Mick Jagger turns 70 in July, well past a normal retirement
age, and hes got plenty of company. Each day, 10,000
people reach 65 in the U.S. alone. Unlike Jagger, the majority
have a fraction of what they need to stop working. Ronald
OHanley, president of asset management and corporate
services for Fidelity Investments, says the U.S. faces a
catastrophe if it doesnt address the problems with its
retirement system. Most working Americans have little hope of
maintaining their current living standards when they retire, he
With Social Security under pressure and defined benefit
pension plans on the decline, defined contribution plans such
as 401(k)s are becoming the main means of funding retirement.
Under these plans, employees and employers contribute to
portable accounts that enjoy tax-sheltered status until
retirees withdraw benefits. Boston-based Fidelity is the
countrys largest 401(k) manager, with more than
$1 trillion in retirement assets.
OHanley, 56, joined the firm in 2010 from BNY Mellon
Asset Management, where he was president and CEO.
Senior Writer Julie Segal spoke with him recently
about proposals to limit defined contribution plans tax
advantages and the mistakes that contributed to the retirement
The Simpson-Bowles commission and others have
recommended limiting tax benefits for retirement plans. Why do
you oppose these limits?
First, the proposals are illogical: They dont
raise a lot of revenue. Now contributions and earnings on that
money are allowed to grow tax-free until employees start making
withdrawals from retirement accounts. At
that point, everything is fully taxed as ordinary income.
Limiting the tax-deferred nature of these accounts doesnt
raise revenue; it just shifts revenue from the future to the
present. I would argue it probably moves less revenue forward
than if the government waited until the future, when investment
earnings would likely be greater. If I wanted to be really
unkind, I could call this another form of borrowing or stealing
revenue from the future.
Point No. 2 is, these incentives matter. We have a lot of
data on this because were the largest recordkeeper out
there and we spend a lot of time talking to our plan
participants. We know what drives their behavior. Even people
too young to imagine retirement are still contributing because
they like paying less in taxes right now.