Good overview of our intensely broken retirement system. I would be remiss however if I didn’t point out just how much those employers who do offer a 401k to their employees contribute to said IRAs. Which isn’t much at all.

Unless you’re in senior management role or other top company official position, based on what I’ve seen the going contribution rate made by employers is a paltry 2-3% of what the employee contributes, and even at that there’s an overall limit (60% maximum employee contribution but how many regular working joes and joans can do that?). Decades ago, I recall hearing about employers offering a dollar-for-dollar match. Then at some point, they contributed 50 cents for each dollar contributed by the employee. It’s nowhere near that now.

So when I heard Prof. Ghilarducci talk about California compelling employers to offer a pension to workers, merely offering one isn’t enough. They’ll offer one all day long if they can get away with contributing 1% of whatever the employee does. There must be a minimum matching legally established and, here’s the other key, enforced. Many mid-size and especially large corporations can afford to pay a lot more than what they’re doing now. They must be forced to contribute more as well. And without taking it from medical insurance coverage, wages/salaries, etc. Of course the core problem that California is creating, and it will become reality, is pushing this into the control of companies. How many times have we already seen governments pawn off what should be there responsibility onto the private sector? Education is a huge example highlighted by the existence of charter schools. That’s been a massive failure. And now they want to come up with a way to empower the companies even more just so they won’t end up enforcing the laws they passed? No thanks.

And no, employers don’t care whether their minuscule company match is wasted; it’s so small and insignificant it doesn’t matter. Employers generally have never cared for their employees, why would they ever care about their teeny 401k contributions to workers?

The 401k, as Prof. Ghilarducci says, is nothing more than a DIY pension. That’s the core reason for its failure. Regular people don’t know how to invest, it’s always tricky, and no the information on all these funds and portfolios are not always readily available nor understandable. I know I don’t have the knowledge it takes to properly and intelligently manage investments, but the real question is do I have to be? Are we now expecting people to have this level of knowledge? If the answer is yes, then it not only shows how much we’re expecting from regular people but also how unrealistic that expectation is. We’re simply asking the mass of people to do something that they can’t do as a whole. No one should be expected to have that deep of knowledge of stocks, bonds, the financial markets, etc in order to have a decent retirement. It’s excessive.