Have 401(k)s failed investors?

Kevin Crain, head of institutional retirement and benefit services for Merrill Lynch, told attendees that 401(k) plans started as a “great democracy” where the responsibility for decision making fell on individuals. Now, he said, we’ve moved to a “democratic paternalism” where plan sponsors are working to help people get more involved through built-in features like automatic enrollment, but as investors become more astute they can move away from the paternalistic aspects and take more control of their plans.

Karen Friedman, executive vice president of the Pension Rights Center, acknowledged that “there’s no question that everyone cares [about clients’ retirement] and wants people to save,” but noted 401(k)s had several weaknesses: they are designed as supplemental income, investment decisions and risk fall on individuals, and millions of people don’t have access.