2016 Postmortem
In reply to the discussion: Why do people attack Hillary as a capitalist? [View all]Half-Century Man
(5,279 posts)Your retirement funds are added together with the retirement funds of others and used to collectively invest, right? A middlemen acts in behalf of you and manages the funds. That middleman is paid.
Under the old system; the middleman worked the fund as a whole, and was paid by the whole. You joined the fund, contributed "X" for whatever length of time you chose. That was added to the greater whole. Which was percentaged out in funds and stocks (some safe, some riskier), it generated interest and dividends. You retired, drew out the money you put in plus your share of the collective interest and dividends.
The accounts could be held by brokerage houses and joined by whoever or, more commonly, were part of a union contract with a corporation. Those accounts were held by the company and viewed by corporate management as part of their property. The company backed their choice of investment firms by guaranteeing to cover contributions lost due to fluctuations in the market. All too frequently corporate management used those funds for reason not intended, picked brokerage houses on bribes paid to the selectors of the brokerage houses, or bad investments were picked. The guarantees made long ago, cut into current profits.
Corporate America hates promises the cut into profits, both real and projected.
Under the 401k system. The middleman works both ends of the fund, and the corporate world evades guaranteeing the contributions of employees. or to say it another way the people involved with your money get paid on both ends.
Brokers give you the illusion of control in return for transaction fees. Instead of a money manager with the training and self control to ride out the fluctuations in the market; they count on the greater trading orders generated by millions of lay persons making decisions based on the minor fluctuations. The 401k'er is too personally involved in outcomes of a system beyond their control to be dispassionate. So instead of a larger single fee manipulating a collective fund, millions of smaller fees combine to generate reliably repetitive profits.
By lumping individual investors into handy sets, corporations(and/or their managers) still are in line for bribes and kickbacks. By breaking the unions (or threatening unions) matching contributions get reduced and/or vesting periods grow longer. And current and future profits are seemingly protected justifying executive pay and bonuses.