How American Workers Have Been Robbed of Their Retirement Benefits
"The 401(k) will turn out to be the greatest systemic financial hoax ever perpetrated on an unsuspecting public."
- William Wollman, The Great 401(k) Hoax
A retirement crisis of staggering proportions faces millions of American working people. The plunge in the stock market has profound implications in a country where most pensions and savings are not based on fixed benefits paid by employers, but instead are dependent on voluntary contributions made by workers to be invested on Wall Street.
The 401(k), as the plan is known, is literally a do-it-yourself retirement plan completely dependent on the vagaries of the market. The 401(k) plan places the responsibility and burden entirely on the worker, unlike a high-powered executive who has a broker who is constantly following investments, giving tips or advising him or her on the wisest allocations.
For the first time in living memory, it seems likely that living standards for those over the age of 65 will begin to decline as compared to those who came before them—and that’s without taking into account the possibility that Social Security benefits will be cut at some point in the future.
The culprit? The 401(k), along with the other instruments of do-it-yourself retirement. Not only did they not make retirees millionaires, they left very many retirees with very little at all. The reasons why include excessive and hidden fees, and market volatility.
Trillions of dollars have evaporated from those accounts that have become the prime source of retirement funds for a majority of American workers, affecting their psyche and their future. If you are still young enough, there's time to rebuild and recover, but if you are in your 50s, 60s or beyond the consequences can be dire, and its drawing attention to the shortcomings of a retirement system that has jeopardized the financial security of tens of millions of people.
What Is A 401(k) Plan?
A 401K is a tax deferred, defined contribution retirement plan. The name comes from a section of the Internal Revenue Code that permits an employer to create a retirement plan to which employees may contribute a portion of their wages on a pretax basis. This section allows the employer to match employee contributions with tax-deductible company contributions. Earnings on all contributions are allowed to accumulate in a tax-deferred trust.
The advent of 401K plan brought about a fundamental shift in employers approach to retirement planning. Pre 401(k) era employers would offer guaranteed retirement plans. After 401(k) plans became the retirement plan of choice for employers, the employee became in charge of his or her own pension plan.
Excessive & Hidden Fees That Cripple 401(k) Participants
Here's a list of the most common fees:
a) Management fees
b) Administrative fees
c) Distribution fees (the top three usually averaging about 1% a year)
d) Sales loads (often averaging 1.4% a year)
e) Trading costs (averaging .5-1% in an actively managed fund)
f) Excess capital gains taxes when a portfolio is turned over
All these fees are a mystery to an overwhelming majority of Americans. According to a poll sponsored by AARP, 83% of workers don't know how much they pay in such fees -- and most do not realize they pay any fees at all. The 401k model is hopelessly flawed and will lead an entire generation to despair.
401(k) Fallout Videos
The Better Way To Plan For Retirement
There is a better way to plan for retirement that provides an entirely new and in-depth look at one of today's strongest financial products. It will show you how to:
Grow your money with zero market risk
Access your retirement dollars tax-free
Leave an income-tax-free inheritance to your heir
Find out how it is TRULY POSSIBLE TO ACCUMULATE MONEY THAT CAN BE ACCESSED TAX-FREE... but only if it is done properly. The financial professionals at John Nunes Financial & Insurance Services will work with you to show you how to properly plan and implement a tax-free retirement without the risks involved with such plans like a 401(k).
For more information on Tax-Free Retirement, click here.