When you favor public solutions to important, yet costly universal needs, you are immediately labeled a socialist. To avoid this label, you have to ignore the shortcomings and outright failure of the private sector’s handling of important “commodities” like health insurance, health care and retirement savings? Who could say with a straight face that before the Affordable Care Act, health insurance was easy to get for everyone? Or that before the Department of Labor’s fee transparency requirements, the retirement services sector was working hard to make sure plan participants knew they were paying any fees at all?

I get it. We are not a country that likes everyone getting a highly sought after good. Someone has to get it and someone has to not get it so that we know we worked harder or are just better or more deserving than the other person. But when we think like this, we let a small, privileged group of people reap huge rewards they didn’t earn. A group that understands our warped psychology and uses that knowledge to line their pockets...

Of course, the retirement and financial services industries are not the only sectors that take advantage of a status-focused and misinformed public. Nor does everyone in the industry engage in this kind of behavior. But lately I’ve been obsessed with just these guys. I’ve been reading a lot about financial fraud, including insider trading and the CalPERS bribery scandal, and the amount of money some people make cheating the system has led to my of course they are stealing from our retirement savings attitude. By stealing I mean overcharging for the services they provide and making backroom deals for their own benefit. Again, not all of them, but enough that we should rethink our preference for the private sector’s high-costs, high risks retirement savings model.

I’m no lone conspiracy theorist and I know that financial fraud occurs in the public sector also (again, CalPERS). Still, I believe if we talked about retirement fees more, people would start to feel the way I do and support an idea like enhanced Social Security benefits. President Obama came out in support of this idea yesterday and the media and others jumped on him for his prior willingness to negotiate a decrease in Social Security benefits. I wished the media had focused on contrasting the costs and risks of expanded Social Security benefits with private sector retirement plan (e.g., 401(k)) costs and risks instead.

But good luck to these reporters in finding, deciphering and explaining private sector retirement plan fees. Despite the 2012 DOL fee transparency regulations and the many retirement plan fee lawsuits, retirement services firms are still operating pretty much the same. Fees are lower but there is still no way of evaluating why they are what they are. What do retirement savers get for the services these firms provide? Why is the retirement services industry flush with billions of other people’s savings?

Until the retirement services industry is willing to justify its billion dollar fees, we should make Social Security the primary retirement savings vehicle for all American workers. Also, no more tax breaks for private plans. They can exist but no more special tax treatment. We don’t need incentives that make an industry rich and leave the original issue of inadequate retirement savings for the majority unaddressed.

Tags: retirement plans, retirement plan fees, Social Security