Sunday, November 1, 2009
Time Shills For Ghillarducci
"Retiree Robert Shively spends his days on the golf course. For many, that would be a dream come true, but not quite in the way Shively does it. The 68-year-old is the cart mechanic at the Niagra Falls Country Club. ... If you have even peeked at your account statements in the past year, it's painfully obvious that something is wrong with the way we save. ... Invented nearly 30 years ago as an executive perk--one more way to dodge Uncle Sam--the 401(k) was never meant to replace the employer-guaranteed pension fund, supplemented by Social Security, as the cornerstone of our nation's retirement system. ... The ugly truth, though, is that the 401(k) is a lousy idea, a financial flop, a rotting repository for our retirement reserves. In the past two years, that has become all too clear. ... The average 401(k) has a balance of $45,519. That's not retirement. ... Today, just 21% of all US workers are covered by traditional pensions, and the number shrinks every year. ... But all the people who shared their financials with us would have been better off in a pension. ... On the corporate end, a change in accounting rules made the growing cost of pensions more apparent to shareholders. Cutting the pension was a guaranteed way to improve the bottom line. The rise of the 401(k) began. ... So what can be done to fix our retirement-savings mess? Most of the proposed fixes to our retirement plans have to do with getting people to save more or invest better. ... The solution: a new type of insurance. Retirement savings, it turns out, are exactly the type of asset we need insurance for. We need insurance to protect against risks we can't predict (when the market collapses) and can't afford to recover from on our own", my emphasis, Stephen Gandel (SG) at Time, 19 October 2009, link: http://www.time.com/time/business/article/0,8599,1929119,00.html.
Time is incapable of or unwilling to separate fact from opinion. Who would SG have assume the investment risk? Uncle Sam? My idea: let Zimbabwe Ben raise interest rates so savers get a real return on their money as opposed to subsidizing Goldman Sachs and Wall Street's other vampire squids. Who shall pay SG? Why is the 401(k) a lousy idea? Because no investment produces a real 20% return annually? Who should do the real saving SG? In the long run American wages must fall to foreign levels. That's reality SG. SG uses anedotes as evidence. This article is a disgrace, shilling for Teresa Ghillarducci, our pension savior. SFAS 87, passed in 1985, exposed pension plan underfunding. The pensions were never going to be paid. This is like saying mark to market accounting caused the banks' problems. Someone must save. Has SG ever heard of annuities? Is SG aware of "fallacies of composition"? Stupidity must be endemic at Time. I roasted Justin Fox at my 23 December 2008 post: http://skepticaltexascpa.blogspot.com/2008/12/ben-franklin-3.html.