The governor wants to move state workers to 401(k)-type accounts for their retirement, but a state senator says this is a bad idea. State Sen. Daniel Biss (D-Evanston), one of the architects of the 2013 pension restructuring law, says we can learn from the 401(k) experience in the private sector.
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“The transition to the 401(k) in the private sector is well under way, it has been ongoing now for around four decades, and so we don’t need to speculate anymore. We can look and analyze and ask. It’s not always popular to say, but the jury is in. The 401(k) experiment in the private sector has been a failure,” he said.
It’s a failure, he says, because participation is voluntary, so workers don’t contribute or don’t contribute enough, investment decisions are made by amateurs, and there’s no economy of scale to keep fees down. He says nationally, retirement accounts are short of what’s needed for retirement by up to $14 trillion, according to the National Institute on Retirement Security. The median 401(k) account has a balance of $31,000.
Biss says the state must assure that teachers and state workers have secure retirements, at a cost that they and taxpayers can afford.