Saturday, December 09, 2017

Is Your 401(k) Kinda Bullsh*t?

The headline of a recent article didn’t pose that as a question. And that should make you think.

The article, penned by a not-yet-30-year old, was mostly negative on the nation’s primary private retirement savings vehicle, but to my read, that wasn’t her fault. Rather, it was the net result of the feedback she got from a number of what we might consider the “usual suspects” who garner headlines that bash the 401(k), including (at least indirectly) the man the mainstream media credits with being its “father” (trust me, there’s more to it than that).

One of the folks she talked to was yours truly – and while I clearly wasn’t persuasive enough to overturn (completely) the cynicism with which I sensed she came to our conversation (at one point she went so far as to say, “you’re a lot more positive about the 401(k) than anyone else I’ve talked to”).

In the course of our conversation we covered a lot of ground – the origins of the 401(k), why traditional pensions have faded in the private sector, the notion that they were widespread and provided full benefits to those who were covered, the benefit of the employer match, and the innovations (like automatic enrollment and target-date designs) that have helped the 401(k) become “better” since I began saving.

Not all of that made it into the article, and some of it was worded differently than I would have explained it – but it was clear that she was listening and trying to understand, even though her article indicates she spent only two days doing her research.

That said, last week if you had Googled “401(k)”, her article came up a lot higher than anything I had managed to write in the last month (though, in fairness, I almost never use profanity in my titles, and reserve use of the “f” word for things like fiduciary).

There is good news here. The author’s cynicism (and misunderstanding of the U.K.’s pension system) notwithstanding, she’s (already) saving in her 401(k), cognizant of issues like fees and investments, and willing to press for continued improvements even as she continues to save. She sees value in having access to the advice of an ERISA fiduciary (though, perhaps since we didn’t discuss it, she doesn’t quite understand the impact of the fiduciary rule, or that it’s currently in place), and is desirous of steps that would make the 401(k) simpler and easier to use by non-experts.

Her 401(k) may still be “kinda bullshit.” But I’m pretty happy with mine. How about you?

- Nevin E. Adams, JD

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