Nevin's Data "Points"

A recent headline  in  The Wall Street Journal  started off: “Forget the 401(k).” And then, unintentionally, proceeded to explain why that would be… nuts. Not that the author (Jason Zweig) didn’t throw in some digs at the subject, making a glancing reference to what he termed “the rigid and often paltry 401(k)s that workers have today” before going on to berate America’s retirement plan, dismissively claiming that “there’s little question that the 401(k) as we know it just isn’t getting the job done.” That, of course, depends on what one considers “the job” – though, to his credit - and I generally appreciate Jason's perspectives - he didn’t fall into the common journalistic device  of pining for the “good old days of the defined benefit plan.” Quite the contrary, he bluntly proclaims (in language that one rarely sees attributed to DB plans) that even in their heyday, “defined-benefit plans were, in fact, sporadic, arbitrary and unfair.” (This is a ...

"Unintended consequences” are generally a bad thing. But not always. The 401(k), for example. This week we celebrated the birthday of the 401(k) – because it’s the anniversary of the day on which the Revenue Act of 1978 – which included a provision that became Internal Revenue Code (IRC) Sec. 401(k) – was signed into law by then-President Jimmy Carter. That wasn’t the “point” of the legislation of course – it was about tax cuts (some things never change) – reduced individual and corporate tax rates (pulling the top rate down to 46% from 48%), increased personal exemptions and standard deductions, made some adjustments to capital gains, and – created flexible spending accounts. But it did, of course, also add Section 401(k) to the Internal Revenue Code. That said, so-called “cash or deferred arrangements” had been around for a long time – basically predicated on the notion that if you don’t actually receive compensation (frequently an annual bonus or profit-shar...