“The 401(k) system has to be fixed, and I don’t know anybody who can fix it but the federal government.”
– John Bogle
Late last week the federal government began floating proposals for reforming America’s broken retirement system. The proposed reform centers around the idea of getting people to invest more conservatively and withdraw the money more slowly so that they don’t outlive their savings.
The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are leading the effort.
Secretary Iwry developed this idea when he was working at the Brooking Institute in 2008 in conjunction with the Heritage Foundation. The concept involves rolling people’s 401(k) savings into directed distribution plans unless they specifically elect not to participate.
This probably sounds like a reasonable idea until you dig beneath the surface.