401 KO: Why Your Retirement Account Won’t Support You


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401(k) accounts were sold to American workers as a way to participate in a booming stock market and put their own names on their retirement accounts. But most Americans who started 401(k)s since the 1980s, when they were introduced, now see that they’re never going to be able to retire on that money.

So what happened? The Wall Street Journal asked the HR experts and finance wizards who sold the government and workers on the idea of privately held, personally managed, tax sheltered investment accounts for retirement. Their answer is simple: 401(k)s were originally intended as supplements to the rest of the retirement-income portfolio — a three-legged stool that also included defined-benefit pensions and Social Security. But businesses, terrified by mounting pension obligations, seized on them as a quick way to cut costs, and kicked the pension leg of the stool right out from under workers. Now a Republican-controlled Congress is eager to cut back on Social Security, too. Also, the 401(k) proponents seriously overestimated long-term market returns.

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