My first reaction to news that most Americans polled by a mutual-fund trade group continue to have a favorable view of 401(k) retirement plans was to marvel at the apparent near amnesiac state of those queried.
My second thought was that even if 90% of the households surveyed for the Investment Company Institute had a favorable opinion of retirement plans, it didn’t mean self-directed 401(k)s are an appropriate retirement savings device for all Americans.
“The 401(k) system has a long and productive future ahead in providing retirement security for millions and millions of Americans,” said Paul Schott Stevens, who heads the ICI mutual fund trade group.
Has everyone forgotten the gallows humor of relabeling the ubiquitous retirement plans, typically based on mutual fund investments, 201(k)s to symbolize the bear market’s rough treatment of their value?
If you were going to retire somewhere in 2008, even if you had a balanced 401(k) investment plan, odds are the bear market ripped through that plan, prompting you to work longer or live more modestly.
This bear market, and maybe that marks its rarity, was not respectful of asset allocation. Stocks and bonds went down and there were precious few places to hide.
Some structural alternatives ought to be considered. I suggested that creative minds on Wall Street would come up with structures that took more and more risk out of accumulated savings as retirement approached.
Maybe they will. Or maybe the bull market in stocks from the bottoms in March 2009 has done enough repair work to 401(k) portfolios to cause a pleasant amnesia and dull the desire for change.
Perhaps it’s as simple as allowing people to keep safe increasing percentages of their retirement funds from the vagaries of markets as they age.