New column: Should the 401(k) be killed?

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My latest column is online and in the issue of TIME with something about Detroit on the cover that won’t be on newsstands until tomorrow. It begins:

Teresa Ghilarducci has always had more interesting — and controversial — things to say than your average retirement-policy wonk. An economist who moved this year from the University of Notre Dame to the New School for Social Research in New York City, she has railed for years against the decline of the traditional pension. She recently wrote a book subtitled The Plot Against Pensions and the Plan to Save Them; the less contentious main title is When I’m Sixty-Four.

Still, as she sat at the witness table on Oct. 7 at a hearing of the House Committee on Education and Labor, running through the litany of what’s wrong with the 401(k) and other defined-contribution retirement plans — they have high fees, for one — Ghilarducci didn’t think she was courting controversy. “I was saying things that seemed completely milquetoast,” she recalls. Ghilarducci did bring up a bold proposal to replace the 401(k) with a mandatory, government-run pension plan and suggested that Congress immediately allow retirees to swap 401(k)s battered by the stock market’s collapse for monthly payouts from the government. But she had floated both ideas before, to little effect.

This time, all hell broke loose. Her proposal caught the attention of talk-radio juggernaut Rush Limbaugh, and over the next few weeks Limbaugh hammered on Ghilarducci’s idea as a Democratic plot to kill the 401(k). “McCain has gotta tie Obama to these people,” he said on the air. Republican presidential candidate John McCain did try, but only perfunctorily. It didn’t help him much on Election Day. Read more.

I’ll provide some links and caveats and background info later, but somebody wanted me to put this post up pronto so that it could be commented upon and I’ve got to go make Curious Capitalist Jr.’s lunch and get ready for work and stuff like that.

Update: You can download Ghilarducci’s testimony and watch a video of the hearing here. A transcript of Rush Limbaugh’s initial tirade on the subject is here. takes on the more wacky stuff being said about the Democratic 401(k) plot here. And the Ric Edelman piece mentioned by lunaport in the comments is worth reading too.

As for caveats, I’m aware that there have been improvements made in 401(k)s since the passage of the Pension Protection Act in 2006, although I don’t think they change the basic point. I’m also aware that there are more problems with traditional pensions than just portability, but those are problems for the guarantors of the pensions (shareholders and taxpayers), not the recipients. And some background: I wrote an anti-pension screed for CNNMoney a couple years ago. I haven’t really changed my mind. I just feel even more strongly than I did then that we’ve got to come up with a better replacement than the 401(k).