Wednesday, Aug. 20, 2014

The disappearing 401(k) and inequality

Compiled by Erik Raymond, Deseret News

Published: Sat, March 8 11:07 p.m. MST

 According to the Economic Policy Institute, personal savings retirement plans, such as 401(k)s, are failing those who need retirement funds the most.

According to the Economic Policy Institute, personal savings retirement plans, such as 401(k)s, are failing those who need retirement funds the most.


Companies are getting stingy with 401(k) plans, according to Bloomberg Businessweek.

In the wake of the financial crisis of 2008, companies are making decisions to bolster their bottom line when in comes to their offering of 401(k)s, and it is going to hurt their rank and file employees who will depend upon that savings upon retirement.

There are mainly two ways that companies like AOL, JPMorgan Chase and many others are shrinking the retirements of their employees, according to Businessweek.

First, some are lowering the matching percentage on their matching plans. A matching plan usually consists of the employer matching a certain percentage of the employee’s gross annual revenue. The second options companies are choosing is to delay the matching payout, usually until the end of the year.

In addition, 401(k)s are making inequality worse, according to the Washington Post.

According to a new analysis from the labor-oriented Economic Policy Institute, “The effect has been a stratification of retirement savings by education, income and race —which could deepen inequality among the elderly as the population ages.”

It goes on to say that younger people are saving at a slower rate than their parents and grandparents, which takes aim at declining wages based on inflation and a smaller job market in general.

The 401(k) “grand experiment” is a catastrophe, according to USA Today.

“Recent and near-retirees, the first major cohort of the 401(k) era, do not have nearly enough in retirement savings to even come close to maintaining their current lifestyles,” according to the article.

The 401(k) transition has been a “disaster, a disaster which threatens to doom millions to economic misery during the later years of their lives,” USA Today reported.

Erik Raymond is experienced in national and international politics. He relocated from the Middle East where he was working on his second novel. He produces content for You can reach him at:


1. kiddsport
Fairview, UT,
March 4, 2014

Blaming the 401k for failure to prepare for retirement is like blaming the wheat stalk for not harvesting and storing wheat for the winter. It is merely a tool in a toolbox a person can and should use to prepare for financial winter- or retirement. Getting out of debt is another neglected tool, one our government sets a poor example for us all. I would venture to say state and federal taxes carry as much a burden on retirement preparedness as anything else. When the government turns to its senior citizens' Social Security checks to raise additional revenue, it has become too bloated and too greedy. Pare that back and seniors will be able to breathe a little easier.

2. cjb
Bountiful, UT,
March 4, 2014

Live below your means, learn to enjoy investing, i. e. make it a hobby, fully fund your and your spouses Roth IRA, and chances are you will do okay in retirement.

3. Anti Government
Alpine, UT,
March 4, 2014

I work for a Fortune 500 company with around 70 000 employees and their stock has doubled in the last 15 months. 2 years ago they completely cut their contribution to the 401K. "They can't afford to give raises or pay bonuses..." but the C.O.O stock value has gone up over $4 million in the last 18 months. You do the math.

As a sidenote they have slashed healthcare benefits due to obamacare as well. $4000 out of pocket before insurance coverage. Stock doubled though.

I will be getting another job elsewhere. I have seen enough. A change in leadership at the top and the trend has become clear what the future holds at this company.

I have poured every dime into my 401K that I am legally allowed to but it won't be enough. I have to do more outside because the IRS limits what I can contribute..because the lower compensated employees don't contribute enough so our contributions get limited.

Go figure. The IRS prevents me from preparing for my retirement because someone poorer than me at the same company won't use the 401K. Brilliant.

Only govt could dream up a rule that stupid.

4. Mountanman
Hayden, ID,
March 5, 2014

Honestly folks, if you ran a company and were facing a future where your business had to accommodate Obamacare, higher taxes, more government regulations, the out of control EPA and seeing the economy continue to be very weak would you not hunker down, cut costs and try to survive? The other alternative is to move overseas to escape and survive. GE did it and look at them now with fists full of government energy research contracts all moved overseas! It pays to donate to Obama's campaign if you are a corporation!

5. Lilljemalm
Gilbert, AZ,
March 5, 2014

Add to this a study by the Society of Actuaries in which they looked at all defined benefit plans that had been terminated and found without exception that they were replaced within 2 years with plans for top management only that cost as much or more than the terminated defined benefit plans for rank and file employees. The stock holders did not benefit from any cost savings because it was just a cost shifting. It's all become a method of taking from the common folk to line the pockets of the few.