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.

[North Coast Conservative]

You can count on the fact that the inflation has already started.

We are planning on at least a 20% purchase power drop of our IRA.

We raise chickens in the summer for the freezer, and have a flock of layers year round. The eggs we don't eat go to our church's food bank.

The house we built in retirement was from the proceeds of the house we sold before moving here, we both drive used cars.

We both work, the wife full time, me part time, it will probably be that way until we are 65/66. Not a big thing.

I was a big fan of Dave Ramsey, who preaches no debt and being out of the market five years before you hope to retire. It sure helps.

Even now in retirement most of our IRAs are tied up in annuities, so we are effectively out of the market.

I think this forum can be very useful to our younger members who can benefit from the advice/trials/tribulations/successes/hardships of the retiring 'baby boomers'.

P.S.- retired or not, take the time to write to your Rep/Senators to tell them what a good/lousy job they are doing.

Become involved with your county political party, and make your voice heard, work on campaigns for the good people coming into the scene.

Don't forget to pray, both for the good guys and the bad guys.

Our family, and our country have been blessed by God almighty, and we have much to be greatful for.

With God all things are possible. He might even deliver us from the "Annointed One", but I bet He expects us to work hard to get there.

[jwalsh07]

My wife is 60 and has been chronically ill for 5 years now and I is incapable of working. The expectation is that you will maintain your health but the rule of life is someday that will go and you never know when

Yup. Last year I tore off the old roof and put the new one on. My wife being my only helper. This year I was crawling on the floor to get to the bathroom. Life sometimes smacks you in the mouth.

Sorry about the Mrs. Prayers for you both.

Best of luck.

[richardtavor]

Amen to that...get prepared. We have reached a tipping point in this country that I do not see how our economy will survive. Therefore, I will not depend on the government, I will prepare for the worst and if it turns out better, fantastic.

[Fantomw]

.........just because their generation screwed up in who they elected. Well, I am 49 which puts me at the tail end of the Boomers. Not sure what generation you are, a X'er or an echo boomer, but I regret to inform you that your generation is here and evidently old enough to vote. Which makes your generation as responsible as any for screwing up who gets elected. Speakin' of generations responsible.. how 'bout that Great Generation giving us that socialist snake oil salesman fdr in the first place. I think playing the spoiled brat of an x'er or echo boomer is not needed as there is plenty of responsibility on who gets elected to spread around. As far as those who feel "entitled". I sure hope you do not drive on the interstate or buy anything transported on them. After all.. "your" generation did not pay for them.

[richardtavor]

I hope that you are right, but I doubt that the government is going to let us keep our 401Ks. I contribute the maximum amount possible, but I also make alternative investments with the knowledge that anything that I have can be stolen by the government.

[desertfreedom765]

You misunderstand the plan.

If halfway decently invested the plan will inflate too. That inflation will be salvation for Social Security

Only if poorly or haphazardly invested will a 401k be worth less

I hope your correct, however plans don’t always work out.
What I’m seeing right now is deflation in wages and property and inflation in the cost of living.

I think that in the future you will see lots of older folks working and also lots of families living together.

This will put downward pressure on property. Not sure if the stock market can keep up with inflation.

As always the best investment is in your self. Your knowledge and health.

[Fantomw]

Government taking of 401’s would probably provoke outright rebellion.

[richardtavor]

I would hope that you are right, but we are well on our road to that..

[BobL]

LOL, I was wondering when you greed-filled types would come out of the woodwork. I am close to your age, so yes, I must sacrifice too, if I don’t want my kids to be economic slaves to the greed of my generation and earlier generations. My plan is simply that Social Security gets treated as a welfare program, since it is CLEARLY not a pension. If you qualify (meaning you’re poor), you get payments. I realize that many who will get payments did not ‘contribute’. But NO ONE contributed - that is a lie. They paid what amounted to an income tax surcharge...since the money was simply spent at the time. There is no LOCK BOX. In my case, I likely will get little or nothing if (or really when) the program gets changed...nor am I entitled to anything, since it is NOT MY MONEY to begin with.

So what do I do? Give up on the second home in Florida, no Winnebego, and maybe live in a condo, rather than stay in my 4 bedroom house when I retire. Maybe even, heaven forbid, ask my kids for help, as had been done for the other 4950 years of recorded history.

How are you willing to sacrifice - by taking my kids’ and (future grand kids) earnings through government gunpoint? Not very nice.

And by the way, EVERYONE benefited from Interstates. It was easily the best investment this country made...they more than paid for themselves MANY times over in increased GNP and increased tax revenue. Same with Hoover Dam, and they paid for themselves QUICKLY. Nice try, but the example doesn’t work. Maybe mention public housing instead. LOL.

[algernonpj]

If you go out to medicare.gov, you can get a list of the medigap plans available for your state:

http://www.medicare.gov/default.aspx

http://www.medicare.gov/find-a-plan/questions/medigap-home.aspx

http://www.medicare.gov/navigation/medicare-basics/coverage-choices.aspx

Prices vary from company to company; (AARP seems to be the most expensive).

http://www.medicare.gov/find-a-plan/staticpages/learn/more-about-medigap-basic-benefits.aspx

[Jimmy Valentine]

"Those without families or who never had children will have it the worst in the future."

They will form artificial families to pool their resources.

[Praxeologue]

Baby Boomers: they grew up little Marxists in the 60’s thinking the world owes them everything because mommy and daddy handed them everything.

So now they’re going to tax their kids to make up the shortfall of their Socialist theories.

Don’t worry: most will vote Obama the next election.

You are right about most baby boomers, as well as for the vast majority of baby boomer opinion leaders. Some Freepers who responded to you seem to be engaging in selective amnesia. For example, it is the baby boomer teachers and professors who have been successfully stuffing a socialist mindset done the throats of the young for a generation now. For all our sakes, I wish that they could afford "30 and out".

[mylife]

Thanks.

[BeAllYouCanBe]

"baby boomer teachers and professors who have been successfully stuffing a socialist mindset done the throats of the young for a generation now"

Just to set the record straight there were socialists teaching in universities when I was in college and that would make them WWII "the greatest generation" age in the early 1970's. My father-in-law was an infantry man in WWII and is a pretty far out liberal and got his indoctrination in the late 1940's going to school on the GI Bill. He served for FDR and Truman but hated Eisenhower. I believe that the assault on higher education has been going on since the 1930's.

Just read that Lincoln read Marx and thought it was a good plan. So socialism isn't new to baby boomers.

http://www.marxists.org/history/international/iwma/documents/1864/lincoln-letter.htm

http://turtledove.wikia.com/wiki/Karl_Marx

Karl Marx was greatly admired by former United States President Abraham Lincoln. Lincoln did not agree with Marx's belief in violent revolution, however, and steered the Socialist Party of the United States towards change through the ballot, rather than the bullet.

In the Confederate States, however, the Negro revolutionaries embraced a purer form of communism, staging a revolt during the early years of the Great War. While various socialist republics were created, the uprising was crushed by the C.S. in short order.

[Praxeologue]

The roots go way back, as you note.

I think that it would be fair to say, though, that socialism became acceptable to mainstream thought and media beginning in 1968.

[Fantomw]

Last first as is my wont.

That the Interstates were a good investment is a point well ceded. As an investment paid for, in part, with funds loaned from my generations(and the Greatest gen too) SS payments, it is an asset which is nice to have in our retirement planning. Which is part of what SS is about. Consider it something bequeathed to your kids... but nothing is free. Or are your kids spoiled brats, they would steal with a government gun that which they did not pay for.... not nice. I can only consider it is poor upbringing... see we can both cast aspersion upon each other. I can just do it more intelligently than you.

Sacrifice, you know nothing about my financial position or life. And we have already established the taking of mine and others investment at the point of a government gun as being not nice and of ill breading. Besides your dad stole at the point of a government gun... your mom too.

Certainly I agree here that the tail end of the Boomers and the beginning of the x’ers will pay the biggest price for the SS ponzie scheame. Likely neither one of us will have a Winnebego.

Actually since the mid-80’s SS overpayment as been converted to government securities which make every SS payer since then a bondholder like any other investor.

Like you I see the absolute need to rework SS into a real retirement vehicle... no welfare. You do not work, you get beans and bread. No money. Privatize SS, pay those within 20 years of retirement what they have coming. Or pay them back their money plus interest at their option. Pay back those outside of that range their money back plus interest.

Will it be easy, no, but it needs to be done. Transition costs can be handled in various ways over decades. Certainly means testing to cut off the very well to do, those who have millions laid back. That will help some, not much. Use our national resources, oil, gas, timber, coal(china will buy lots of this), import fees. And yes, even a modest surtax on everyone of a few %. Or better yet scrap income taxes and go to sales tax.

WWII was paid for over several decades so too can, and should this be born by multiple generations. I note that we had as much debt from WW II as we have today in proportion to GDP.

[dljordan]

“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.”

I was laid of at 57 (along with 1500 others over the age of 50) and I had a hell of a time getting another job. I finally managed to get a job with a temp agency and work my way up, competing with younger workers who, to be fair, offer no competition.

I imagine the cause is that I’m just a lazy Southern Hippie that doesn’t want to work.

[Nick Danger]

For the most part, yes.

Thank you. There will be no more need for us to communicate.

[MV=PY]

How can anyone think that they could keep spending like they were working and be ok?

If you spend less than you make, you can save and invest enough to allow you to spend at the same rate for a while without any income. If you plan well, you can call that "retirement."

If you stay out of debt, interest works in your favor instead of against you.

That's how you can think that way.

[SVTCobra03]

“Baby Boomers: they grew up little Marxists in the 60’s thinking the world owes them everything because mommy and daddy handed them everything.

So now they’re going to tax their kids to make up the shortfall of their Socialist theories.

Don’t worry: most will vote Obama the next election.”

The Red Diaper Doper Baby Boomers are a very vocal but very small minority of Boomers. Most of us Boomers served our country in time of war; went to college on the GI Bill; got well paying jobs after graduation; got married and taught our children to make good life decisions; voted Republican, paid our taxes, and saved more than enough for a comfortable retirement.