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Reaction to the PBS Frontline show “The Retirement Gamble”

Posted on Apr 25, 2013 by  in In the News, Retirement Plan Fees, Retirement Readiness


I dutifully watched the PBS Frontline report “The Retirement Gamble” last night.  I am a regular PBS viewer and I know that Frontline is a reliable source for good information, so it was with some trepidation that I anticipated the airing of this particular episode.  I say this because the advance reports on the show sounded like this was to be another round of 401(k) bashing.

Fortunately, it was a bit more balanced than I expected, at least as to 401(k) plans themselves.  The take-away from the program for me was primarily that most people do not have the tools to make intelligent decisions about their own retirement savings and investments.  The fact that most 401(k) plans put this burden on the average person who must then rely on advisors and product providers who do not necessarily have their interests at heart compounds the problem.  The program emphasized the fact that advisors generally do not have fiduciary responsibility to the people they advise.

Every industry which relies on selling something (and what industry doesn’t?) has its bad actors.  The advisors we work with are skilled and knowledgeable.  They have to get paid for what they do and they earn it.  They care about the success of their client Plans and the Retirement readiness of the Participants in those plans.  At TSC we have been providing our TSC 401(k) Health Check to our clients for their Participants since 2007.  One of the goals of this tool is to assist Plan Sponsors and their advisors in acting solely for the benefit of the Plan participants.

The show strongly emphasized the impact of fees on 401(k) investments. It stated that an AARP study found that 70% of mutual fund investors do not realize they are even paying fees.  Recent fee and expanded information disclosure rules for both Participants and the companies that sponsor plans are making fees more transparent and there are indications that fees are coming down. This was not mentioned in the program.

The program pushed the use of index funds as the lowest cost type of investment that apparently all Participants should be using in 401(k) Plans.  If I didn’t know better it would have seemed to me that the producers had something to gain in plugging index funds as the panacea for retirement plan investors.  It is not the role of this blog to comment on investments or investment strategies.  Other commentators will chime in on that issue.  It seems doubtful that a single type of investment is suitable for all investors, however.

As Brian Graff points out in his article “Retirement Plan Services Are Not Orange Juice,” we would not have over 4 trillion dollars in accumulated retirement savings in this country without employer-sponsored 401(k) Plans funded through payroll deductions.  Most people would not have the discipline to save this money on their own and those few who do would still be paying fees, usually at higher “retail” rates.  We see the 401(k) world improving all the time. I hope that an influential show such as this does not discourage people from participating in their workplace 401(k) plans.

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