Teresa Ghilarducci is a staunch advocate of comprehensive pension reform.  She believes that the 401k is a regressive long-term savings vehicle that leaves the vast majority of American workers unprepared for the financial realities of retirement.

In the video below, Ghilarducci makes the case for a mandatory, government-sponsored defined benefit pension system.

 The facts of Ghilarducci’s case are hard to refute:

• In reality, the current retirement system in the U.S. does not rest soundly on the three pillars of Social Security, employer-sponsored pensions and private savings.  For most, Social Security is the sole or dominant source of retirement income.
• Americans save too little.
• The current 401k system is regressive—benefiting a tiny minority of the population at the upper end of the income spectrum.
• Lump sum distributions from 401ks are irresponsible.
• There is a lack of emphasis on secure sources of retirement income.
• Making people professional money managers and charging them with complex financial decisions is not sound policy.
• Volatility and sequence of returns risk is unacceptable and should be addressed.
• The asset management community has benefitted greatly from the advent of the 401k and the general trend away from defined benefit pension plans.
• Fund managers have also benefitted greatly from the growth in 401k assets.
• In general, the decline of defined benefit pension plans has not been a positive for the American worker.

Ghilarducci’s views are controversial because they strike a very sensitive nerve in the financial services community.  401k assets flows have been the lifeblood of many asset managers over the past several decades.

For those who are working to create a secure retirement for themselves or others, listening to Ghilarducci is a must.