Teresa Ghilarducci on Pension Reform

Teresa Ghilarducci is a staunch advocate of comprehensive pension reform.  She believes that the 401k is a regressive long-term savings vehicle that leaves the vast majority of American workers unprepared for the financial realities of retirement.

In the video below, Ghilarducci makes the case for a mandatory, government-sponsored defined benefit pension system.

 The facts of Ghilarducci’s case are hard to refute:

  • In reality, the current retirement system in the U.S. does not rest soundly on the three pillars of Social Security, employer-sponsored pensions and private savings.  For most, Social Security is the sole or dominant source of retirement income.
  • Americans save too little.
  • The current 401k system is regressive—benefiting a tiny minority of the population at the upper end of the income spectrum.
  • Lump sum distributions from 401ks are irresponsible.
  • There is a lack of emphasis on secure sources of retirement income.
  • Making people professional money managers and charging them with complex financial decisions is not sound policy.
  • Volatility and sequence of returns risk is unacceptable and should be addressed.
  • The asset management community has benefitted greatly from the advent of the 401k and the general trend away from defined benefit pension plans.
  • Fund managers have also benefitted greatly from the growth in 401k assets.
  • In general, the decline of defined benefit pension plans has not been a positive for the American worker.

Ghilarducci’s views are controversial because they strike a very sensitive nerve in the financial services community.  401k assets flows have been the lifeblood of many asset managers over the past several decades.

For those who are working to create a secure retirement for themselves or others, listening to Ghilarducci is a must.


Great article--I just read it.

Talk about the value of guaranteed returns...

For those who have not read the article (it is strongly recommended) or do not have access to the Wall Street Journal, the piece discusses the startling differences between 401k plans and deferred compensation plans that are available to executives at certain large companies:

Many of the returns in the deferred comp plans are actually guaranteed. Walmart's CEO had a guaranteed return of 6.6% in 2008, resulting in $2.3 million in additional retirement savings on a $40 + million retirement account.

Meanwhile, the 1.2 million employees in Walmart's 401k plan lost an average of 18% in their accounts.

What's good for the goose is clearly not good for the gander!

Wouldn't it be nice for everyone to have guaranteed investment returns in a retirement account.

Oh wait, that is exactly what used to exist with defined benefit pension plans...

It seems there is no deal that lawmakers might make with US citizens that cannot be undone. Tax 401k money? Force retirement savings into yet ANOTHER ponzi scheme by investing in US Treasuries? Really?

To those who fail to take government commitments seriously, and who see more government intervention and madates as a solution.... Get your hands out of my wallet, live up to the commitments you've already made and STOP spending money that you don't have!

It should be no wonder to see gold prices continue to spike.... Trust in government is near zero, tax and spend schemes abound, and those who manage to save a bit are targeted by those who either never bothered to do so, or who want others to pay for their lives......