Don't Trust Us With Social Security

Every time I write about Social Security, I get an email box full of letters from readers who just plain don't like the philosophy behind the government-run retirement insurance program.

They don't like the idea that the government takes their money and, after "investing" it for them, decides how big a check they'll receive every month after they've reached some bureaucratically determined retirement age. It's paternalistic because it assumes the government invests our money better than we would. And it's coercive because the government doesn't give most of us a choice about whether we're going to participate in the system.

All of which is true. The program is bureaucratic, often arbitrary, definitely paternalistic and certainly coercive.

But a recent study from Hewitt Associates, the global human-resources management and consulting company, argues that paternalism and coercion are exactly what most Americans need, at least when it comes to saving for retirement. It also says that the average 401(k) retirement savings plan could use a bit less freedom and a tad more paternalism and coercion.

I know that goes against the philosophical and political grain for many of us. But frankly, the Hewitt Associates study says that many of us aren't exactly in need of more financial freedom and that we aren't ready to take on more financial responsibility.

Put that in your pipe and smoke it when the discussion turns to how to reform Social Security.

The Sad Results

Here's what Hewitt Associates found in a study of nearly 200,000 workers who participate in 401(k) retirement plans:

45% of workers take a cash distribution from their 401(k) plans when they leave or change jobs. In other words, they take money out of their 401(k) retirement plan and spend it.

66% of workers aged 20 to 29 take a cash distribution. In other words, the very workers who have the most to gain from compounding over time take money out of their retirement plan and spend it.