02.24.09
“The current economic crisis has exposed deep flaws in our nation’s retirement system,” said U.S. Rep. George Miller (D-CA), chairman of the committee. “For too many Americans, 401(k) plans have become little more than a high stakes crap shoot. If you didn’t take your retirement savings out of the market before the crash, you are likely to take years to recoup your losses, if at all.”
According to a survey released late last year by the AARP, a growing number of baby boomers have stopped contributing to their retirement plans just to make ends meet as a result of the financial and housing crises. Many companies have also recently announced that they are suspending matching contributions to their workers’ 401(k)s.
“Our nation’s system of retirement security is imperiled, headed for a serious train wreck,” said John C. Bogle, founder and former chief executive of the Vanguard Group. “That wreck is not merely waiting to happen; we are running on a dangerous track that is leading directly to a serious crash that will disable major parts of our retirement system.”
The economic downturn has drained trillions of dollars from Americans’ 401(k) accounts and hit other forms of retirement assets, including home values. In fact, median household net worth for those near retirement fell by more than 45 percent between 2004 and 2009, according to an analysis by the Center for Economic and Policy Research.
“The events of the last two years shown how exposed workers’ retirement income is to market risk,” said Dean Baker, co-director of the Center for Economic and Policy Research. “The collapse of the housing bubble has called attention to the fact that the value of not only their pensions, but also their homes, fluctuate with the market, while their homes are an even more important asset for most workers.”
According to recent data, more than two-thirds of workers with retirement plans rely solely on 401(k) type plans as their primary retirement vehicle. Where investment decisions were once made by professionals managing a traditional pension portfolio on behalf of workers, the responsibility of picking the right investments and implementing retirement savings strategies are left up to an individual account holder.
“Today most workers with pension coverage have a 401(k) as their primary or only plan. They were not designed for that role,” said Alicia Munnell, director of the Center for Retirement Research at Boston University. “Evidence indicates that people make mistakes at every step along the way. They don’t join the plan; they don’t contribute enough; they don’t diversify their holdings; they over invest in company stock; they take out money when they switch jobs; and they don’t annuitize at retirement.”
As a result, witnesses urged Congress to work on solutions that would strengthen 401(k) plans and consider additional strategies to ensure that all Americans have the ability to save for retirement, regardless if their employer offers a plan at work.
“As we work to preserve and strengthen 401(k)s and the other legs of the retirement savings stool, we must also tackle these difficult questions about the state of our nation’s retirement system as a whole and look to see whether we need to create a retirement system that works for all Americans, not just the fortunate few,” said Miller.
Photos from the hearing:
Created with flickrSLiDR.
Nation’s Retirement Security in Peril, Witnesses tell House Panel
WASHINGTON, D.C. – The economic collapse has uncovered problems in our nation’s retirement systems that must be addressed to ensure that Americans can enjoy a safe and secure retirement, witnesses told the House Education and Labor Committee today.“The current economic crisis has exposed deep flaws in our nation’s retirement system,” said U.S. Rep. George Miller (D-CA), chairman of the committee. “For too many Americans, 401(k) plans have become little more than a high stakes crap shoot. If you didn’t take your retirement savings out of the market before the crash, you are likely to take years to recoup your losses, if at all.”
According to a survey released late last year by the AARP, a growing number of baby boomers have stopped contributing to their retirement plans just to make ends meet as a result of the financial and housing crises. Many companies have also recently announced that they are suspending matching contributions to their workers’ 401(k)s.
“Our nation’s system of retirement security is imperiled, headed for a serious train wreck,” said John C. Bogle, founder and former chief executive of the Vanguard Group. “That wreck is not merely waiting to happen; we are running on a dangerous track that is leading directly to a serious crash that will disable major parts of our retirement system.”
The economic downturn has drained trillions of dollars from Americans’ 401(k) accounts and hit other forms of retirement assets, including home values. In fact, median household net worth for those near retirement fell by more than 45 percent between 2004 and 2009, according to an analysis by the Center for Economic and Policy Research.
“The events of the last two years shown how exposed workers’ retirement income is to market risk,” said Dean Baker, co-director of the Center for Economic and Policy Research. “The collapse of the housing bubble has called attention to the fact that the value of not only their pensions, but also their homes, fluctuate with the market, while their homes are an even more important asset for most workers.”
According to recent data, more than two-thirds of workers with retirement plans rely solely on 401(k) type plans as their primary retirement vehicle. Where investment decisions were once made by professionals managing a traditional pension portfolio on behalf of workers, the responsibility of picking the right investments and implementing retirement savings strategies are left up to an individual account holder.
“Today most workers with pension coverage have a 401(k) as their primary or only plan. They were not designed for that role,” said Alicia Munnell, director of the Center for Retirement Research at Boston University. “Evidence indicates that people make mistakes at every step along the way. They don’t join the plan; they don’t contribute enough; they don’t diversify their holdings; they over invest in company stock; they take out money when they switch jobs; and they don’t annuitize at retirement.”
As a result, witnesses urged Congress to work on solutions that would strengthen 401(k) plans and consider additional strategies to ensure that all Americans have the ability to save for retirement, regardless if their employer offers a plan at work.
“As we work to preserve and strengthen 401(k)s and the other legs of the retirement savings stool, we must also tackle these difficult questions about the state of our nation’s retirement system as a whole and look to see whether we need to create a retirement system that works for all Americans, not just the fortunate few,” said Miller.
Photos from the hearing:
Created with flickrSLiDR.
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