The Financial Industry Preys on 401(k) Fees. It Doesn’t Have to Be This Way.

Many people studying retirement income have long warned about the risk to future retirees from the collapse of the traditional defined benefit pension. Middle-class workers have generally been able to enjoy reasonably comfortable retirements due to the income these defined pensions provided, in addition to their Social Security.

However, with defined benefit pensions rapidly disappearing, and Social Security benefits replacing a smaller share of income, the prospects for future retirees looks considerably worse. An increase in the percentage of health care costs not covered by Medicare also does not help.

Conservatives have long argued that the loss of defined benefit pensions was no big deal since 401(k)s and IRAs would fill the gap. Many actually claimed that these retirement instruments were superior to pensions since workers have more control over these defined contribution systems, where workers decide how much they want to contribute and how quickly they draw it down. Op-Ed