The 401k recession as portrayed by 60 minutes

60 minutes a popular CBS show has come up with a portrayal on 401k plans that can be defined as a bit shallow.

60 minutes portrayed a picture that shows that because of the recession people have been loosing their jobs, their retirements saving portfolios have been destroyed, and so their dreams of a relaxed retirement have to be deferred. This is sadly all true however there are ways and means of projecting this.

Steve Kroft was interviewing job seekers at a job fair, and curiously enough they happened to have their 401k plan statements with them! The whole 13 minute section did come out with some interesting points: First, people investing in 401k plans have lost money and second, there are hidden fees in the 401k plan. The 401k plan segment still did come out with some interesting learning points.

As we said people have lost money. This is not only true for 401k plans however, it is true for all the other investments. People who have lost their jobs, as well as small business owners have suffered. So it does not make sense claiming that only the 401k plans are letting down their investors.

We have also mentioned the fees issue. It is true that hidden fees are a problem within retirement plans, but 60 minutes have decided to just stop at listing them, instead of putting them in a constructive context.

The old style pensions’ popularity has been constantly declining, however these plans were better suited for the average American, since the worker would get a good idea about what money they will be getting. Employers however were eager to get them out of the way, thus reducing their costs as well as business risk.

The solution to this problem is consumer education and luckily more effort is being made to inform contributors about how their retirement plan works. If you have a 401k plan or a 403b plan, from a previous employer, then you can very easily transfer these funds without paying tax, into an IRA account. You will therefore have more control, and more choice. It is important however to consult a financial planner to assist you in choosing the right plan for you.

Reference: http://www.keyfeeonly.com/2009/04/23/60-minutes-the-401k-recession/