WASHINGTON – The television news program 60 Minutes aired a devastating indictment of 401(k) plans Sunday, further documenting the need for a new retirement system above Social Security. The piece featured several older Americans whose 401(k) accounts have dropped precipitously in the past year, shattering their dreams of retirement. The Pension Rights Center hailed the program as a “resounding wake-up call that compellingly dramatized the need for a new universal, secure, and adequate retirement income system for the future.” Such a system is the objective of Retirement USA, an initiative launched by the Center and three other organizations last month.
“60 Minutes has shown what we have been saying for years: 401(k)s alone simply cannot do the job for most working Americans,” said Karen Ferguson, director of the Pension Rights Center. “As the segment notes, 401(k)s were never intended to be the sole source of retirement income besides Social Security. The idea that workers ‘control’ their own destinies in 401(k) plans is a myth, as the past seven months of economic turmoil have shown. 401(k) plans simply cannot provide the dependable stream of income that all American workers should be able to count on in retirement. Add to that the fact that traditional pensions are in decline, and the fact that only about half of all workers are covered by any type of workplace retirement plan at all, and you get a retirement system in crisis. That’s why we joined together with the Economic Policy Institute, the National Committee to Preserve Social Security and Medicare, and the Service Employees International Union to launch Retirement USA.”
In addition to highlighting the riskiness of 401(k)s, the program cautioned viewers about “mediocre” investment options and hidden fees. In an interview, Congressman George Miller (D-Calif.), who is sponsoring legislation for greater 401(k) fee disclosure, stated, “There clearly has been a raid on these funds by the people of Wall Street. And it’s cost the savers and the future retirees a lot of money that would otherwise be in their account, independent of the financial collapse.”
The Pension Rights Center supports greater fee disclosure — not only as a way to ensure that fees are reasonable, but also to help consumers make more informed decisions about their investments.
“In the short term, we want to make current retirement income programs work as well for consumers as they possibly can,” said Ferguson. “However, in the long run, making fees more transparent is not enough. Even before the current economic crisis, half of all older workers had less than $40,000 in their 401(k) accounts. Telling people who can barely make ends meet to save more is not enough. Expecting people to be expert investors is not enough. Urging people to work longer is not enough. Clearly, we need a new system.”
For more information on Retirement USA, check out the initiative’s web site. Read the Pension Rights Center’s 2008 testimony on 401(k) fees and find out how much people are saving in their 401(k) accounts.