Students Could See 401(k)s Disappear

This story was written by Teri Ruland, The Battalion
Economic pressure put on companies by the failing stock market has caused some companies to consider drastic measures to remain effective.

The measures these companies are taking could affect those are trying to obtain a 401(k).

"The first big issue is that companies are considering stopping 401(k)s," said Thomas Saving, professor in the Private Enterprise Research Center and Jeff Montgomery professor of economics at Texas A&M University.

A 401(k) is a plan for retirement someone at any job may opt to have. Stopping the 401(k)s is not the only issue companies face.

"The second big issue is that the individuals are going to try to utilize their 401(k)s and you can do that in several ways. You can borrow money from your 401(k) and pay it back. Now, if you do that, there are penalties in order to not go further into debt," Saving said.

The third issue, Saving said, is that the government is considering making 401(k)s government-run because of the mistakes people have made handling their own money.

"Argentina is doing the equivalent of that," he said. "What they intend to do, though, is steal the money and pay off some of the Argentinean debt. There have been some individuals in Congress that say that we should nationalize the 401(k)s. What we would do with the money, I don't know what the government would do."

He said the government may do what it has done with social security and essentially force taxpayers to foot the bill.

"The government says there will be no risk. By saying this, what is really being said is taxpayers are really at risk. Instead of risk on the individuals, there will be risk for the taxpayers," he said.

Students have a different opinion on the situation.

"I believe it's the companies' jobs to continue putting money into the 401(k)s because it basically is providing a future retirement for the business class of today so they don't have to retire at such a late age," said Shannon Rians, a sophomore marketing major.

Another student gave his take on the economic status of the nation.

"I think that the economic state of the times is forcing companies to quit putting money into the 401(k)s," said David Joya, a freshman general studies major. "However, I still feel bad for the people this development will hurt."

Saving said companies shouldn't focus only on 401(k)s. Some companies take different strides in reducing the money spent.

He said it makes sense for corporations to ask how they can cut the wage bill in the short run.

"You can lay people off, then they get no contribution to their 401(k) because they're not working; you can lower wages, which is a lot harder to do; or we can cut our contribution to their 401(k)s, eliminate it temporarily."

He said most companies would prefer to eliminate 401(k)s temporarily.

"Two years ago, no one would have been talking about it because the market was booming and it wasn't necessary to find ways to cut [expenditures]," he said. "You're hearing more about it now because there are the market issues that are going on. The stock market's gone down 40 percent since its peak and only in a few months, so it's [had] a very significant effect on a lot of people."
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