Social Insecurity

Social Insecurity

401(k)s and the Retirement Crisis

Book - 2014
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How 401(k)s have gutted retirement security, from charging exorbitant hidden fees to failing to replace the income of traditional pensions

Named one of PW 's Top 10 for Business & Economics
 
A retirement crisis is looming. In 2008, as the 401(k) fallout rippled across the country, horrified holders watched 25 percent of their funds evaporate overnight. Average 401(k) balances for those approaching retirement are too small to generate more than $4,000 in annual retirement income, and experts predict that nearly half of middle-class workers will be poor or near poor in retirement. But long before the recession, signs were mounting that few people would ever be able to accumulate enough wealth on their own to ensure financial security later in life. This hasn't always been the case.

Each generation of workers since the nineteenth century has had more retirement security than the previous generation. That is, until 1981, when shaky 401(k) plans began replacing traditional pensions. For the last thirty years, we've been advised that the best way to build one's nest egg is to heavily invest in 401(k)-type programs, even though such plans were originally designed to be a supplement to rather than the basis for retirement.

This financial experiment, promoted by neoliberals and aggressively peddled by Wall Street, has now come full circle, with tens of millions of Americans discovering that they would have been better off under traditional pension plans long since replaced. As James W. Russell explains, this do-it-yourself retirement system--in which individuals with modest incomes are expected to invest large sums of capital in order to reap the same rewards as high-end money managers--isn't working.

Social Insecurity tells the story of a massive and international retirement robbery--a substantial transfer of wealth from everyday workers to Wall Street financiers via tremendously costly hidden fees. Russell traces what amounts to a perfect swindle, from its ideological origins at Milton Friedman's infamous Chicago School to its implementation in Chile under Pinochet's dictatorship and its adoption in America through Reaganomics. Enraging yet hopeful, Russell offers concrete ideas on how individuals and society can arrest this downward spiral.
Publisher: Boston :, Beacon Press,, [2014]
ISBN: 9780807012567
0807012564
Branch Call Number: 332.024 Russell 2014
Characteristics: xix, 201 pages ; 24 cm

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danielestes
May 04, 2015

I'll admit I'm almost convinced. Author James Russell argues, with plenty of empathetic appeals, that the all-around better choice for retirement savings is the defined benefit plan (e.g. pensions) over the define contribution plan (e.g. 401ks). I need do my own homework on the subject a little bit more before I make up my mind, but his case is compelling. The logistics of reinstating such plans in the current economic and political environment notwithstanding, the deciding factors for most seem to be portability and having the choice to pass on your savings to your children.

Social Insecurity: 401(k)s and the Retirement Crisis is mostly a history lesson—what retirement used to look like, how it's changed and the realities of the present. The author also weaves in his own personal story. My own dad is only a few years away from retirement and he sounds more than a little anxious when I hear him talk about it. While I wouldn't recommend the whole book to him, I would suggest he read chapter 5, "How 401(k)s Are Supposed to Work and Why They Don't," and possibly the last chapter, "What We Can Do."

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StarGladiator
Feb 22, 2015

Really, both a fantastic book and an eye-opener on the scam of 401(k)s. Please pay close attention to chapter 3, then go and skim the whacko book by whacko author, Deepak Lal [Poverty and Progress]. Also, didn't realize that the Cato Institute employs former thugs from Augusto Pinochet's regime!?!?! What another vile tink tank. Complementary books to read: Retirement Heist, by Ellen Schultz, and Banking on Death, by Robin Blackburn

montieth Nov 10, 2014

James Russell's new book is a must for anyone who wants to understand how the financial investment industry serves itself at the expense of the employee. Professor Russell outlines his own experiences with 401(k)s and explains how even he, a college professor, didn't realized how inadequate his retirement savings would be. The book gives a fascinating account of how a group of professors who had been pursuaded to give up their university pensions for defined contribution plans, realized how inadequate these plans were and successfully fought to win back the pensions. With easy to understand graphs, the reader can understand how adequate their income will be in retirement. He offers the way forward with creative and workable policy solutions for the coming retirment crisis.

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