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A Response to Aaron Brown​’​s July 21, 2020 Bloomberg Opinion Article About 401k Plans

by Money Hammer

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about

Hello! I make songs and videos that use brutal heavy metal to teach basic personal finance and investing. On July 21, 2020, Bloomberg Opinion published an article by Aaron Brown arguing against the usefulness of 401k plans. This song is my response to the article.

lyrics

A July 21, 2020 article by Aaron Brown on Bloomberg argues 401k plans no longer make sense for investors. It argues that because of change in capital gains taxes, high 401k fees, and low fees in non-401k funds like low-cost ETFs, 401ks offer increasingly little benefit for those saving for retirement.

I am in agreement with the author’s main argument; that capital gains taxes should be higher and 401k fees should be lower, or other changes should be made to strengthen the benefits of using 401ks.

But I worry that many who see the article will take it at face value as a reason not to save in their 401ks. Furthermore the author downplays the impact of employer match contributions. Even if these are small, they should not be ignored as a free benefit to an employee. The author also overlooks behavioral aspects; an employee is more likely to save if a plan is offered. Also, 401k funds are committed to retirement; it is difficult to remove them for other reasons. This prevents misuse of retirement savings for other expenses.

401ks remain a good option for retirement savings.

credits

released July 27, 2020
Performed, recorded, mixed, and mastered by Mark Cichra, CFA.

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