Retiring Boomers Find 401(k) Plans Fall Short

The Wall Street Journal ^ | February 19th, 2011 | E.S. Browning

[andyk]

The 401(k) generation is beginning to retire, and it isn't a pretty sight. The retirement savings plans that many baby boomers thought would see them through old age are falling short in many cases. The median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed in that account to maintain its standard of living in retirement, according to data compiled by the Federal Reserve and analyzed by the Center for Retirement Research at Boston College for The Wall Street Journal. Even counting Social Security and any pensions or other savings, most 401(k) participants appear to have insufficient savings. Data from other sources also show big gaps between savings and what people need, and the financial crisis has made things worse. This analysis uses estimates of 401(k) balances from the end of 2010 and of salaries from 2009. It assumes people need 85% of their working income after they retire in order to maintain their standard of living, a common yardstick.

[Nick Danger]

Baby Boomers: they grew up little Marxists in the 60’s thinking the world owes them everything...

What is this, some new form of astrology based on the year people were born instead of the month?

Seriously: do you really believe that everyone born in a period that spans 20 years was raised the same way by identically-situated parents, and now act and behave the same way in unison? Just how gullible are you?

Also, considering that it was young people, not Boomers, who put Obama in office, where do you get that last sentence? You are either dumber than a post, or nuts.

[EQAndyBuzz]

“Once Barry reaches his goal of turning America into a third world country for his friends at the UN, retirement will become a thing of the past. That’s the plan.”

In 2008, at the age of 48, if I could have kept the money I put into my retirement fund over 25 years, in exchange for foregoing all SS benefits, I could have retired fully funded till I died. I asked my accountant who said I would lose 38% (28% taxes, 10% penalty). That ended that.

I was buying a place in Panama, a nice little boat where a few times a year I would take my friends fishing. My wife would write and continue speaking, my kids away at school.

Then the market collapsed, I lost my job, my kid got sick, I lost my COBRA by a fluke and next thing I know I am working 1500 miles from my family and am living paycheck to paycheck.

What is troubling is I wasn’t the exception. Many of my friends who were financially secure are now worrying about what they are going to do at 75 years old.

[mylife]

Why does Mr Rutschmann have a heavy mortgage at age 60?
How can you expect to carry on a large lifestyle like that in retirement?

Down size and move someplace inexpensive, you can enjoy yourself and do all the things you wanted to do while still being comfortable.

[Nepeta]

I’m 60 and have no desire to retire, but the trick is finding an employer who will hire me at my age.

I tried to do everything right. I have no debts. I’ve been a conservative all my life. Not all boomers were hippies.

[OpusatFR]

“When I finish paying my debt, I imagine I would only need 40% of my working income to be comfortable. 60-80% would make it luxurious. :)”

We have been retired for quite a few years. While we require much less income now than during our working years, we didn’t factor in a 100 fold increase in property taxes or the additional taxes larded onto the property like rainwater tax, recycling fees, and so forth.

We are positioned for many financial buffettings, however, one can’t foresee all that could occur.

You need that extra 60 -80% not for luxurious living, but to account for the price hikes in everything along with medical expenses.

Just FWIW from a retiree.

*Not to mention helping the adult kids’ needs when emergencies occur or they lose their jobs.

[screaminsunshine]

You got it.

[desertfreedom765]

It’s hard to save enough to retire when the Government is taking 40%+ directly in taxes and most of the rest silently through inflation.

The problem is when your 65 how do you really know that you have enough to carry you through the end of your life. What happens when you run out of money at 78?

I know of several people in their early 60’s who had to start taking SS because they were laid off and could not find jobs. What happens when they raise the SS age to these people.

[Zuben Elgenubi]

I haven’t met many creeps from Nebraska.

[goodnesswins]

You have the gall to post THAT here? Maybe over at the DailyKos....but, here????

[Old North State]

Why does Mr Rutschmann have a heavy mortgage at age 60?...

I think a lot of people got sold on the idea that a primary residence was just another financial investment; that a big house was a liquid asset you could live in. It didn’t work out that way and now they are stuck.

[goodnesswins]

I thought any talk of raising retirement age was grandfathering in people over something like 58??? I could be wrong...

[Hoodat]

Maybe if the 13% of income that the government confiscated for social security had been added to their 401(k) instead, they would be much better off.

When I reach retirement age (70+), my 401(k) will be mine to do with as I please. If I die, then I can will that money over to my grandkids. As for my Social Security, I will be at the mercy of government to give me whatever they deem fit for me to have. And if I die, my grandkids get nothing. Which sounds like the better deal to you?

Let's take someone who works 40 hours a week making $10/hr. If that person took 12% of their income and invested it in something yielding 5% (compounded quarterly), and did so from the age of 25 to 65, they would have over $300,000. If that same person lived to be 85, they would have enough money to draw $2100 per month for 20 years. Does Social Security offer monthly payments of $2100 to workers making $10/hr their whole lives?

[Tzimisce]

I sure hope that was sarcasm. All of us kids are babyboomers. I grew up in a large family(6 kids) where my mom stayed home and my dad was a secretary. We got by without extras or vacations and never knew any differently since all of our family friends were in the same situation. We put ourselves through school with scholarships and loans. What are you—like 22?

Did you even bother reading my post?

[Tzimisce]

Bullshit post of the month; I sure hope you have the ability to realize it.....

Yeah! The thieving ungrateful young'uns need to learn their place!

[mylife]

I see so many couples living in 4000 sq ft houses.

[Tzimisce]

Seriously: do you really believe that everyone born in a period that spans 20 years was raised the same way by identically-situated parents, and now act and behave the same way in unison?

For the most part, yes.

Look at how everyone is reacting to my post.

Also, considering that it was young people, not Boomers, who put Obama in office, where do you get that last sentence? You are either dumber than a post, or nuts.

The younger you are, the less likely you are to vote. The elderly have the highest turn out rates at the polls. Now I know the Obama talking points were all about the young vote - but like everything else this administration says, it's a lie.

But you're gullible enough to believe it. Interesting.

[meyer]

On the other hand, price inflation will eat up your retirement if you don’t account for it when you determine how large a nest egg you’ll need. And you need to watch out for unreported price increases as well. Just because the government says inflation is 2% doesn’t mean that the things you need to buy haven’t gone up way more than that (like food, medicine, and energy).

[heye2monn]

<<<< But a 401(k) also requires steady, significant savings >>>>>

Steady, significant? Not the profile of the average spendthrift American.

[mylife]

I am a baby boomer.
I was raised in a blue collar family.
I was paying rent by at age 18. I then joined the USN and chased commies around the globe.
No one gave me anything ever. I never even got the GI Bill.

Am I a commie?

[mylife]

Also of note is that the 401k was devised as a supplemental retirement account.

It was never devised to take the place of traditional pensions and savings.