What should be done?
1. Make participation mandatory. All new employees are put into the plan with a 10% contribution. When people are offered jobs, their compensation should be based on that. Don't say they will make $50,000/year. Say they will make $45,000/year plus an automatic $5,000 retirement plan contribution. Have a phase-in period of 3-5 years for existing workers to get them all up to the 10% level.
2. Give employees the option to contribute more, up to the annual limit of $16,500 (or whatever it is), but not less than the 10%.
3. and 4. Eliminate loans. Eliminate early withdrawals. This is a retirement account. It is for retirement. Period.
5. Make it simple for workers to roll over 401k assets into their new employer's plan when they change jobs. Make it impossible for them to cash out the money (see point #4).
I think those 5 things would make 401k plans a whole lot more useful and successful.
__________________
Steve
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