401(k) Accounts & the DOL

Last weekend’s Wall Street Journal had a front page article called Retiring Boomers Find 401(k) Plans Fall Short. The article begins by noting that “The 401(k) generation is beginning to retire, and it isn’t a pretty sight. The retirement savings plans that many baby boomers thought would see them through old age are falling short in many cases.”

This article peaked my interest since 401(k)’s are the retirement saving vehicles of our time. The old traditional defined benefit plans that promised a certain benefit every month after retirement until death are dinosaurs. The burden has shifted to employees to fund their own retirement through these and similar plans.

Interestingly, the Wall Street Journal article leaves the impression that it is the structure of the 401(k) that is the problem. But, to me, that’s like blaming the Pot because the Soup was bad. Perhaps it is more appropriate to blame the ingredients (the plan’s investment selections and costs) and to blame the chef (the plan’s advisor).

I believe that 401(k) plans can be a great way to save for retirement. With adequate employee savings rates and properly structured portfolios, there is no reason why these plans can’t meet employee retirement needs.

Give me a call if you need help in this area, we maybe able to use our academic approach with your companies 401K. It’s an extremely important issue. Check out this 2 1/2 minute video from a 60 Minutes segment that was first aired in April 2009, but is still very relevant today.