Despite what you might read in the naïve mainstream press, 401(k) retirement investors continue to thrive. Every day, more American workers are becoming 401(k) millionaires. And these aren't limited to those in the executive suite. No, the entire middle class fall into this category of 401(k) millionaires. In fact, in the vast expanse of this great country of ours, there's only one class of citizens not allowed to partake in the 401(k) millionaire opportunity—public employee workers.
Private companies—for their own good and, as it turns out, for the best interests of their employees—shifted from the defined benefit paradigm to the defined contribution archetype decades ago. Unfortunately for public workers, municipal governments continue to live in the 1930s. They've shackled their employees with pension plan promises, and only now are we seeing the false credibility of those assurances.
Just ask the public employees of Detroit, Stockton, and, possibly coming soon to New York City, Los Angeles and the entire state of Illinois.
Why do we continue to subject public employees to the Damocles Sword of public pension plans? These workers are held at bay by the continual need to negotiate and justify their benefits. Such are the demands of the defined benefit world. In the land of defined contribution, on the other hand, no such benefits whip exists to keep the workers in line. In fact, unlike those condemned to the prison of pensions, 401(k) beneficiaries can choose their own destiny.
And for many, that destiny includes retiring with a nest egg approaching the seven figure range. Public employees, with the possible exception of those working in schools who are permitted to use 403(b)s, don't have access to the same prospect. Why not? Why have they been oppressed for so long?
Politicians have long relied on the carrot of retirement benefits to buy votes. But municipal workers have been duped into believing the covenants offered to them by one generation of politicians will be delivered by some future generation of office holders. Governments, no matter how sincere, cannot overcome the cruel reality of mathematics. And while elected officials might merely shrug this all off, it's the public employees left holding the bag. They thought they'd put in their time and get a lucrative income stream upon retirement. In reality, all they're left with are unpaid bills.
The solution is simple. Wean the politicians off this deceitful vehicle and give public workers their retirement freedom. Give them their 401(k)s. If they really want an income stream, they still have the annuity option. Only now, they control their own fate. They can make their own decisions. Never again will governments be able to hold them hostage to their own retirement.
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
