Strange bedfellows. It’s a sign of the topsy-turvy times in which we live that a far-left publication like Mother Jones would strike out at the pages of The Wall Street Journal in order to defend the 401k.
401ks involve investments, after all, and investments are tainted by that awful thing called capitalism and its depraved sidekick, Wall Street.
The mag named for the hero of the American labor movement specifically addresses a WSJ piece from April 2 titled “The Rising Retirement Perils of 401(k) ‘Leakage.”
Leakage refers to 401k participants who take loans and cash-out when leaving a job, thereby displaying the sort of bad behavior that can harm the long-term viability of the savings vehicle. The Journal argues it’s a drain of the retirement system as a whole.
Mother Jones writer Kevin Drum isn’t buying it, arguing the evidence presented doesn’t make the case, and goes so far as to say the 401k system in working out pretty well (it’s actually the title of his rebuttal).
“One of the paradoxes of retirement is how much control people should have over their own accounts,” Drum writes. “On one end you have personal savings, which you can do anything with. On the other end you have Social Security, which you can’t do anything with. You pay in via mandatory payroll taxes, and when you retire you get a guaranteed monthly payment. Period.
He sees 401(k) accounts “in the middle.”
“You don’t have to pay in, but everyone is encouraged to. And there are rules about how much you can withdraw during your working years, but those rules are flexible.”
Should they be, he rhetorically asks? The answer involves a slippery slope, one liberals in particular wouldn’t like.
“We could do away with the flexibility, but liberals argue that this just makes 401ks into a clumsy version of Social Security. If that’s the vision, why not just do away with the whole thing and increase Social Security instead?”
Good question, and after noting (surprisingly) that “people ought to have some control over what happens to their money,” since they know their individual situations best, Drum concludes that it’s working out pretty well.
“Social Security provides a basic safety net, while 401(k) accounts provide an incentive to save more but allow more flexibility than Social Security. It’s a good combination, and it’s getting better as new rules bring more and more people into the 401(k) universe.”
If a publication like this gets it, shouldn’t so many others in the supposed learned class?
We AGREE with Mother Jones magazine—strange indeed.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
