401(k)s face ‘crisis,’ says Nobel Prize Winner Merton

Marketwatch reports that since the dark days of 2008, employers have taken some steps to fix the 401(k), the backbone of the nation’s private retirement-savings system. But Nobel laureate Robert C. Merton says that in the rush to upgrade these plans, plan sponsors and administrators have overlooked one big problem: They are managing these plans with the wrong goal in mind.

“The seeds of an investment crisis have been sown,” the MIT professor of finance writes in an article in the July-August issue of Harvard Business Review, which was published Tuesday. “The only way to avoid a catastrophe is for plan participants, professionals, and regulators to shift the mind-set and metrics from asset value to income,” writes Merton, who won the Nobel Prize in Economics in 1997.

via 401(k)s face ‘crisis,’ says Nobelist Merton – Encore – MarketWatch.

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.