Teresa Ghilarducci is a 51 year old economist who directs the Schwartz Center for Economic Policy Analysis at the New School in New York.
Why was Ghilarducci--who sure looks like a nice person in her picture--labeled the most dangerous woman in America in a recent US News & World Report column?
The short answer is that she thinks 401k plans stink and she is not afraid to let the world know.
Ghilarducci is the author of a recent book titled: When I'm 64: The Plot Against Pensions and the Plan to Save Them. Ghilarducci uses the book to lay-out the case against the 401k plan and to advocate an alternative which would involve a retirement system run by the government rather than the private sector.
Among her criticisms are the following:
- 401ks are voluntary and not enough people actually participate.
- Levels of savings for those who do participate are completely inadequate.
- Mutual fund management fees are excessive and eat away at the savings of 401k participants.
- Not enough employers make matching contributions to 401ks.
- 401k plans are highly regressive. In other words, those who benefit most from the system and the tax advantages are higher income earners. Those at the lower end of the income spectrum benefit least.
These criticism are well founded and are not entirely novel. What has the industry and certain parts of the media up in arms is Ghilarducci's proposed alternative to the status quo.
Ghilarducci advocates mandatory contributions from employers and employees that would total 5% of income. The retirement program would be administered by the government, but the plan assets would remain private property of each employee. The program also calls for the government to guarantee a return of at least 3% over the rate of inflation.
Pretty interesting and provocative ideas that we'll continue to follow--Ghilarducci must be on to something to have received the strong reactions that have surfaced thus far.