Word: taxed
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...gets its name from a section of the Internal Revenue Code that, a clever benefits consultant discovered in 1980, could be used to build tax-sheltered employee retirement plans. It was at first seen as a supplement to the existing system of workplace pensions, but during the 1990s the 401(k) largely replaced pensions in the private sector...
...risk that the market will tank - as it has done this year - when they're close to retirement. At retirement comes another issue: pensions insure against the risk that you'll outlive your money, because they pay until you die; 401(k)s don't. And finally, the tax breaks built into the 401(k) - about $80 billion a year - fall mostly in the laps of high earners. (See 10 things to do with your money...
...that it's portable, while most pensions aren't. But on balance, there's widespread agreement among those who study retirement matters that the 401(k) has so far proved a less-than-adequate replacement for disappearing corporate pensions. "It may be a good tax-free-savings system for wealthy individuals," sums up George Miller, the California Democrat who chairs the Education and Labor Committee and plans to spearhead a re-examination of the 401(k). "It may not be the best retirement-savings system for working families...
...Barack Obama during the campaign) to create modestly subsidized, automatic IRAs, at least for the more than 50% of private-sector workers who don't have access even to 401(k)s. Ghilarducci wants more - a government-run plan, financed in part by the end of the 401(k) tax deduction, that would guarantee a 3% return above inflation. Don't think that's a good deal? Fine. But remember that for most Americans, the 401(k) isn't either...
...drop in sales underscored another weakness. Although gas-eating SUVs found a sweet spot in the U.S., for Detroit to assume a world in which gas prices would remain below $2 a gal. was asinine. In Europe, gas had long sold for more than $5 a gal., and tax policy ensured that it would stay there; the growing BRIC countries - Brazil, Russia, India, China - were driving up demand. Detroit's response was to lobby furiously against increasing fuel-economy standards instead of building more-efficient SUVs...