401 KO’d: Gambling with Your Retirement Plan

BY Ray Suarez  April 23, 2013 at 5:51 PM EDT


Ray Suarez spoke to FRONTLINE correspondent Martin Smith on “The Retirement Gamble,” a documentary that reveals the inner workings of 401(k) plans, a product millions of Americans buy, but few understand. “The financial services industry isn’t necessarily looking out for your best interest,” Smith said.

Tonight on FRONTLINE, we’re taken to a place far from the happy and fulfilled senior citizens living out their dreams in robust and ruddy health that we see in a thousand commercials for financial services companies. In “The Retirement Gamble,” the program brings us face to face with … ourselves. Millions of Americans are on the verge of retirement without anything near enough money to stop working, and countless others in their 30s, 40s and 50s look destined to make many of the same mistakes their boomer counterparts did.

And FRONTLINE reminds us, it was all kind of an accident. A group of executives looking for a tax shelter for their highly-compensated employees found a way to exploit a little-known and perhaps even less-understood clause in the tax code, 401(k), that provided a way to augment income and augment retirement savings without incurring a big tax bill. At the same time, companies were desperate to unload the massive obligations they looked set to take on in a work world still largely built around defined benefit company pension plans.

The market was taking off around the same time (there was jubilation on the trading floor when the Dow closed above — wait for it — 1000 in the 1980s) and financial services companies began their decades-long journey from a reflection of the economy to the economy itself. Now a tiny minority of American workers can expect to retire with a defined benefit pension, and tens of millions more are trying to figure it out for themselves.

Rather than stacking the deck with what you might call “low-information investors,” FRONTLINE producer Martin Smith brings us to fairly typical middle- and upper middle-class families trying to get ready for retirement following one of the worst financial crises in American history. Unemployment is high, their savings were beaten down by the market collapse and the messiness of real life intrudes … kids who need to be educated, parents who need to be cared for, homes that are no longer worth their original purchase price. Smith goes a step further, putting his own finances under the microscope, and a financial adviser breaks the bad news: He’ll have to work full time until 70, and then part time until he’s 75, in order to fund a secure and comfortable retirement.

You will likely see aspects of your own family’s story in parts of “The Retirement Gamble.” All those people who populate the TV commercials may be getting ready to take their grandchildren on a dream vacation, or putting the last touches on a restored antique car … while you might take a moment to pull out your last quarterly 401(k) statement just to get a reminder of where you stand.