Baked Ziti and Why We Have To Live With The 401(k)

In Canarsie, Brooklyn, where I grew up, the best place for baked ziti was a place called Anna Napoli.  Baked ziti was one of the very foods I ate that weren’t named pizza or hamburger. Baked ziti was a Saturday staple until they closed down a few years before we moved.  The placed I would get baked ziti after Ana Napoli was a few steps down as they were lazy by plopping down ricotta cheese in the middle of the dish, instead of mixing it with the sauce. Was the best baked ziti at Ana Napoli or was it the best because that is the first place I ate it? Whatever the reason, Ana Napoli isn’t coming back so I have to eat elsewhere for some baked ziti.

There was an article about 30 years with 401(k) on Businessweek.com and there is the usual lament on how the advent of 401(k) plans coupled with the employers’ decision to cut back on defined benefit plans.

I always love the love of defined benefit plans and how some commentators want the defined benefit plans to be brought back.  My response reminds me of what Rick Pitino said when he was the coach of the Boston Celtics on the expectations of Celtics fans:  “Larry Bird is not walking through that door, fans. Kevin McHale is not walking through that door, and Robert Parish is not walking through that door. And if you expect them to walk through that door, they’re going to be gray and old.” So no matter what we want or how much people decry the 401(k) plan, defined benefit plans are not coming back. If municipalities and state governments are having a tough time funding them, the private sector isn’t about to bring them back.

Unless someone comes up with a better system for retirement savings, we are left with the 401(k) plan and instead of complaining about them, I think we should do all we can to improve them. While fee disclosure is certainly a good step, I think one of the biggest problems is participation. The article in Businessweek noted that 401(k) plan assets only comprise 16% of all retirement assets.

More companies should have 401(k) plans and employees should have an easier time to participate. Perhaps the Federal government should offer tax credits for the implementation of new 401(k) plans for small businesses and that would create greater incentive for the plan sponsor to borne the costs of administration, rather than the participants. Provisions that spur participants to defer should be championed. That should include automatic enrollment and automatic eligibility for salary deferrals. While the article stressed the need to pare down investment options and noted the use of target date funds as an example, I encourage that investment options be pared down to a manageable level, but I don’t believe that target date funds are the solution that the mutual fund industry think they are.

Needless to say, 401(k) plans are here and they aren’t going away. To steal a quote from Ric Flair, 401(k) Plans: learn to love them because they are the best thing going.