A piece that aired last week on “60 Minutes” has gotten some attention and a lot of play from those arguing that a retirement system based on 401(k)s or other investment accounts is fundamentally broken.

But I couldn’t disagree more completely with the data, inferences, and conclusions in this report—and I was pretty irked by some of the misrepresentations in the program. (Does shouting at the screen and stomping around the room count as “irked”?)

It’s important, before attempting to correct the record, to say this first: It’s clear there are people out there who have been deeply and tragically hurt by the financial crisis. Those stories are compelling and poignant. When we see people in tragic circumstances, most of us are emotionally affected—and we feel a strong urge to do something to help. There is nothing wrong with that aspect of these kinds of stories.

The problem, however, starts with weakly supported finger-pointing and innuendo. Of course, this kind of thing makes television more dramatic, and probably raises ratings. Not only has there been a tragedy, but it was caused by some fat cat’s negligence or maliciousness!

A piece in the Arizona Republic does a good job of covering the basics of the several places where the show went off the rails: Fees are nowhere near as high as was suggested; changes in the design of “k-plans” have helped alleviate the worst problems regarding participant inertia and confusion; and each plan has fiduciaries in place who are personally liable for making sure that plans are designed first and foremost in participants’ interest.

But there’s one thing about the article and the show that I’d correct: I’ve always heard the three legs of the “retirement stool” described as (1) Social Security, (2) employer-sponsored plans (which includes both pensions and k-plans), and (3) personal savings.

I think a major driver behind the financial crisis we’re in now was that people forgot completely about the third leg, which has nothing to do with government or employer plans. Fundamentally, it has to do with living within your means—something that will be important regardless of what happens with Social Security and 401(k)s.


• The links to CBSNews.com and AZCentral.com will open new browser windows. Vanguard accepts no responsibility for content on third-party websites.

We invite your comments on this Vanguard Blog entry. Comments will be monitored and published at Vanguard’s discretion. Comments received prior to July 7, 2009 will not be published.