Apis & Heritage Capital Partners’ Post

Make this your weekend read: a deep dive on how the sweeping shift from pensions to defined-contributions plans has become a “driver of the inequality that is a defining feature of American life.” The article draws on the work of Teresa Ghilarducci, economist at the New School in New York, and the author of “Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy." Here are my 3 big takeaways: 1. While 401k plans have been extraordinarily successful for the top 10% of households, they have proven to be an ineffective retirement savings tool for the vast majority of Americans. In 2022, the average retirement account for people with household incomes between $30,000 to $58,000 held just $20,000. 2. So clearly insufficient for retirement, for people with low to moderate income, retirement accounts are more likely to become a source of emergency funds, taken early at a 10% penalty. 3. Nearly half of Americans age 55 to 66 had “no personal retirement savings” in 2017, according to US Census data. This is due, in no small part, to the fact that only 48% of private-sector employees even have access to a retirement savings plan, and more than 80% of those who lack access earn less than $50,000. We have got to do better.

Many lower middle-class and working-poor individuals are finding it difficult to plan for retirement due to the inadequacies of 401(k) plans. Jen Forbus' story in this NYT article exemplifies these struggles: despite diligent saving and investment, reaching retirement goals remains uncertain. The shift from pensions to 401(k)s has left many without enough savings, highlighting the need for more reliable retirement solutions. #HR #HumanResources #RetirementPlanning #401k #Benefits #EmployeeBenefits

HR Leaders, take some time to read this thought-provoking article. Having been a staunch advocate of the 401(k) since its inception in the mid-80s, when I spearheaded its implementation as a Benefits Manager for a technology firm, I've dedicated years to urging employees to not only participate in their 401(k) plans but to maximize their contributions to benefit from company matches. Discouraging withdrawals and promoting prudent financial management became focal points of my HR leadership, particularly as I facilitated the transition from defined benefit to defined contribution plans for various companies, balancing business needs with employee empowerment. Initially, I admired the Chilean Retirement System's model of mandatory contributions and individual account management, only to witness its shortcomings in practice. While I champion free enterprise and personal accountability, my experiences, especially in rural communities, have underscored the reality that many individuals struggle to make informed financial decisions and rely on government assistance as they age. While the 401(k) can be effective for those who engage fully and responsibly, sadly, this is the exception rather than the rule. The root causes lie in widespread financial illiteracy, inadequacies in our educational system, and a lack of familial and communal support structures. Addressing these challenges demands a multifaceted approach: • Extended working years: With life expectancies reaching into the 80s and 90s, working longer to fund lengthier retirements becomes imperative. • Revised education: Prioritize career planning and financial literacy in educational curricula while bolstering community-based support systems. • Government reform: Enhance and possibly overhaul existing programs, though political inertia remains a significant hurdle. These viewpoints are personal and do not represent any affiliated organization.

Have you checked out this interesting article from The New York Times about retirement savings? Check out this eye-opening article titled "Was the 401(k) a Mistake?" It discusses how 401(k) plans, which were meant to help people save for retirement, might actually be contributing to inequality in America. https://zurl.co/eeqr #nytimes #retirementplanning #financialplanning #finances #retirement #incomeinequality #wealth #financialfreedom

Retirement plan folks: before you read this NYT article (and you probably should), keep a few things in mind: 1. The title of the article is clickbait. Strong reactions elicit more clicks. 2. It’s not a bad article; it’s fairly well-researched and gives weight to different perspectives. 3. The article only fleetingly mentions a central fallacy: that there was a Golden Age when the American Worker was economically secure in retirement from their pension, and the shift to 401(k) has led to inequitable outcomes. At worst, the 401(k) system may exacerbate underlying economic inequalities, but did not cause them. If you had a low income in the 1970s and/or worked for one of the 50% of organizations that didn’t provide a pension, retirement was hard then, too. https://lnkd.in/dKBRktTv #401k #fiduciary 60-Second Soapbox

When it comes to saving for retirement, not all companies offer 401(k)s, and millions of private-sector employees lack access to workplace retirement plans. Availability is just one problem; contributing is another. Many people who have 401(k)s put little if any money into their accounts. With Americans now aging out of the work force in record numbers — according to the Alliance for Lifetime Income, a nonprofit founded by a group of financial-services companies, 4.1 million people will turn 65 this year, part of what the AARP and others have called the “silver tsunami” — the holes in the retirement system are becoming starkly apparent. U.S. Census Bureau data indicates that in 2017 49 percent of Americans ages 55 to 66 had “no personal retirement savings.” Dig into the numbers deeper, and you will find that 401(k)s have arguably become another driver of the inequality that is a defining feature of American life with the affluent profiting the most: That's because the more money you can invest, the more money you stand to make. Important read with commentary from Teresa Ghilarducci, Ted Benna, Andrew Biggs and more. So was the 401(k) a mistake? Share your thoughts in the comments below.

Was the 401(k) a Mistake? IMHO and in many respects, yes. As one individual frequently cited in this article states, this "40-year experiment with do-it-yourself pensions” has been “an utter failure.” But there's much more to this article than just basic criticism of 401ks that make it a worthwhile read for anyone concerned about the financial wellbeing of current employees, employees close to retirement, and those already retired and struggling to maintain a dignified life. #FinancialWellbeing #retirement #401ks

“[…] there is no guarantee of what you will get back, only limits on what you can put in.” 1️⃣ U.S. Census Bureau data indicates that in 2017 49 percent of Americans ages 55 to 66 had “no personal retirement savings.” 2️⃣ Larry Fink, the chairman and chief executive of BlackRock, wrote that the United States was facing a retirement crisis due in no small part to self-directed retirement financing 3️⃣ The main beneficiaries of 401(k) have been higher-income workers; instead of making an economically secure retirement possible for more people. ➡️ According to the Federal Reserve, the value of the median retirement-saving account for households in the 90th to 100th income percentile has more than quintupled during the last 30 years. ➡️ In 2022, the median retirement account for households in the 20th through 39th percentile held just $20,000. 4️⃣ Ghilarducci portrays the move to defined contribution retirement plans as part of the sharp rightward turn that the United States took under President Ronald Reagan, when the notion of individual responsibility became economic dogma ❓ Do you have people in your live close to retirement or recently retired? How do they feel about their financial situation? And how do you feel about yours? Read the full article: https://lnkd.in/eDSmtz_5

Inequality in the workplace matters even after workers pass retirement age. The decline of the defined-benefit (pension) plan and the rise of the employee-funded 401k threatens to create a future in which many Americans will need to work into retirement. Learn more about what we can do about that inequality at the link below.

Was the 401(k) a Mistake? A very thought-provoking article questioning the role of 401(k) plans in our financial futures. The 401(k) is just one tool among many that can be utilized in our financial planning. The real question lies in how we as individuals have reacted to the changing landscape of retirement savings. In the past, employers often provided pensions, but as the shift towards 401(k) plans occurred, individuals were entrusted with more responsibility. The key now is to assess whether we have made the right decisions in response to this change and if we are saving adequately to secure our retirement goals. Focusing on the importance of savings, it's crucial to help clients create their own pension opportunities in the absence of traditional pensions. Viewing the 401(k) as a valuable option, but not a one-size-fits-all solution, is essential. Each financial tool should be carefully evaluated based on its benefits and contributions to an individual's overall plan. The 401(k) may not be a mistake, but it's clear that it doesn't fulfill every expectation placed upon it. Successful outcomes are not solely determined by the financial constructs themselves, but by our ability to adapt to changing circumstances and make necessary adjustments along the way. Read more about this insightful perspective on 401(k) plans and retirement planning in the article linked below and reach out if you want to have a thoughtful review of your current financial strategy. https://lnkd.in/et49Crun