Nevin's Data "Points"

Critics of the 401(k) have moved way beyond mere bad-mouthing—and are now openly advocating actions that would undermine support for, and participation in, those programs. It started with criticism of the 401(k) itself—how it was “never intended” to be a primary source of retirement income—as though that precluded the possibility. There were the insinuations that later became outright claims that—despite evidence to the contrary—401(k) plan benefits were “ upside down ” and that tax benefits accrued only to the rich. Then reports—based on small samplings of data—that employer matching contributions didn’t really impact/influence contribution levels—and that the match was…“ unfair ”—or “ exploiting naïve myopic workers .” More recently, there was the  pining for the defined benefit plan design , even though it never really provided the level of benefits promised for most—and even though the vast majority of workers in the private sector  never even had that as an option —and ev...

Perhaps because of the recent full moon, the nation’s 401(k) “haters” were out in force. Yes, last week we were “treated” to a  Bloomberg op-ed  with ideas on how to “fix” America’s broken retirement savings system, a back-handed compliment (of sorts) on SECURE 2.0 in  Forbes  from Teresa Ghilarducci, and the trifecta was completed with an academics op-ed in the  Washington Post  alleging that the current retirement system is “built for the rich.”  Most of the criticism was focused on the same old myopic view on taxes and tax preferences—all flavored through the prism of a highly biased preference for the involvement of the federal government in such matters, rather than the private sector. Key Points So, let me take a couple of minutes to make a few points that always seem to be glossed over: Tax deferral is not tax avoidance. Those contributions and earnings will be taxed (though generally outside the 10-year budget scoring window Congr...