The, "He'll Take Our 401(k)" Myth

You've probably seen the email....Somehow, I mercifully missed screaming that "Bqrack Obama will take your 401(k)/403(b) to finance something....Not quite sure what....Maybe an arms for hostages swap, but that seems to be Republican foreign policy.

Not surprisingly, this is complete crap. Generally the finger is pointed at Education and Labor Committee Chairman George Miller (D-CA) for this scheme, and there are two very small grains of truth.

The first is that Miller he wants to regulate, not take 401(k)s, specifically, he's talking about reigning in fees, which will mean, of course, lower fees, but also mean less aggressively managed portfolios, because aggressively managed portfolios are more expensive, since aggressively managing anything takes resources.

In the long run, since stuff like S&P 500 funds beat actively managed funds, particularly when fees are taken into account, this would be a good thing, as people who lose their retirement in Emu farms generally run screaming for a taxpayer bailout.

The second grain of truth is that Teresa Ghilarducci has this pet program that she touted as a witness at the hearing: that 401(k) holders be allowed to voluntarily trade in their 401(k)s for a so called, "Guaranteed Retirement Account". She also suggests that in the long term the pre-tax income features of 401(k)s be abolished and be replaced with a retirement plan with guaranteed payout (which sounds an awful like what social security already is).

It's guaranteed benefits, as opposed to guaranteed asset, a return to the pensions of old.

I'm not sure of her concept, though on the face of it, it seems to be a better one than the Chilean model, where broker fees, and the market depressing effects of large population echelons end up leaving people with far less than they anticipated.

Of course the real conundrum of defined asset retirement plans is the equation that if you die young, you win.