its own benefit.

Some candidates on the Republican presidential ticket are pushing policies that would put more people into risky -- and costly -- 401(k)-style accounts. This will make this crisis worse. Now is the time we talk about how and why 401(k)s are failing.

If you are lucky enough to be in a workplace that provides some type of retirement savings -- 38 million working American households are not -- it's likely your retirement is insufficient. About 92 percent of households are financially unprepared for retirement, according to the National Institute on Retirement Security.

The gulf between what Americans have saved and what they actually need to retire is startling. We have only about half of what we need, or $6.8 trillion versus $14 trillion. The U.S. Government Accountability office estimates that about half of all households with working adults who are within a decade of retirement have nothing saved at all, and the average savings for those who do -- either in a 401(k) or an Individual Retirement Account, or IRA -- add up to a monthly allowance of just $649 or less.

It wasn't always this way. For generations, workers in America paid into professionally managed defined benefit pension systems, and after a career of hard work were rewarded with the promise of a stable retirement. Over the past three decades, the private sector has driven a trend toward 401(k)-style plans as the default retirement savings tool for most Americans, shifting the burden of managing retirement savings accounts from employers to employees, and all of the benefits to Wall Street.

As a result, we're seeing an increasing number of Americans arrive at the end of their working lives financially unprepared. Studies show that 401(k)s are failing low-income and middle class workers -- the core drivers of the American economy -- while the only people who benefit are those whose annual incomes are well into the six figures.

The fact of the matter is that with 401(k)-style plans, the cards are stacked against workers trying to build up their nest eggs. Abusive trading practices by Wall Street brokers are costing workers $8 billion to $17 billion in retirement savings each year, and investors lose five to 10 percent of their long-term savings in all due to conflicted advice, according to top White House economic advisers.

For those who can afford it, a financial adviser can help navigate the shark-infested waters. However, the hefty price of outside help can also eat away at retirement savings, and advisers don't always act with their clients' best interests in mind. In fact, the Obama administration is pushing for federal legislation to make these common practices illegal.

Individual accounts like 401(k)s yield lower returns in comparison to group accounts. That's because individuals tend to take less investment risks as they get closer to retirement in order to ensure their savings aren't decimated by a sharp market turn right before they need them. Group accounts like defined benefit pensions continuously add younger members who can assume greater risks so funds can always be invested in a way that is likely to yield higher returns in the long term.

We all stand to lose when so many aging members of our communities -- after a lifetime of work -- are forced to rely on public services because they can't afford to pay for food, housing or medical expenses. It's clear that there are better options for a secure retirement than the 401(k) model, and it's a wonder that we have stuck with 401(k) style plans given the results we've seen.

We need real solutions to America's growing retirement crisis, and unfortunately 401(k)s are only making it worse. Our decades-long experiment with insecure retirement plans has failed.

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