Saturday, April 12, 2014

401(k) amounts to Businesses Taxing your Income and to Grand Larceny of your retirement savings

Companies love the 401(k) System because it amounts to Private Enterprises being able to Tax American Workers.

Americans hold $4.2 trillion in 401(k) plans, according to the Investment Company Institute. An additional $6.5 trillion is in Individual Retirement Accounts.

A Defined Benefit pension plan is superior to 401(k) which is why Corporations don't like them. Corporations don't want workers who have assured retirement benefits, they want workers who are slightly desperate and willing to agree to whatever Ownership wants for fear of losing everything.

But, in keeping with the Neoliberal Economic Assault on 99% of Americans the 401(k) plan was sold to America as a superior way for you to manage your retirement! But, all 401(k) turned out to be was another mechanism for Corporations to steal your money.

If you happen to be planning on retiring during one of Capitalism regular crisises say 2001 or 2007 for instance, well then you are truly screwed because the 401(k) you've been contributing too and the market in general, probably lost 50% or more of its' value.

But, it's the day-to-day, year after year nickel-and-diming fees which eventually allow Hedge Funds to steal thousands of dollars from your retirement account.

From the Center for American Progress (CAP) comes a study of the impact the often hidden fees which Wealth Mismanagement Firms use to siphon off your retirement funds.

The CAP study showed how raising the annual fee from 0.25% to 1% or 1.25% would take $70,000 to $100,000 from the employees 401(k) account.

Putting aside the current American Job Market where no employee is going to last 30 years at a company offering up to 5% matching funds for your 401(k) account, the bigger picture is the continuing Legerdemain and accounting gimmicks Hedge Funds use.

One of the ways, Vultures like Wealth Mismanagement Pro Bruce Rauner caused the Illinois Pension Crisis was by charging fees. Rauner's firm GTCR and other Hedge Funds gained access to Public Pensions in the 1990's and now we find they are underfunded.

By Rauner's own admission 2/3rds of GTCR funds were supplied by Public Pensions. In Illinois GTCR has "managed" money for the Illinois Teachers' Retirement System (TRS) and the Illinois State Board of Investment, the state's largest and third-largest, respectively. Additionally, GTCR had access to state and municipal pension plans from the San Francisco City and County Employees' Retirement System to the Massachusetts Pension Reserves Investment Management Board. 

For this "work" GTCR, takes consultation and management fees. Bruce Rauner got paid no matter what the funds he "managed" did.

So, it's not surprising that Illinois and other Public Pensions began to go into insolvency once Vandal Capitalists got their hands on the funds. In fiscal year 2009, TRS lost $4.4 Billion (22% of its' value) in 2008 TRS lost 5% of it's value because of the Management of their Portfolios by Rauner-types.

Hedge Funds aren't growing wealth, they are parasitic Rentiers clinging to productive workers, like Teachers, sucking money from the Working Class like leeches and Vultures.


Jerry Critter said...

401K and IRA fees are kind of like a pot rake in poker. The house always gets its cut whether you win or lose. And unless new money enters the game, ultimately the house ends up with most of the money.

Kulkuri said...

At various times while working I had company sponsored 401Ks. Not once did the account earn more interest than the fees charged to manage the account.

ChickenHammer said...

LOL! My 401(k) is worth many multiples of what I've put into it. I saw 40% growth over 2013 while paying 0.5% in quarterly fees. QE has kept the market profitable and will continue to do so until Yellen starts tapering. When things change the firm that manages my account will re-allocate and I'll continue to earn.

My 401(k) quit sucking when I quit trying to manage it myself.

Grung_e_Gene said...

As Jerry C, pointed out 401(k) is a Casino operation.

While an individual may have an account which makes big returns the Fees, accounting and consultation costs are designed to siphon off money for nothing.

The House always wins in the aggregate

Oh and Chickenhammer congrats on catching a Fish this ))///////////////////////// big.

Jerry Critter said...

The real purpose of a 401K is to lessen the liability of the company. It is sold to the employee as a means of giving them more freedom over their retirement. In reality, it exchanges security with uncertainty for the employee.

It takes what was often a well defined guaranteed retirement plan and turns it into a stock market gambling scheme. For the company, however, it turns a long term fixed liability into a short term, flexible liability at often substantially reduced cost.

True, the company often makes a 50%, 100%, or sometimes even a 200% matching contribution. But, because the severely limit the employee contribution to a few percent of their total salary, the actual cost to the company is a few percent of their total payroll. Plus, if the company decides that they are contributing more than they want to, they can change the percentages and they often do. If they want to contribute less next year, they can. And when they do, the company increases its profits, and the employees lose retirement funds.

The one thing you never see is the company saying we are reducing our contribution to your retirement plan by $1000 per year and increasing your salary by $1000 per year. What happens instead is that the top management of the company receive large bonuses because they increased profits, even when it is at the expense and paid for by the employees.

ChickenHammer said...

Oh and Chickenhammer congrats on catching a Fish this ))///////////////////////// big.

And kisses to you too Gene. :) There's a reason I'm generally happy and your crew is most often angry.