The Retirement Plan Racket

Recognizing Regulatory Capture as You Plan Your Finances

The retirement plan industry is a racket. Its entire existence is based on the premise that retirees need its help planning their retirement, yet the industry itself actually creates the very problems that it purports to solve. Its members also engender continuous usage of the services they offer through a partnership between the public and private sectors that promotes regulation at everyone else’s expense.

Paul Sippil appeared as a live guest on The Stateless Man, Monday, March 25, 2013. His was the first segment, and you can tune in here.

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price so highBecause of the way our current system in the United States operates, all of the time and energy that providers devote to these unnecessary services is a diversion of resources away from value they could offer—services that would actually focus specifically on helping retirement plan participants achieve their retirement goals. This diversion is not unique to the United States and inevitably results from central economic planning that is doomed to fail. Central planners cannot possibly create rules that constantly adapt to the ever changing and diverse needs of millions of people whose knowledge is widely dispersed rather than contained in a database that these planners can access.

Not surprisingly, centrally enforced rules do not make anyone smarter. If anything, the result of additional rules has been just the opposite. Retirement plan sponsors and participants are now bearing increased compliance costs and have replaced what little individual initiative they had left to become more informed investors with a desire to adhere to the rules of a one-size fits all bureaucratic system.

Plan sponsors and participants now have a false sense of security, while retirement plan providers continue to increase their fees, enjoy protection from competition, and keep consumers in a state of ignorance.

Regulators are, of course, distant from the needs and concerns of participants, and for this reason, cannot possibly create a regulatory structure that works in participants’ favor. On the contrary, this vertically integrated structure serves to do nothing more than strengthen the partnership between regulators and large providers to the point where regulators have become beholden to the interests of the industry they claim to be regulating.

This partnership is not indicative of capitalism, but rather a system called corporatism, which, as Ron Paul has pointed out, is “a system where businesses are nominally in private hands, but are in fact controlled by the government. In a corporatist state, government officials often act in collusion with their favored business interests to design polices that give those interests a monopoly position, to the detriment of both competitors and consumers.”

anarchyAn example is the recent fee disclosure regulations, issued by the Department of Labor, which force retirement plan service providers to disclose their fees to plan sponsors and participants. One small retirement plan service provider, despite having already clearly disclosed its low, flat-dollar administration and record keeping fees on its website, recently had to announce a fee increase to comply with the new mandate to disclose the fees that it was already disclosing! This regulation has simply resulted in greater difficulty for small service providers and a consolidation of power with the larger providers that already dominate the marketplace.

To expound upon Ron Paul and what he stands for, he brought the message of capitalism to the national stage in a way that no other person ever has. He helped distinguish between a pure capitalist system and the crony capitalism we have now which does not even remotely resemble a free market economy. For these accomplishments, I credit him for spurring an intellectual revolution that helped provide me with the resources to expose the retirement plan industry as a racket. I also credit Murray Rothbard, an economist and historian who strongly influenced Ron Paul’s thinking.

I do not know exactly why Ron Paul gravitated more towards Rothbard rather than other great thinkers of his time, but I suspect he shared a similar aversion to the hypocrisy of coercive rules and admired the personal integrity that Rothbard displayed in consistently condemning governmental abuses of power and all forms of central planning. Because of his ideas, Rothbard gained the nickname, “The Enemy of the State,” as he served as the greatest threat to those in power. His ideas have posed so great a threat that academics have largely excluded him from history, and few if any people have heard his name—even those who have studied economics.

In a recent Fox News interview with Whole Foods Market CEO John Mackey, for example, Mackey remarked, “I began to read widely and I read a number of free market economists like Frederick Hayek and Ludwig Von Mises and Murray Rothbard, and I discovered that these explanations of the world worked a lot better than the philosophy I had previously.”

The Fox News, transcript, however, left out Rothbard’s name. While it is not clear why Fox News omitted Rothbard, it is clear that his spirit and philosophy of Anarcho-capitalism lives through Ron Paul, and those in power can no longer act as the gatekeepers of truth and control the flow of information the way they once did.


The reality is growing clearer by the day; centralized and politically driven systems attract unscrupulous individuals because they reward dishonest practices while making the path to success more difficult for honest people who wish to expose the truth. Only decentralized, non-coercive systems and the understanding that these types of systems alone, based upon mutually beneficial exchanges, are capable of encouraging honest behavior and helping retirement plan sponsors and participants effectively deal with the challenges of a complex investment marketplace.

A system where information is equally available to buyers and sellers will necessarily make people less gullible and much more discriminating in their investment decisions. Participants will become much less likely to believe retirement plan providers’ sales pitches without understanding all of the details. To put these systems in place, we don’t need more coercive rules. We simply need more freedom.

This is an abridged version of an article with the same headline, found on

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Paul Sippil About Paul Sippil

An independent financial advisor who exposes the conflicts of interest in the retirement plan industry from a free market perspective.