401K: What works and doesn't!

Why It's Time to Retire the 401(k)

Excerpt:

The idea that we could ever save enough to pay for 30 years of leisure is a relatively recent invention. An entire profession, financial planning, is dedicated to telling people they can, and must, pay for their own retirement. A 401(k) is usually a central part of those plans. Even for people who don't have enough money to send their kids to college or buy a home, building their 401(k), they are told, is their first priority. It's not terrible advice. The accounts grow tax-free, though you have to pay Uncle Sam's levy when you cash out. Unlike health coverage, you don't lose your 401(k) when you lose your job. And once you set the account up — a minor task at most companies — it's automatic, making it an easy, thought-free way to save. Indeed, Americans have more saved specifically for retirement than ever before. But the past year has shown that even with our added savings, we are at much greater risk today of our bank accounts running empty than when employer-guaranteed pensions were the norm. By Munnell's calculations, 44% of all Americans are in danger of going broke in their postwork years.

Comment: Employer-guaranteed pensions will never return! I wouldn't mind working past normal retirement age, in fact I would like to do that! But I sense that companies prefer younger people. And being a greeter at a big box store does not appeal to me!

Goodbye traditonal pensions

Wells Fargo freezes traditional pension plan

Excerpt:

Wells Fargo & Co. told employees on Monday it will no longer contribute to their traditional pension plan, effectively cutting the total compensation of its workers less than two weeks after announcing record first-quarter profit.

The San Francisco bank is combining its existing program with that of Wachovia Corp., the Charlotte, N.C., bank it acquired in December, and freezing both companies' cash balance plans, a type of defined benefit plan.

"We must manage expenses prudently to help Wells Fargo continue our long track record of profitable growth so have decided to have one team member retirement plan for the combined company," spokesman Chris Hammond said in a statement. "These decisions were difficult and we are confident that we're taking the right steps to ensure the long-term strength of our company."

He said the bank will maintain the dollar-for-dollar match for its 401(k) plan, up to 6 percent of pay.

Current participants in the cash balance plans will keep their accrued benefits and account balances, but no new employees can enter the program, according to an internal memo from Julie White, executive vice president of human resources at Wells, obtained by The Chronicle. Workers can take distributions from the plan after they leave the company.

One Wells Fargo employee, who requested anonymity because the individual wasn't authorized to speak to the media, said Wells Fargo's strong benefits plan has been crucial in keeping the company competitive in terms of recruitment.

"Now the benefits side is deteriorating," the worker said. "It's a big disappointment. There is a feeling of lack of loyalty."

Comment: To quote Chris Farley (or misquote him): "I'll be living in a van down by the river!". Realistically one needs to SAVE SAVE SAVE for retirement. Starting early is best.