Tuesday
Oct072008
Retirement plans don't work
Rep. George Miller (D-Calif.) said that the current "go-go, wild west style approach to governing" is severely affecting citizens' retirement security.
In a hearing held by the House Education and Labor Committee, Miller said, "63 percent of Americans are worried that they will not have enough savings for retirement." He continued, "one in five middle-aged workers stopped giving funds to their retirement plans in the last year." In addition, he said $500 billion has been lost from current 401(k) plans in the last year.
Director of the Congressional Budget Office Dr. Peter Orszag said that the current economic crisis is affecting state and local pensions as well. He said $300 billion were lost from those pension between the second quarter of 2007 and the second quarter of 2008. He said workers are taking "unnecessary risk" in that 90 percent have 401(k) plans in their own company's stock. He said workers need to be given "a strategy of diversification."
Research Director of the Employee Benefit Research Institute Jack VanDerhei said there are "fundamental flaws" in our current retirement plans. He said that the last few weeks have proven that even large companies can go bankrupt and retirement plans are always at risk. He added that he hopes workers don't "overreact" to the economic downturn and continue to contribute money to their retirement plan.
Rep. Yvette Clark (D-N.Y.) said that the public is "in a state of shock." "We're in the midst of a reorganization of the financial system," said Clarke in reaction to the failing economic system.
In a hearing held by the House Education and Labor Committee, Miller said, "63 percent of Americans are worried that they will not have enough savings for retirement." He continued, "one in five middle-aged workers stopped giving funds to their retirement plans in the last year." In addition, he said $500 billion has been lost from current 401(k) plans in the last year.
Director of the Congressional Budget Office Dr. Peter Orszag said that the current economic crisis is affecting state and local pensions as well. He said $300 billion were lost from those pension between the second quarter of 2007 and the second quarter of 2008. He said workers are taking "unnecessary risk" in that 90 percent have 401(k) plans in their own company's stock. He said workers need to be given "a strategy of diversification."
Research Director of the Employee Benefit Research Institute Jack VanDerhei said there are "fundamental flaws" in our current retirement plans. He said that the last few weeks have proven that even large companies can go bankrupt and retirement plans are always at risk. He added that he hopes workers don't "overreact" to the economic downturn and continue to contribute money to their retirement plan.
Rep. Yvette Clark (D-N.Y.) said that the public is "in a state of shock." "We're in the midst of a reorganization of the financial system," said Clarke in reaction to the failing economic system.
tagged 
401(k), George Miller, economy, peter orszag, retirement, yvette clark in Congress
401(k), George Miller, economy, peter orszag, retirement, yvette clark in Congress
Pinching from the piggy bank
Christian Weller, Ph. D., senior fellow at the Center for American Progress, discussed the reasons behind 401(k) loans. Weller said that families are taking loans because they are uninsured or under-insured for risks they might face. In addition, he said that families are trying to cope with slow income growth and rising prices for houses, food, energy and health care.
Kohl said that he was against the idea of a 401(k) debit card which allows participants to make everyday purchases using his or her retirement fund. He said it is a ‘gross distortion of the plan’s intended use’ and the high fees associated would ‘drastically diminish savings.’ Ranking member Gordon H. Smith (R-Ore.) pointed out that, according to Vanguard, if an employee takes out two loans of $30,000 total from his 401(k) and pays them back in five years, he will have $40,000 less in his retirement fund after 30 years than an employee who never takes out a loan.
David C. John and Mark Iwry, both principals of the Retirement Security Project, pointed out that aside from withdrawals and loans, leakages were another detriment to retirement plans. In their joint statement, John and Iwry said that the automatic Individual Retirement Account (IRA) approach would feature direct payroll deposits and help households overcome barriers to saving.