The creator of the 401(k) plan concedes there may be problems — including too many options and high fees, but he says all those are fixable in a strong economy.
Ted Benna (right), who in the early ’80s devised the most popular IRA, believes the problems of all retirement plans, both private and public, are highlighted when the economy is bad.
“All retirement programs are dependent on a strong economy. And right now the stock market has poor returns. And the bond market looks very bad,” he says. And bonds, he notes, are where many retirees have traditionally put a big part of their assets, hoping to live off the yield.
Yet Benna believes the 401(k), with certain reforms, can still be an effective retirement savings vehicle. The biggest problem today, he believes, is that workers don’t know how to use the plan and too often switch among a plethora of confusing investment choices.
“We need to simplify the array of confusing investment choices,” he says.
The solution?
Plans should automatically put workers into a mix of long-term life-cycle funds. Workers need to be educated in how to use 401(k)s and all other retirement vehicles, Benna says.
“Convince workers to stay through the ups and downs of the market, to invest for the long term.”
stock market, 401(k), economy, retirement
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