The 401(k) Mirage
Largely by accident, 401(k) plans became Americans' primary source of retirement funds over the past 30 years. It's now clear that shift away from traditional pensions isn't working out. The 10,000 Baby Boomers turning 65 every day are discovering they don't have enough to retire -- even as more companies squeeze their 401(k) plans.
Phyllis Borzi spent decades helping invent ways to protect people from unpleasant surprises in their health and retirement plans. Never did she run into the kind of resistance finance firms have mustered against her latest idea.
Kathleen Tarr says AT&T employees looked to her as “their de facto 401(k) expert.” Visiting their homes and offices, she advised them on their retirement plans as they called up balances on computer screens.
Premature withdrawals from retirement accounts have become America’s new piggy bank, cracked open in record amounts during lean times by people like Cindy Cromie, who needed the money to rent a U-Haul and start a new life.
Novant Health Inc. employees are suing the nonprofit hospital system for allegedly overcharging them in their retirement accounts by millions of dollars, according to a complaint that highlights how workers’ savings are eroded by high fees to financial firms.
For a company that has caught heat for the low wages it pays workers, McDonald’s has a retirement savings plan that’s surprisingly generous, matching 300 percent of the first 1 percent employees save in their 401(k) accounts.
The Massachusetts Securities Division is calling on 401(k) plan administrators to report how many companies have shifted to a lump-sum matching contribution once a year, a change that can undermine worker savings.