Wall Street WARZONE
Your 401(k) Plan Managers: In a Bear Market, You Lost 37%, While “They” Got Richer By a Billion. Yes, It’s Time America Got a New Retirement System!
by Paul B Farrell, JD, PhD
| Discuss | Print | 5/13/2010

Since the mid-nineties, when the Wall Street powerhouses announced a strategic shift from a commission-based business model to an asset-based model, all retirement plans have been targeted as one way to accumulate lots more assets under management, now almost $3 trillion. This trend is accelerating as Corporate America began replacing employer-funded pension plans with 401(k)s funded by individual employees.

Experts see many problems in employer-sponsored 401(k) retirement plans, which one BusinessWeek columnist jokingly called “201(k)” plans. A big failing in the system is the way fund plan managers like Fidelity, State Street, Putnam, Metlife and others lock in company executives and naïve investors to a system of fund choices that are too restrictive, fees that are often hidden and excessive, while trusting corporate managers and employees remain vulnerable to exploitation and manipulation. College tuition plans have similar problems.

Several years ago economist Bill Wolman and Anne Colamosca, authors of The Great 401(k) Hoax, said it’s “a time bomb ready to go off.” In fact, America’s 401(k) plan has already “bombed” because $40,000 is no long-term retirement nest-egg in an age where a retiree’s money must last 20-30 years, and need a million invested to generate a comfortable cashflow in retirement. As the authors point out, many employees don’t even bother to enroll, and of those that do, 80 percent spend the money when they change jobs, rather than rollover into a IRA. Worse yet, during the 2000-2010 decade, many 401k plans actually lost big money. This would be funny, if it wasn’t such an ever-increasing disaster. (More)

Pension & Retirement Fund Managers: What Are They Hiding? Another Secret Scam?
by Paul B Farrell, JD, PhD
| Discuss | Print | 4/27/2010

There are roughly seventy thousand professional money managers running institutional pension and retirement funds as well as retail mutual funds and exchange traded funds. They control about 70 percent of all stock market trading, but are extremely secretive with their clients and the trading they do in their portfolios, which they turnover more than once a year. Moreover, they and virtually all their colleagues in the retail fund management arena will tell you virtually nothing about their own personal investments. Fund managers don’t want you to know where they invest their own money because it might prove embarrassing if their investors were to discover they don’t have enough confidence in the funds they’re managing to put their own money in them.

One rare institutional manager caught our eye because he was the only one willing to break this Mafia-like code of silence and reveal exactly where his own taxable money was invested. This was exciting news from the start: Actually meeting someone who in fact bought Bogle’s Vanguard 500 Index Fund way back in 1976 when it was launched. Not only that, he still owns this dull, boring, passive fund that does nothing but sit quietly in his portfolio and track the S&P 500 index … chalking up a cumulative gain in excess of 2,500 percent since inception. (More)

Retire the 401(k)? Yes! It’s Failing Americans: CEOs Get Sweetheart Deals, While Your Wages Fall & You Can’t Retire!
by Paul B Farrell, JD, PhD
| Discuss | Print | 4/7/2010

Time magazine tells us “Why It’s Time to Retire the 401(k).”  They were supposed to be a solid new retirement plan for workers when enacted three decades ago. Since then, while the compensation of Wall Street and corporate CEOs has increased 40 times or more, inflation-adjusted employee income has actually fallen, and the 401(k)s has failed to live up to its promise. According to Time, the odds are heavily stacked against the 401(k) helping you much in retirement:

 The Society of Professional Asset-Managers and Record Keepers says nearly 73 million Americans, or just under 50% of our working population, now have a 401(k). And collectively we pour more than $200 billion into these accounts each year. But retire rich? Don’t bet on it. The average 401(k) has a balance of $45,519. That’s not retirement. That’s two years of college. Even worse, 46% of all 401(k) accounts have less than $10,000. Today, just 21% of all U.S. workers are covered by traditional pensions, and the number shrinks every year.” A major overhaul is essential, “and the government seems to agree. This summer, the Government Accountability Office concluded, ‘If no action is taken, a considerable number of Americans face the prospect of a reduced standard of living in retirement’.”  (More)