In New Book, Thomas J. Mackell, Jr. Says 401(k)s Won't Solve Retirement Crisis "When Good Pensions Go Away": Published by Wiley April 2008 
United States of America (Press Release) April 15, 2008 --
NEW YORK, NY, APRIL 14, 2008 — A new book by the Chairman of the Federal Reserve Bank of Richmond aims at the country’s broken pension system and says that the United States is ill-equipped to deal with a future of retiring Baby Boomers relying solely on individual 401(k) plans and Social Security.
“WHEN THE GOOD PENSIONS GO AWAY” by Thomas J. Mackell, Jr., analyzes the coming retirement crisis. The powerful book seeks to help Americans retire with dignity and inspire a collective call to action to hold political leaders accountable for finding a viable solution before a major collapse in the economy occurs.
“The volatility of the market is an indication that the 401(k) plan doesn’t work,” said Dr. Mackell. “We will witness a tsunami in global markets once the German banks reveal how much money they’ve invested in mortgage-backed securities. 10 years from now the American president will have to admit the need to infuse a substantial amount of money into the government-supported system to prevent citizens from living under bridges.”
Dr. Mackell’s insights into the looming retirement crisis stem from his 40 years in employee benefits administration and investment management of pension assets as well as his service as the Chairman of the Board of Directors for the Federal Reserve Bank of Richmond and his post as Chairman of the Board of Directors of United Benefits and Pension Services, Inc. He also is president of the Association of Benefit Administrators.
Problems with the Current Retirement System
In the book, Dr. Mackell discusses a number of factors that point to trouble for retiring Americans in coming years:
o Congress created the 401(k) plan in 1981. This represented the beginning of a great shift in the risk of benefit programs from the shoulders of the institution onto the shoulders of the individual.
o 90% of Americas who join a 401(k) plan make an asset allocation and never change it. If the money is put into stocks, which have generally made more money in the long run, and the stock market falls, as it is now, no-one is going to remind anyone to reallocate their investment. You’re On Your Own.
o Evidence is already building of the problems with relying solely on 401(k)s for retirement is already starting. 54% use their 401(k) plan to pay their monthly expenses (CNN poll 2/20/08) and 401(k) plan assets are now being used to ward off mortgage foreclosures (USA Today 3/11/08).
o The average holdings in a 401(k) plan are $65,000. The average American has enough savings to replace 59% of his or her income for retirement.
o Financial illiteracy is pervasive at every generation level – many people don’t know the difference between a stock and a bond. Do YOU know where your 401(k) is being invested?
Solutions:
With his book, Mackell hopes to spark a new period of discussion, realization and action among citizens, elected officials and financial professionals:
o Education – By understanding the nuances of financial products and the ever-changing complexities of the financial markets we are more in control of our financial future.
o Review – Trustees of funds and individuals with 401 (k) plans should review and monitor their investment managers and strategies frequently to prevent losing money.
o Confront Congress – There are over 300 million citizens and only 535 legislators in Washington D.C. The majority should be the ones dictating the agenda.
o Seize some outrage – Sarbanes-Oxley was passed in 2002 by the most conservative Congress and signed into law by one of the most pro-business presidents in the history of this country because of the fury of the constituency over the major corporate scandals such as Enron.
About the Author
Thomas J. Mackell, Jr. is Chairman of the Board of Directors, Federal Reserve Bank of Richmond. Dr. Mackell, Jr. is an advisor and consultant in the employee benefits field in the private and public sectors with broad experience in the maritime, transportation, and steel industries and in health care, public safety, and financial services. He is also Chairman of the Board of Directors of United Benefits and Pension Services, Inc., and is president of the Association of Benefit Administrators and editor of its newsletter, Insights.
He is a member of the Board of Directors of the Inter-American Dialogue and a director of the Foundation for Fiduciary Studies. He was a White House appointee to the ERISA Advisory Council to the Secretary of Labor in 1997 through 1999.
When the Good Pensions Go Away: Why America Needs a New Deal for Pension and Health Care Reform – Thomas J. Mackell, Jr. – Published by John Wiley and Sons
978-0-470-13975-2 – 154 pages – $39.95 – April 2008
Media Contacts:
Jocelyn Johnson, Gravitas Communications, 212-924-9500, jjohnson@gravitas-pr.com
Contact: Cynthia Shannon, Wiley, 201-748-6017, cshannon@wiley.com
“WHEN THE GOOD PENSIONS GO AWAY” by Thomas J. Mackell, Jr., analyzes the coming retirement crisis. The powerful book seeks to help Americans retire with dignity and inspire a collective call to action to hold political leaders accountable for finding a viable solution before a major collapse in the economy occurs.
“The volatility of the market is an indication that the 401(k) plan doesn’t work,” said Dr. Mackell. “We will witness a tsunami in global markets once the German banks reveal how much money they’ve invested in mortgage-backed securities. 10 years from now the American president will have to admit the need to infuse a substantial amount of money into the government-supported system to prevent citizens from living under bridges.”
Dr. Mackell’s insights into the looming retirement crisis stem from his 40 years in employee benefits administration and investment management of pension assets as well as his service as the Chairman of the Board of Directors for the Federal Reserve Bank of Richmond and his post as Chairman of the Board of Directors of United Benefits and Pension Services, Inc. He also is president of the Association of Benefit Administrators.
Problems with the Current Retirement System
In the book, Dr. Mackell discusses a number of factors that point to trouble for retiring Americans in coming years:
o Congress created the 401(k) plan in 1981. This represented the beginning of a great shift in the risk of benefit programs from the shoulders of the institution onto the shoulders of the individual.
o 90% of Americas who join a 401(k) plan make an asset allocation and never change it. If the money is put into stocks, which have generally made more money in the long run, and the stock market falls, as it is now, no-one is going to remind anyone to reallocate their investment. You’re On Your Own.
o Evidence is already building of the problems with relying solely on 401(k)s for retirement is already starting. 54% use their 401(k) plan to pay their monthly expenses (CNN poll 2/20/08) and 401(k) plan assets are now being used to ward off mortgage foreclosures (USA Today 3/11/08).
o The average holdings in a 401(k) plan are $65,000. The average American has enough savings to replace 59% of his or her income for retirement.
o Financial illiteracy is pervasive at every generation level – many people don’t know the difference between a stock and a bond. Do YOU know where your 401(k) is being invested?
Solutions:
With his book, Mackell hopes to spark a new period of discussion, realization and action among citizens, elected officials and financial professionals:
o Education – By understanding the nuances of financial products and the ever-changing complexities of the financial markets we are more in control of our financial future.
o Review – Trustees of funds and individuals with 401 (k) plans should review and monitor their investment managers and strategies frequently to prevent losing money.
o Confront Congress – There are over 300 million citizens and only 535 legislators in Washington D.C. The majority should be the ones dictating the agenda.
o Seize some outrage – Sarbanes-Oxley was passed in 2002 by the most conservative Congress and signed into law by one of the most pro-business presidents in the history of this country because of the fury of the constituency over the major corporate scandals such as Enron.
About the Author
Thomas J. Mackell, Jr. is Chairman of the Board of Directors, Federal Reserve Bank of Richmond. Dr. Mackell, Jr. is an advisor and consultant in the employee benefits field in the private and public sectors with broad experience in the maritime, transportation, and steel industries and in health care, public safety, and financial services. He is also Chairman of the Board of Directors of United Benefits and Pension Services, Inc., and is president of the Association of Benefit Administrators and editor of its newsletter, Insights.
He is a member of the Board of Directors of the Inter-American Dialogue and a director of the Foundation for Fiduciary Studies. He was a White House appointee to the ERISA Advisory Council to the Secretary of Labor in 1997 through 1999.
When the Good Pensions Go Away: Why America Needs a New Deal for Pension and Health Care Reform – Thomas J. Mackell, Jr. – Published by John Wiley and Sons
978-0-470-13975-2 – 154 pages – $39.95 – April 2008
Media Contacts:
Jocelyn Johnson, Gravitas Communications, 212-924-9500, jjohnson@gravitas-pr.com
Contact: Cynthia Shannon, Wiley, 201-748-6017, cshannon@wiley.com
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