A reader writes:
As a loyal Dish reader, I feel privileged that I've finally found a post where I can add some expertise. I'm a call center manager for one of the major 401(k) providers in the U.S. I've been working there for about 5 years now, so I remember your original posts about the effect of the 2008 downturn (and subsequent downturn-around). From purely anecdotal evidence, it absolutely is the high income earners who participate the most in the 401(k) plans. Consider, too, that they have the most to gain, the most likely to be familiar with its benefits, the most able to save. The real benefit of the 401(k) for people starting out is auto-enrollment. By setting people up who would otherwise miss out on things like matching company contributions and tax savings, that's where the real savings increase.
Another writes:
Given that 401(k) plans are a very poor substitute for the retirement schemes of my parents' generation (i.e., generous defined benefit pensions, AKA annuities), it's lamentable that they are being held out as some kind of unjustifiable boondoggle of a rarified class of privileged people.
I am privileged, but not nearly so privileged as professionals of an earlier generation who did not have to figure on market risk and plan carefully to make the most of the program. I'm by no means super-pleased with my 401(k) – it is larded with fees for its administration (which, since I work for a bank, are fees that I effectively pay to my employer for managing my main retirement account, increasing exponentially my credit risk to my employer) and does not guarantee ANYTHING – if I am unlucky, as many are now as a result of the crisis, I will wind up having to delay retirement despite my prudence in planning and saving diligently.
I am privileged, but not so privileged as my banker clients. I don't mind paying more; I should. But the closing of these kinds of loopholes will fall disproportionately on "working Wall Street stiffs" like me, and others similarly situated, and others still who are less privileged than I am, but still quite privileged compared to most. The truly privileged, my banker clients, e.g., will barely notice. That's where all of this loophole closing and deduction capping is going – screwing the ordinarily fortunate, like me, so that the uber-fortunate aren't troubled while they waterski behind their yachts.
Take away my 401(k) benefit – fine, if you must. But give me some other option. One idea: the maximum social security withholding in 2012 was about $4,600; it will go up to about $7,000 in 2013, with the expiration of the payroll tax holiday. The maximum 401(k) contribution for 2013 is $17,500. In lieu of my 401(k) contribution, can I voluntarily 2x or 3x my pre-tax contribution to social security withholding in return for an increased social security benefit when I turn 67? (Taking away 401(k), by the way, also means taking away my company's matching contributions, effectively halving my retirement savings.) I'm willing to pay more; I want to pay my fair share; but I don't see the equity in making upper middle class / lower upper class slobs like me pay a disproportionate price for our nation's fiscal woes.
The Dish 