On Jan. 10, Los Angeles Times columnist Tim Rutten penned a column on the recent tumble of the nation\u2019s 401(k) tax-deferred retirement accounts. <\/p>\n
\u201cThere\u2019s been little discussion of the way in which this economic implosion has exposed the utter failure of the now-ubiquitous 401(k) retirement accounts,\u201d Mr. Rutten offered. \u201cIn fact, the entire 401(k) system looks increasingly like the sort of bait-and-switch con relished by the Bernie Madoff\u2019s of the world. <\/p>\n
\u201cAs Robyn Credico, a leading consultant on pensions, told the Wall Street Journal this week, \u2018This is the biggest test that the 401(k) plan has seen to date, and it has failed.\u2019\u201d <\/p>\n
The problem, according to Mr. Rutten, is that \u201cIn 1978, when Congress amended the Internal Revenue Code to include Section 401(k), it envisioned the provision mainly as a way for workers to supplement their companies\u2019 traditional defined-benefit pension plans and Social Security. … <\/p>\n
\u201cNobody at the time envisioned the 401(k) as something on which people would rely for their retirement. But in the years that followed, more and more employers began to look for ways to get out of funding the pension and health plans that, up to then, had been regarded as part of the responsible capitalist social contract. … <\/p>\n
\u201cNobody bothered to ask employees whether they wanted to swap their pensions for choice or ownership, nor did anybody stop to notice that very few people are suited by background, ability or temperament to actively manage investments. … <\/p>\n
\u201cCompanies seized the opportunity to abandon their defined-benefit pension plans. Today, more than 60 percent of all U.S. workers rely on 401(k)s as their primary retirement fund. They\u2019re not eager to \u2018choose\u2019 their own retirement program, nor are they enthusiastic \u201cowners\u201d of American business. They\u2019re draftees. …\u201d <\/p>\n
Since October of 2007 our 401(k)s have lost a third of their value — a collective $1 trillion. <\/p>\n
Mr. Rutten has some points — though my granddad was promised a pension from the Tri-State Asphalt Company when he retired. New owners took over; the pension disappeared. I think Hick might have preferred to have been left with some stocks in his own name, even if the market had dropped. <\/p>\n
What I keep going back to, though, is that part about how \u201cvery few people are suited by background, ability or temperament to actively manage investments.\u201d <\/p>\n
The clear implication is that some small number of people with 401(k) retirement accounts, who ARE \u201csuited by background, ability or temperament to actively manage investments,\u201d should have been able to do better by carefully positioning their 401(k) assets, unlike the rest of us hayseeds, who presumably just said \u201cAw, pick four of them funds at random and put a quarter in each.\u201d <\/p>\n
Early in 2008, figuring the market was going to hell, I dumped all the domestic stock holdings from my own 401(k), shifting those funds into bonds (despite the fact I\u2019m constitutionally opposed to loaning more money to Uncle Sam, given the fact he uses it to jail gun owners and pot smokers, poison crops overseas, ruin our free economy, stuff like that.) This preserved a little more of my capital than if I\u2019d stayed on the New York Exchange last spring. <\/p>\n
However, since the Great Dump of Autumn, 2008 pulled down my overseas stock fund right along with stocks in the U.S. index funds, my \u201cgood fortune\u201d was short-lived. <\/p>\n
The question is, if you\u2019d been lucky enough to \u201ccall the markets right,\u201d and if you were \u201csuited by background, ability or temperament to actively manage investments,\u201d could you have made money with your 401(k) fund — or even preserved the value of your assets — over the past year? <\/p>\n
What happened to those of us who saw trouble coming back in 2007, and who called our 401(k) administrators, asking \u201cCan you shift all my funds into cash for the next year or so?\u201d <\/p>\n
I can tell you what happened, because I tried. <\/p>\n
I was told, \u201cSir, if you cash out your 401(k), there will be adverse tax consequences.\u201d <\/p>\n
\u201cNo, no,\u201d I tried to explain. \u201cI don\u2019t want to \u2018cash out,\u2019 I don\u2019t want you to send me a check. I just want you to sell all holdings and hold my assets AS CASH.\u201d <\/p>\n
\u201cSir, if you cash out your 401(k), there will be tax consequences.\u201d <\/p>\n
Once you worked your way up the food chain to someone who could parse a sentence, what you learned was that \u201cWe\u2019re not like a brokerage house. By federal statute, all your assets have to be invested in one or more of our approved funds at all times.\u201d <\/p>\n
OK. Could they sell my stock and bond funds and put the money in gold bars? <\/p>\n
No. <\/p>\n
Did they have a fund that would allow me to put a sizeable hunk of my assets in gold MINING shares? <\/p>\n
Um … no. <\/p>\n
Mining shares in general? A commodity and resource fund, including mining, timber, cattle ranches, coffee, tobacco? <\/p>\n
No. <\/p>\n
I mentioned earlier that, to escape dependence on paper instruments denominated in increasingly worthless Federal Reserve fiat \u201cdollars,\u201d I\u2019d placed all my remaining stock holdings in the one and only \u201cInternational fund\u201d offered by my 401(k) plan. But it turned out that placed 37 percent of my holdings in the European Union, 19 percent in Great Britain, and 16 percent in Japan — a mix over which I had no control. Only 10 percent of my assets in that fund — the only \u201coverseas\u201d fund available — were invested in \u201cemerging markets\u201d or the \u201cPacific Basin not including Japan,\u201d which is where I wanted to be. <\/p>\n
Could I shift more of my modest retirement savings into an \u201cEmerging markets\u201d fund? No. Into a \u201cPacific rim\u201d fund? No. Swiss pharmaceuticals? No. Anywhere better divorced from the fate of the interlinked fiat dollar, pound, Euro and yen? No. <\/p>\n
Although these 401(k) managers self-righteously stress \u201cdiversification\u201d at every turn, virtually all their stock packages are index funds, designed to mimic the holdings and performance of the S&P 500 or some subdivision thereof. <\/p>\n
OK, that\u2019s more \u201cdiversified\u201d than investing all your savings in your sister\u2019s frozen yogurt stand. But it\u2019s also why they\u2019ve all tumbled in unison with a falling New York market. <\/p>\n
Look through a list of the holdings of ANY stock fund in which you were allowed to invest your 401(k) funds a year ago. You\u2019ll find fund after fund where the highest percentage of holdings were in the \u201cfinancial\u201d sector — 22 percent of holdings, 17 percent of holdings, 33 percent of holdings. <\/p>\n
Banks, for God\u2019s sake. Instead of putting my money in a bank, I invested in a stock fund — which proceeded to shift the lion\u2019s share of my funds into BANK stocks, because \u201cEveryone knows banks are safe.\u201d <\/p>\n
\u201cThe regulators have told them if they create a gold fund or a commodities fund — anything that\u2019s considered a \u2018high-risk investment\u2019 — and people end up losing money, the people who put money in those accounts could come back and sue them, for \u2018allowing\u2019 them to put their money at risk,\u201d I was told by someone who actually deals with these 401(k) folks on behalf of a major local employer. <\/p>\n
Did we lose a third of the value of our 401(k)s in the past year because we\u2019re clueless boobs \u201cnot suited by background, ability or temperament to actively manage investments,\u201d Mr. Rutten? <\/p>\n
Or did our 401(k) funds collapse, like fishing floats in a tidal wave, because the government nannies who oversee the \u201cprivate\u201d 401(k) administrators saw to it we had no option but to plow our retirement funds into Bear Stearns and Shearson Lehman — you know, the \u201csafe\u201d stuff — or directly into loans to Uncle Sam (\u201cgovernment bonds\u201d), who then proceeded to turn around and loan our money to Bear Stearns and Shearson Lehman, Citigroup, Bank of America …? <\/p>\n
Buy guns and gold. And for heaven\u2019s sake, don\u2019t tell anybody where they\u2019re hid. <\/p>\n","protected":false},"excerpt":{"rendered":"
On Jan. 10, Los Angeles Times columnist Tim Rutten penned a column on the recent tumble of the nation\u2019s 401(k) tax-deferred retirement accounts. \u201cThere\u2019s been little discussion of the way in which this economic implosion has exposed the utter failure of the now-ubiquitous 401(k) retirement accounts,\u201d Mr. Rutten offered. \u201cIn fact, the entire 401(k) system […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[17,18],"tags":[],"class_list":["post-157","post","type-post","status-publish","format-standard","hentry","category-big-brother","category-economics"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/pWqFl-2x","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/posts\/157","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=157"}],"version-history":[{"count":0,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/posts\/157\/revisions"}],"wp:attachment":[{"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=157"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=157"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=157"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}