He won’t take it lying down. Investment Company Institute president and CEO Paul Schott Stevens fired off a response last week to The Wall Street Journal’s thinly-veiled attack on the 401k.
The Journal interviewed pioneers in the use of the 401k savings and investment vehicle—Herbert Whitehouse and Ted Benna among them—the previous week, highlighting their supposed misgivings over the “revolution” they once championed.
“It may be, as you report, that “401(k) Pioneers Lament What They Started” (Page A1, Jan. 3),” Stevens begins. “But the facts are clear: America’s retirement system is stronger today, in the expanding 401k era, than it was when defined benefit pensions were the primary vehicle for retirement savings.”
He points to ICI data that finds the share of retirees receiving retirement income from private-sector plans has nearly doubled since 1975, and the median income received from those plans is up by more than 50 percent.
Unlike defined benefit pensions, he adds, where benefits can be reduced by job change or threatened by company failure, a 401k plan provides workers with ownership of real assets that continue to grow throughout an entire career.
“The 401k system can be stronger still,” Stevens concedes. “But the 35-year record of 401ks is one of growth and innovation, as employers and providers adapt to promote saving for retirement with features like auto-enrollment, auto-escalation, and new portfolio options to help more Americans save more for retirement. And fees have fallen for nearly two decades.
“Little wonder that recent OECD data show that the United States has one of the highest levels of retirement funding among developed countries,” echoing a recent report that found Americans are the most confident in their retirement expectations, even more so than their “cradle to grave” European counterparts.
He concludes by noting the 401k pioneers have no reason for regrets.
“Today’s 401ks are working well to build upon Social Security and help provide retirement security for millions of American workers.”
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