I'm enamored with economic and political guru Dean Baker's new book, "The End of Loser Liberalism." In it, he advocates for -- among many other things -- letting all of us save for retirement in the federal Thrift Savings Plan, or TSP, which is the government's answer to 401(k)s.
Baker points out that 401(k) management fees average 1 percent of the the value of assets -- often more -- while the federal TSP has a 0.15 percent average fee. He says enlarging the plan might be costly to begin with, but would level out after that. This kind of fee management would be an enormous retirement planning boon for us working types.
I called Baker this morning. He said that he thought this idea might actually be adopted because while the financial industry might oppose it -- and they have clout -- Republicans and Democrats see the idea as something they can embrace philosophically.
"It makes a lot of sense to almost everybody for people to have a single plan that they can take from job to job," he says.
While he believes that the financial industry won't be thrilled, he was on a panel with an executive from Fidelity Investments recently and they discussed the idea. The Fidelity executive saw the idea as an acceptable way for people without access to 401(k)s to have savings plans. "He didn't yell, 'No, no, no, we can't let this happen,'" Baker said, facetiously.
He believes that the way this may ultimately play out is state by state. Several states that have state employee savings plans that are similar to the TSP have actually considered opening them to all citizens, but have been discouraged by the startup costs. "This idea doesn't require public money, but you do need startup funds," Baker says.
Former California Gov. Arnold Schwarzenegger considered a plan, but then ran into economic issues. And Washington state got it through the legislature, but also couldn't identify a source of startup capital and let the idea slide, Baker says.
"If we can get past this current downturn, and get this idea going in three or four states, there would be a snowball effect," he says.
"The End of Loser Liberalism" is available for free download in PDF format on the Center for Economic and Policy Research's website, CEPR.net, which Baker co-founded. Well worth a read -- no matter what your political leanings.