American workers more cautious about 401K plans

You don’t say? So just because Americans have increasingly been pushed into 401K plans as opposed to old fashioned pension plans and they’ve all been scorched by Wall Street, they’re now less enthusiastic? It’s almost too hard to imagine such a result. Whether we like or dislike Wall Street, it’s in our collective best interest to have a Wall Street hitting on all cylinders. As the system stands today, periods such as this are crushing retirement plans which means years of lost investments and delayed retirement *if* people can still find employment.

The retirement problems alone should have been enough for Washington to provide serious oversight but no, the free market phonies won the day. The likes of Phil Gramm, comfortable with his earnings from UBS and Wall Street lobbying, is just fine and without a scratch. And everyone else?

U.S. workers are increasingly cautious about investing in corporate retirement funds, having shifted money out of stocks, reduced how much they contribute and, in some cases, stopped contributions altogether or withdrawn money, according to a study released Monday.

The study by Hewitt Associates, which administers 401(k) plans for corporations, found the average U.S. 401(k) plan balance was down 14 percent through October to $68,000 from $79,000 in 2007.

401(k) refers to a section of the U.S. Tax Code that allows retirement plan investors to defer paying taxes.

Hewitt, a human resources consulting and outsourcing firm, found 4 percent of workers had stopped contributing to their plans in response to the declines on Wall Street, and fewer are investing in stocks.

Many people moved money into safer assets after particularly bad days in the stock market, said Pamela Hess, Hewitt’s director of retirement research.

“I see people that are very unsophisticated moving to cash, but I also see people who believe themselves to be sophisticated trying to time the market,” she said.

After the initial drop earlier this year I listened to a fairly sophisticated fund manager from Saxo Bank talk about moving out of the market to 90% cash, if I recall correctly. Even with currency fluctuations, cash has been much more stable than the market and the insider experts have not exactly been right about much lately.

An American in Paris, France. BA in History & Political Science from Ohio State. Provided consulting services to US software startups, launching new business overseas that have both IPO’d and sold to well-known global software companies. Currently launching a new cloud-based startup. Full bio here.

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