Offering his version of the ideal defined contribution system, John Bogle, founder of Vanguard, spells out a private system overseen by a federal retirement board that would include:
• One plan type combining the current menagerie of tax deferred retirement plans
• Limited ability of participants to cash out or take loans
• Reliance on low-cost index funds
• Pooling of assets, which would offer lower costs, diversification and the ability for participants to annuitize at retirement
While Bogle’s bias in favor of indexing is legendary, more assets do seem to be flowing into index funds, both in and outside the DC system. Like plan advisors, active money managers need to be able to show value to argue against the Bogle system. With the election over and the power of the Obama administration consolidated, look for a more lively debate about how to improve the DC system.
