Father of 401(k) has cautionary retirement tale
The 401(k) plan, probably the most-used retirement method in the private sector today, was born in Bedford County.
Millions of Americans, without the security of a defined benefit pension that most public-sector workers get when they retire, put their faith in a 401(k) plan when setting themselves up for retirement.
They dutifully stash whatever money they can in the plans for years, hoping by the time they retire successful investment of the cash by managers of the fund will create a funding pool that will improve their golden years.
Ted Benna, known as the father of the 401(k), now lives near Jersey Shore and spoke recently at a Williamsport/Lycoming Chamber of Commerce breakfast.
You would think he would be a comforting voice amid a sea of uncertainty over the condition of retirement investment. You would be wrong.
He warned they don’t guarantee a lifetime of high living.
They are subject to the whims of Wall Street and the stock market.
Benna warned that there will be another market crash similar to 2008 at some point in the future.
Benna didn’t even guarantee that government employee plans promising benefits for life are a full-proof answer.
Such plans provide a false sense of security because those plans are underfunded and the only feasible way to get them out of the hole will be cuts, according to Benna.
We’ve been warning for years that the payout amounts involved in public sector pension plans are unsustainable.
Benna called for reforms in formulas used to pay out pensions.
He called for tax reform, though he cautioned that elected officials worried about being re-elected may not have the stomach to make the correct changes.
Benna’s comments are a cautionary tale to anyone saving for retirement. When living expenses, medical costs and the possibility of nursing home care in later years are factored in, it’s almost impossible to remain in perfect economic position.
In our view, the best thing people can do is make sure their monthly expenses are minimal as a buffer against the unforeseen, which can come from almost anywhere but is surely coming.