Dallas, TX (11/20/08) — There's With an eye on the current economic crisis, some experts say 401(k) plans should be abolished and replaced with a government retirement plan. NCPA Senior Policy Analyst Pamela Villarreal says 401(k) plans have served most workers very well for a many years.
"To say that 401(k)s are a failure simply because the market is in a downturn, is simply false and appears to be an excuse for Congress to get involved in individual investments," Villarreal said.
Some are proposing a new Guaranteed Retirement Account (GRA) as a replacement for 401(k) plans. Villarreal says such a government-based plan would be a disaster.
"Requiring a five percent mandatory contribution to a government-run account like a GRA – one that pays a three percent real rate of return — is the ultimate ‘nanny-state' investment strategy," adds Villarreal. "This rate of return does not compare to the stock market's real historical return of about seven percent. What will happen when we have a bull market and people become dissatisfied with this government scheme?"
Pam Villarreal has been paying close attention to the discussion about changes to 401(k) plans, and believes that 401(k)s are a good option for employees, despite the economic crisis.