The Case Against 401(k) Automatic Enrollment

401k automatic enrollment

sorry it is not. i don't want in a 401k plan and I think this is communist to automatically enroll an employee in it if they do not want to be.

sharon kossman of OH @ Aug 07, 2009 19:35:51 PM

Auto enrollment

You missed quoting the 1936 Alf Landon speech when he argued against the passage of Social Security. His reasons were as simple as yours; government paternalism. That is an understandable position. Back then, social security was viewed the same way, an unwanted inteference in peoples lives. Not acceptable then and not acceptable today.

However, Social Security passed and almost 75 years later is still in businss. Despite the government coming up with the idea, legislating the idea, and it being run by the government, it still works. Nobody complains when it is taken out of your paycheck. It is a guarenteed check on retirement, a defined benefit for the rest of your life.

The reason social security is in trouble is that no one thought people would be living so much longer. Is that a bad reason? No.

What we need is an additional tool, a defined contribution plan to make people self sufficient and reduce the stress on public retiree benefits.

In order to have everyone do it, is to have autoenrollment. The difference between Social Security and DC auto-enrollment is that can also be used to address specific and defined problems in your life prior to retirement especially when it comes to times of undue hardship such as death, medical emergency, home or job loss.

Auto enrollment will be the key in reducing sole reliance on social security, medicare and unemployment. That savings can reduce reliance on medicare and could make the difference in an older person's dinner.

There is also a choice - they can always choose not to participate in the first 90 days of implementation or reduce the amount to zero.

The best thing that can happen to this country is to have an opt out plan.

Dean Carothers - National Save for Retirement Committee- NAGDCA Delegate of CA @ Aug 03, 2009 22:23:42 PM

Right On

Automatic enreollment is just another predatory practice to subsidize the equity markets. The 2006 Pension Reform also allowed automatic enrollments to be invested in riskier assets, like hybrids instead of money market funds.

Ultimately, the ICI and members want to make 401ks mandatory to provide a guaranteed stream of revenue to the markets. The dream is that they can jack up the markets again, with our retirements, in the tech bubble tradition.

OSR of MD @ Jul 19, 2009 07:18:07 AM

automatic enrollment is a better idea

Emily, here is what you are wrong about in this article: everything.

The only way to invest money for the future is to INVEST MONEY. You have very lofty utopian dreams of magical seminars that will open people's eyes and inspire them to educate themselves about retirement planning.

But those seminars never come to pass.

What is important about them having money is saving it now. No amount of seminars is going to help them invest their money. Investing their money is going to help them.

As far as visiting payday lenders and low-income employees, the only thing that is going to help them with their future money is investing some present money.

The most successful revenue stream on earth is the US income tax. Why is it so successful? Because it is taken out of everyone's paycheck before they have a chance to visit a payday lender or turn that cash to trash.

When people are automatically enrolled, THEN they will get interested in educating themselves about money, choices and retirement, because they will have skin in the game.

Nothing else works. History says so. We have all the educational seminars about money that could possibly exist, right now. How is that working for low-income people? Not so good. How is it working for payday lenders? Pretty well.

Automatic enrollment is the future, and more importantly, a better future for everyone.

Anthony Migyanka of TX @ Jul 03, 2009 18:27:04 PM

Employers need to educate participants

Auto enrollment is great for the mutual fund industry, but it's also great for getting regular workers to start saving something for retirement. A large percentage of 401(k) investors make no changes to their plans, regardless of market activity or the type of plan they're in, but all of them have the opportunity at any time to take control, change their asset allocation or opt out of the plan entirely.

Employers need to educate plan participants so they will have the knowledge to make the right choices that best suit their individual retirement savings needs. But until investors take control of their destiny, plan sponsors should be looking for the best automatic default option, such as an age-appropriate target-date fund with auto escallation and auto-rollover features when they change jobs.

JM of NY @ Jul 01, 2009 13:36:45 PM

401K Is a rip-off anyway

401-K is a tax code exemption originally meant to benefit over compensated executives at General Electric. It was NEVER meant to be a retirement plan for the entire population. But Wall Street investment banks saw HUGE profits in getting the entire population to mindlessly buy mutual fund products. Wall Street lobbied Congress to make it easier for all to participate and funded the propaganda and mis information that has convinced people the 401K is a retirement plan.

The stock market is a ZERO sum Gain contest. If you win somebody else has to loose. A HUGE number of us have to loose in order to pay for the latest rip-off of all time.

All the expertise in the world will not make a difference.

Dean of OR @ Jul 01, 2009 10:11:32 AM